This week in Indian law: The Finance Act 2023 received presidential assent, making the new tax regime the default from FY2023-24. The Competition Amendment Bill passed Lok Sabha with significant reforms to merger control. The RBI paused the repo rate at 6.5 per cent after six consecutive hikes, and issued a framework for green deposits. 4 significant legal developments this week across legislative-policy and regulatory-updates.
Top story
Finance Act 2023 Receives Presidential Assent
Category: legislative-policy | Date: 31 March 2023 | Source: Ministry of Finance
The Finance Act, 2023 received presidential assent on 31 March, bringing into effect the tax and fiscal changes announced in the Union Budget 2023-24. Key provisions now in force include the new income tax regime under Section 115BAC as the default for individuals and HUFs, the cap on capital gains reinvestment deductions under Sections 54 and 54F at Rs 10 crore, enhanced presumptive taxation thresholds, the Vivad Se Vishwas II scheme for government contract disputes, and customs duty rationalisation.
Why it matters: Tax practitioners must ensure all clients are advised on the default regime switch before the start of FY2023-24. Employers need to collect regime election declarations for TDS purposes.
Read more: Veritect analysis
Legislative and policy developments
Competition Amendment Bill Passes Lok Sabha
Date: 29 March 2023
Lok Sabha passed the Competition (Amendment) Bill, 2023, introducing significant reforms to India's competition law framework. Key changes include a deal-value threshold of Rs 2,000 crore for mandatory merger notification (catching acquisitions of startups and digital businesses that may not meet turnover thresholds), enhanced penalty provisions, a settlement and commitment framework, and strengthened CCI investigation powers. The Bill awaits Rajya Sabha passage and presidential assent.
Key point: The deal-value threshold for merger control is a game-changer for M&A in the digital economy, requiring mandatory CCI notification for transactions exceeding Rs 2,000 crore regardless of target turnover.
Regulatory updates
RBI Pauses Repo Rate at 6.5% After Six Consecutive Hikes
Date: 6 April 2023
The RBI's Monetary Policy Committee unanimously decided to pause the repo rate at 6.5 per cent, marking the first pause after six consecutive hikes totalling 250 basis points since May 2022. RBI Governor Shaktikanta Das emphasised that the pause was a 'strategic' decision to assess the cumulative impact of rate hikes, not a signal that the tightening cycle has definitively ended.
Key point: The rate pause signals the likely end of the aggressive tightening cycle, with implications for lending rates, corporate borrowing costs, and real estate financing.
RBI Issues Green Deposits Framework
Date: 1 April 2023
The RBI issued a framework for acceptance of green deposits by scheduled commercial banks and deposit-taking NBFCs. The framework mandates that proceeds from green deposits be allocated to specified sectors including renewable energy, energy efficiency, clean transportation, green buildings, and sustainable water management. Banks must obtain third-party verification of green deposit utilisation.
Key point: Banks and NBFCs offering green deposit products must comply with the RBI's allocation and verification requirements, marking India's first regulatory framework for sustainable finance deposits.
By the numbers
- 6.5% — Repo rate held steady after 250 basis points of cumulative hikes since May 2022
- Rs 10 crore — New cap on capital gains reinvestment deductions under Sections 54 and 54F
- Rs 2,000 crore — Deal-value threshold for mandatory CCI merger notification under the Competition Amendment Bill
Looking ahead
- April 11: Competition Amendment Act expected to receive presidential assent after Rajya Sabha passage.
- April-May: SC to begin hearing major Constitution Bench matters (Article 370, same-sex marriage).
- April: SEBI expected to issue multiple circulars on investor protection and market regulation.
This is the Veritect Weekly Legal Roundup for Week 13 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.