Key income tax modifications for AY 2023-24 — updated returns, 30% VDA tax, 15% surcharge cap on LTCG and cess disallowance, still relevant in FY 2026-27.
AY 2023-24 (FY 2022-23) is now history for fresh filings, but updated returns under section 139(8A), reassessments and refund matters keep this year alive well into FY 2026-27. Several modifications introduced by Finance Act 2022 still shape how older returns are scrutinised, especially the new section 139(8A) updated return facility, the 30% tax on virtual digital assets, and the restructured TDS framework.
Introduction of Updated Returns — Section 139(8A)
From AY 2023-24, taxpayers could file an updated return within 24 months (now extended to 48 months by Finance Act 2025) of the end of the relevant assessment year on payment of additional tax of 25% or 50% of aggregate tax and interest. The provision excludes loss returns, returns that reduce tax liability or increase refunds, and cases where search or survey has been initiated.
Virtual Digital Assets — Section 115BBH
- Income from transfer of any VDA taxed at flat 30% with no deduction except cost of acquisition.
- No set-off of loss from VDA against any other income or against gain from another VDA.
- TDS at 1% under section 194S on consideration above the prescribed threshold.
- Gifts of VDA taxable in the hands of the recipient at slab rates under section 56(2)(x).
These provisions remain unchanged for FY 2026-27. Exchanges and players in crypto, NFTs and tokenised assets must continue to apply this framework.
Capping of Surcharge on Long-Term Capital Gains
Finance Act 2022 capped the surcharge on long-term capital gains from any asset at 15%, ending the earlier escalation up to 37%. This continues into the current regime. Short-term gains on listed equity under section 111A are similarly capped.
Health and Education Cess Disallowance
Cess on income tax cannot be claimed as a business expenditure under section 40(a)(ii), retrospectively from AY 2005-06. Any deduction taken before FY 2022-23 had to be reversed in an updated return, with safe-harbour penalty waiver if filed within the window.
Bonus Stripping and Brought-Forward Losses
The scope of section 94(8) was widened to include all securities and units, curbing artificial loss creation through bonus issues. Brought-forward losses from set-off were tightened for shell company structures.
Compliance Implications Today
For taxpayers receiving notices under section 148A or 263 relating to AY 2023-24, these provisions are the substantive law to argue from. Reconcile your AIS, Form 26AS and books for that year before responding. Updated returns can still cure honest omissions if filed within the extended window.
Conclusion
FY 2022-23 was a turning point — the year India formally taxed crypto, opened the updated return window, and capped surcharges on capital gains. These rules continue to define how the CBDT treats older years in current reassessment proceedings.
