Budget 2020-21 was announced on 1st February 2020, here’s how you can be a gainer with the ream of changes in taxation. Summarizing direct taxation and indirect taxation which is applicable from 1st April 2020 below:
Direct tax: amendments applicable in case of individual, HUF, AOP & BOI
Tax Rates: Income tax rates for Individuals, HUF, Association of Persons or Body of Individuals are as follows:
| If Total income is | Tax Rates |
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
Tax credit u/s 87A i.e. rebate of Rs. 12,500/- is available to assess having taxable income between Rs. 2.50 Lakhs to 5 Lakhs.
Taxation for Senior and Super Senior citizen:
In the case of an individual who has attained the age of between 60 years to 80 years i.e. Senior Citizen, the basic exemption limit has remained unchanged i.e. Rs. 3,00,000.
And in case of individual who has attained 80 years or more i.e. Very Senior Citizen, the basic exemption limit has remained unchanged i.e. Rs. 5,00,000.
The tax rate for senior citizens having income above Rs.3 Lakhs but below Rs.5 Lakhs is 5%.
Incentives to Individuals and HUF:
On satisfaction of certain conditions, an individual or HUF shall, from the assessment year 2021-22 onwards, have the option to pay tax in respect of the total income at the following rates:
Withdrawal of Dividend Distribution Tax (Sec 115-O):
Currently, Dividend Distribution Tax which is being charged in the hands of Domestic Company at the rate of 15% exclusive of surcharge and cess.
| If Total income is | Tax Rates |
| Upto Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to 5,00,000 | 5% |
| Rs. 5,00,001 to 7,50,000 | 10% |
| Rs. 7,50,001 to 10,00,000 | 15% |
| Rs. 10,00,001 to 12,50,000 | 20% |
| Rs. 12,50,001 to 15,00,000 | 25% |
| Above 15,00,000 | 30% |
Now, the DDT has been withdrawn and the dividend shall be taxable in the hands of the recipient at the applicable rate.
Withdrawal of DDT will remove the Cascading effect of taxes.
Reducing the rate of TDS on fees for technical services (other than professional services):
It is noticed that there is a large number of litigations on the issue of short deduction of tax treating assessee in default where the assessee deducts tax under section 194C, while the tax officers claim that tax should have been deducted under section 194J of the Act.
Therefore, to reduce litigation, it is proposed to reduce the rate for TDS in section 194J in case of fees for technical services (other than professional services) to 2% from the existing 10%. The TDS rate in other cases under section 194J would remain the same at 10%.
| If Total Income is | Surcharge |
| Upto Rs. 50,00,000 | Nil |
| More than Rs. 50 Lakhs but less than Rs. 1Cr | 10% |
| More than Rs. 1Cr but less than Rs. 2Cr | 15% |
| More than Rs. 2Cr but less than Rs. 5Cr | 25% |
| Above Rs. 5Cr | 37% |
| Rs. 12,50,001 to 15,00,000 | 25% |
| Above 15,00,000 | 30% |
Vivaad se Vishwas Scheme:
Finance Act 2020 has introduced, “Vivaad se Vishwas” scheme where a taxpayer would be required to pay only the amount of the disputed taxes and will get a complete waiver of interest and penalties provided, he pays disputed tax liability by 31st March 2020.
The scheme will remain open till 30th June 2020. Those who avail of this scheme after 31St March 2020 will have to pay some additional amount in addition to disputed basic tax liability.
Taxpayers, in whose cases appeals are pending at any level can benefit from this scheme.
Amendments applicable only in case of Companies
Concessional tax rates for New Manufacturing Companies (Section – 115BAB):
Earlier, these concessional rates were available to only manufacturing sectors.
Now, a Concessional corporate rate tax of 15% is applicable to new Domestic companies in Manufacturing & Power sector also.
The above concessional rate shall be applicable only to those domestic companies’ set-up their unit on or after 1st Oct 2019, which commence manufacturing or production by 31st March 2023 and do not avail of any specified incentives or deductions. It gives a boost to the manufacturing sector and the generation of electricity.
Deductions for Eligible Startups:
Earlier, startups having turnover up to 25 crores were allowed deduction of 100% of its profit for any 3 consecutive assessment years out of the first 7 years.
Now, Eligible startups having turnover up to 100 crores will be allowed deduction of 100% of its profit for any 3 consecutive assessment years out of first 10 years.
It gives a boost to large scale start-ups.
Surcharge applicable for Companies:
- A) Domestic Companies:
In the case of every domestic company except such domestic company whose income is chargeable to tax under section 115BAA or section 115BAB of the Income-tax Act, —
At the rate of 7%. of such income-tax, where the total income exceeds Rs. 1 crore but does not exceed Rs. 10 crores;
At the rate of 12%. of such income-tax, where the total income exceeds Rs. 10 Crores.
- B) Other than Domestic Companies:
In the case of every company, other than a domestic company, —
At the rate of 2%. of such income-tax, where the total income exceeds Rs. 1 Crore but does not exceed Rs. 10 Crores;
At the rate of 5%. of such income-tax, where the total income exceeds Rs. 10 Crores.
Amendments applicable to in cases of other categories
Incentives to resident co-operative societies:
Currently, the Co-Operative societies are taxed at the rate of 30% with allowable deductions and exemptions.
Now, Option has been given to co-operative societies to be taxed at rate of 22% plus 10% surcharge and 4% cess with no exemption and deductions.
Further, these Co-operative societies are exempt from Alternative Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternative Tax (MAT) under New regime.
Surcharge in case of Co-Operative Societies:
In the case of every co-operative society or firm or local authority, at the rate of 12% of such income-tax, where the total income exceeds Rs. 1 crore.
Threshold Limit for Tax Audit. (44AB)
Turnover threshold limit for Tax Audit has been increased from 1 Crore to 5 Crore on fulfillment of the following conditions:
In order to reduce the compliance burden on small and medium enterprises, it is proposed to increase the threshold limit for a person carrying on business from 1 Crore to 5 Crore in cases where, –
An aggregate of all receipts in cash during the previous year does not exceed five percent of such receipt; and
An aggregate of all payments in cash during the previous year does not exceed five percent of such payment.
Extending the time limit for sanctioning of loan for affordable housing for availing deduction under section 80EEA and 80IBA of the Act:
The deduction under section 80EEA is up to 1.5 Lakhs for interest paid on loans taken for the purchase of affordable houses is now allowed on housing loans sanctioned on or before 31st March 2021.
Builders and developers deriving income from a business of developing and building affordable housing projects be allowed a deduction under section 80-IBA of 100% of the profit from such business (subject to fulfillment of certain conditions). In order to incentivize building affordable housing to boost the supply of such houses, the period of approval of the project by the competent authority is proposed to be extended to 31st March 2021 (previously time limit was till 31st March 2020).
Special provision for the full value of consideration of immovable property:
In the case of Sale/Purchase of immovable property, if Consideration value is less than stamp duty value by more than 10% (Earlier it was 5%), then the difference is counted as capital gain or business income in the hands of seller and income from other sources in the hands of Purchaser.
Where the property (Land and Building both) acquired by the Assessee before 1st April 2001:
Earlier, the Cost of Acquisition means the cost of acquisition of the property to the assessee or fair market value of the property as on the date of 1st April 2001, at the option of assessee.
Now, the Cost of Acquisition means the cost of acquisition of the property to the assessee or fair market value of the property as on the date of 1st April 2001 where Fair Market Value shall not exceed stamp duty value of such property as on 1st April 2001.
Donation to Charitable Institution:
The income of charitable institutions is fully exempt from taxation. Further, a donation made to these institutions is also allowed as a deduction in computing the taxable income of the donor.
Now, to claim the tax exemption, the charitable institutions must be registered with the Income Tax Department.
In order to ease the process of claiming a deduction for the donation, pre-fill the donee’s information in taxpayer’s return on the basis of information of donations furnished by the done.
To simplify the compliance for the new and existing charity institutions, the process of registration has been made completely electronic under which a unique registration number
(URN) shall be issued to all new and existing charitable institutions. Further, to facilitate the registration of the new charitable institution, which is yet to start their charitable activities, allow them provisional registration for three years.
Widening the scope of TDS on E-commerce transactions through the insertion of a new section:
In order to widen and deepen the tax net by bringing participants of e-commerce within the tax net, it is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of 1% with the following key points:
The TDS is to be paid by e-commerce operator for sale of goods or provision of
service facilitated by it through its digital or electronic facility or platform;
E-commerce operator is required to deduct tax at the time of credit of the amount of sale or service or both to the account of e-commerce participant or at the time of payment thereof to such participant by any mode, whichever is earlier.
Modification of residency provisions:
To become a non-resident, an Indian will now have to stay out of the country for 240 days instead of 180 days that was the norm earlier.
“Government has proposed to make changes in the Income Tax Act where if an Indian citizen stays out of the country for more than 182 days, he becomes a non-resident. So, Government has proposed to make some changes, now in order to become non-resident he has to stay out of the country for 240 days”.
But if any Indian citizen is not a resident of any country in the world, he will be deemed to be a resident of India and the government will tax his income.
Indirect Tax: Proposed Amendments in Indirect Taxation
GST:
- a) Simplified GST return shall be implemented from 1st April 2020. The refund process to be fully automated.
- b) The electronic invoice is another innovation wherein critical information shall be captured electronically in a centralized system. It will be implemented in a phased manner starting from this month itself on an optional basis. It will facilitate compliance and return filing.
- c) Dynamic QR-code is proposed for consumer invoices. GST parameters will be captured when payment for purchases is made through the QR-code. A system of cash reward is envisaged to incentivize customers to seek invoices.
- d) Penalty for fake invoice – it is proposed to introduce a new provision in the Act to provide for a levy of penalty on a person if it is found during any proceeding under the Act that in the books of accounts maintained by him there is an (i) false entry or (ii) any entry relevant for computation of total income of such person has been omitted to evade tax liability. The penalty payable by such a person shall be equal to the aggregate amount of false entries or omitted entries.
- e) Punishment for certain offenses – The offense of fraudulent availing of input tax credit without any invoice is now a cognizable and non-bailable offense. Provision of prosecution is extended to cover the person who even causes to commit (can be a consultant) and retain the benefit out of any offense.
- f) Application for revocation of GST registration:- Earlier the time limit for the application for revocation was 30days, if missed then one has no option to go for an appeal to the higher authorities. After the amendment, on sufficient reason, the time limit for the revocation can be extended by 30 days and for further 30 days by the respective authorities.
- g) Time-limit for taking credit in case of Debit Notes– Time-limit for availing input tax credit in respect of debit note would now be dependent on the date when such debit note is issued rather than the date of the invoice in respect of which it is issued.
Custom Act:
- a) Reduction in basic customs duty on imports of newsprint and lightweight coated paper from 10
% to 5%. - b) Customs Duty on Footwear and Furniture raised and Additional Health Cess levied on Medical Equipment Import. This is done to promote Indian Industries.
- c) Anti-dumping duty on PTA is being abolished.
- d) Proposed additional benefits to exporters– In the Budget speech, the Hon’ble finance minister has proposed to provide the following additional benefits for exporters:(i) To digitally refund to exporters, duties and taxes levied at the Central, State and local levels, such as electricity duties and VAT on fuel used for transportation, which is not getting exempted or refunded under any other existing mechanism.(ii) To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched, which provides for higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim settlements.
Disclaimer
This material and the information contained herein prepared by P R A S S & Associates LLP is intended to provide general information on Union Budget 2020 and is not exhaustive. We are not providing any professional advice or service by means of the above information. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult with us or any other qualified professional advisor.