This week in Indian law: The Union Budget 2023-24 made the new income tax regime the default, capped capital gains reinvestment deductions, and announced the Vivad Se Vishwas II scheme for government contract disputes. SEBI issued a consolidated AML/CFT master circular for securities intermediaries, and the NCLAT ruled that provident fund dues are outside the IBC Section 53 priority waterfall. The Adani-Hindenburg crisis continued with the withdrawal of the FPO. 4 significant legal developments this week across legislative-policy, securities-market, and corporate-insolvency.
Top story
Union Budget 2023-24: New Tax Regime as Default
Category: legislative-policy | Date: 1 February 2023 | Source: Ministry of Finance
Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24 on 1 February, introducing several significant legal changes. The new income tax regime under Section 115BAC of the Income Tax Act becomes the default for individual taxpayers and HUFs, with enhanced rebate making income up to Rs 7 lakh tax-free. The capital gains reinvestment deduction under Sections 54 and 54F was capped at Rs 10 crore. The Vivad Se Vishwas II scheme was announced for settlement of contractual disputes involving the government. Presumptive taxation thresholds were increased to Rs 3 crore for businesses and Rs 75 lakh for professionals.
Why it matters: Tax practitioners must immediately advise clients on the default regime switch and the Section 54/54F cap, which closes a significant high-net-worth tax planning strategy.
Read more: Veritect analysis
Regulatory updates
SEBI Issues AML/CFT Master Circular
Date: 3 February 2023
SEBI published a comprehensive Master Circular on Anti-Money Laundering and Combating the Financing of Terrorism, consolidating all existing AML/CFT obligations for registered intermediaries including stock brokers, depositories, mutual funds, and portfolio managers into a single document. The circular incorporates amendments to customer due diligence, enhanced due diligence for politically exposed persons, and updated beneficial ownership identification requirements.
Key point: All securities market intermediaries must review their AML/CFT frameworks against the consolidated master circular and ensure updated compliance by the specified deadline.
Corporate and insolvency
NCLAT: Provident Fund Dues Not Subject to IBC Section 53 Waterfall
Date: 6 February 2023
The National Company Law Appellate Tribunal held that provident fund dues are not subject to the priority waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code, 2016. The NCLAT ruled that the statutory protections afforded to provident fund contributions under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 operate independently of the IBC distribution framework.
Key point: Employee provident fund contributions are ring-fenced from the IBC resolution process, protecting workers' retirement savings in corporate insolvencies.
Also this week
- Adani Enterprises FPO withdrawn — Despite being fully subscribed, the Rs 20,000 crore FPO was withdrawn on 1 February amid the Hindenburg-triggered market crisis. Supreme Court petitions continue.
- Budget session commenced — Parliament's Budget session began on 31 January with the tabling of the Economic Survey 2022-23.
Looking ahead
- February 8: RBI Monetary Policy Committee decision — sixth consecutive repo rate hike widely expected.
- February 10: Supreme Court to hear Adani-Hindenburg petitions; SEBI response expected.
- February-March: Finance Bill 2023 to be debated and passed; amendments expected during committee stage.
This is the Veritect Weekly Legal Roundup for Week 5 of 2023. For daily updates, visit our legal news page. Subscribe to receive this roundup every Monday morning.
Veritect provides this content for informational purposes and does not constitute legal advice.