Overview of Union Budget 2020 and Income Tax Slabs
Detailed overview of the Union Budget 2020 focusing on the income tax slabs for AY 2020-21 and 2021-22, including the optional tax scheme under Section 115BAC. It also lists exemptions and deductions that cannot be availed under the new scheme.
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Overview on UNION BUDGET 2020 By Sunil Singh Direct Tax Assistant DNV & Co.
Income Tax Slab for AY 2020-21 & 2021-22: Income Individual (Age less than 60 Years) Senior Citizen (Age above 60 Years) Super Senior Citizen (Age above 80 Years) Up to Rs. 2,50,000 Nil Nil Nil Rs. 2,50,000 to Rs. 3,00,000 5% Nil Nil Rs. 3,00,000 to Rs. 5,00,000 5% 5% Nil Rs. 5,00,000 to Rs. 10,00,000 20% 20% 20% Above Rs. 10,00,000 30% 30% 30%
Optional tax scheme - Section 115BAC Government has introduced a new scheme for Individuals and HUF s with lower rates for those who are ready to forgo exemptions/deductions Total Income Tax Rates (Under new tax regime) Tax Rate (under Old ta regime) Upto Rs.2,50,000/- Nil Nil Rs. 2,50,001 to Rs. 5,00,000 5% 5% Rs. 5,00,001 to Rs. 7,50,000 10% 20% Rs. 7,50,001 to Rs.10,00,000 15% 20% Rs.10,00,001 to Rs.12,50,000 20% 30% Rs.12,50,001 to Rs.15,00,000 25% 30% Above Rs.15,00,000 30% 30%
List of Exemptions/Deductions that cant be availed by those who opt new scheme Leave Travel Concession Section 10(5) House Rent Allowance Section 10(13A) Allowances exempt u/s 10(14) Allowances to MP s/MLA s Section 10(17) Clubbed income of Minor upto Rs.1,500/- Section 10(32) Exemption for unit in SEZ Section 10AA Standard Deduction of Rs.50,000/- (on salary) Section 16 Professional tax deducted from salary - Section 16
List of Exemptions/Deductions that cant be availed by those who opt new scheme Interest in respect of Self Occupied Property Section 24(b) Set off of loss under the head income from house property against other heads Section 71 Additional depreciation Section 32(1)(iia) Deduction under section 32AD, 33AB and 33ABA Specified deduction for donations or for expenditure on scientific research Section 35(1)(ii)/(iii) or section 35(2AA) Weighted deduction for expenditure on specified business/agricultural extension project- Section 35AD and 35CCC
List of Exemptions/Deductions that cant be availed by those who opt new scheme Standard deduction for family pension- Section 57(iia) Deduction under chapter VI-A (such as section 80C, 80D, 80TTA, 80TTB, 80G etc.) Other than a) 80CCD(2)-employer s contribution in notified pension scheme b) 80JJAA Employment of new employees c) a person having unit in International Financial Service Centre (IFSC) - 80LA Exemption in respect of voucher granted for free food and beverages to employees as mentioned in explanatory memorandum There is no separate higher threshold for senior and very senior citizen Provisions related to AMT and credit relating to same are not applicable
The option under the new taxation scheme is required to be exercised by the taxpayer In case of individuals, HUFs having business income, option to be exercised while filing return of Income. The option once exercised shall apply to subsequent years. Withdrawal from this option is permitted only once. In case of individuals, HUFs having no business income, option to be exercised annually while filing return of income
Tax Rates for Other assessee for the A.Y. 2020-21 & 2021-22: Status of Tax Payer Rate of Income Tax Firms/Local Authority 30% Domestic Company Normal If Turnover of F.Y.2018-19 < Rs. 400 Cr. u/s 115BAA u/s 115BAB 30% 25% 22% plus surcharge @10% 15% plus surcharge @ 10% Foreign Company 40% Co-Operative Society Normal u/s 115BAD (Can t avail slab benefit and eligible deductions) As per Old tax slab rate Straight 22%
Tax on income of certain domestic companies (Section 115BAA & 115BAB) Section 115BAB has been amended to include business of generation of electricity under the definition of manufacturing to give benefit of tax @ 15% subject to conditions of this provision. Taxation of domestic companies at concessional rates is subject to non- availment of specified deductions and incentives. Now, such benefit of concessional rate shall be available for the company after allowing the deductions under section 80JJAA or Section 80M.
Amendment in Section 6 relating to Residential Status of Individual and HUF An Indian citizen or PIO, who is outside India, to be considered as a resident in India, inter- alia, if his period of stay while on a visit to India is 120 days or more during the said Financial Year (as against 182 days or more as per existing provisions) An Individual being Indian citizen shall be deemed to be a resident in India, if such individual is not liable to tax in any other country or territory by reason of his domicile, residence or any other criteria of similar nature. Individual or HUF shall be considered as not ordinarily resident in India, if such individual or manager of such HUF is a non-resident in India for 7 out of 10 preceding years (as against 9 out of 10 preceding years as per existing provisions). Alternate condition of stay in India upto 729 days in preceding 7 years has been deleted now.
Tax on dividends Dividend distribution tax (DDT) will no longer be payable from 1st day of April, 2020. Consequently Section 115BBDA, wherein dividend exceeding Rs. 10 lakhs were taxed would be not effective after 31st March 2020. Also Section 10(34) dividend on shares and 10(35) dividends on units / M.F are withdrawn from 1stApril 2020. Only interest expense allowed as a deduction upto 20% of the dividend (Amendment to Section 57) Foreign shareholders to pay tax at 20% under the Act (subject to availability of treaty benefits). No interest deduction
Taxation of Perquisite (Amendment in Section 17) A combined upper limit of Rs. 7.50 lakh per employee per year has been proposed in respect of Employer s Contribution to NPS, Superannuation Fund and Recognised Provident fund and any excess contribution would to be taxable in the hands of employees as perquisites. Earlier the said upper limit for employer s contribution was separately mentioned as given below categories i) for approved superannuation fund with limit of Rs. 1.5 lac, ii) for PF 12% of salary iii) for NPS 10% of salary Consequently, annual accretion of interest, dividend or any other amounts of similar nature on such taxable Employer s Contribution to be taxable as perquisite.
Tax Audit Tax Audit turnover threshold limit u/s 44AB increased from Rs.1 crore to Rs. 5 crores, provided tax payer should not transact more than 5% of business transactions in cash So now the Enterprise has to prepare payment and receipt account so as to see whether cash transactions are not more than 5% to take the benefit of enhanced limit. Total of Receipts and payments is to be checked separately to ensure the above limit of 5%.
Amendments in [Section 139] Due date for filing of Return Due date for filing of return of audit cases including all (deleting working) partners of a firm to be audited is extended from 30thSeptember to 31st October. Due date for filing of return of Transfer Pricing cases will remain 30th November.
Due date for Tax Audit Report Finance bill proposes that, tax Audit Report to be filed 1 month prior to the due date applicable for filing the return of income. Accordingly, the due dates for filing the Tax Audit Report will be 30 September (31 October in cases where Transfer Pricing provisions are applicable)
Amendments in [Section 55(2)(b)] - FMV in case of Land and building Under the existing provisions of section 55 of the Act, for computing capital gains in respect of an asset acquired before 1st April, 2001, the assessee has been allowed an option of either to take the fair market value of the asset as on 1stApril, 2001 or the actual cost of the asset as cost of acquisition. Finance bill proposes to insert an explanation under clause (ac) of sub-section (2) of the said section to provide that in case of a capital asset, being land or building or both, the fair market value of such an asset on 1st April, 2001 shall not exceed the stamp duty value of such asset as on 1st April, 2001 where such stamp duty value is available.
Amendments in [section 80GGA] - changes u/s 80GGA- Donation for scientific research or rural development The deduction for eligible donations to a donor u/s 35 to be allowed only if a statement in respect of donation is furnished by the donee. Failure to file such statement to attract fees u/s 234G (applicable w.e.f.01.06.2020) @Rs.200 per day for such failure and penalty u/s 271K(applicable w.e.f.01.06.2020) that will start from Rs.10,000/- but shall not exceed Rs.1,00,000/- in any case. The deduction of cash donation for scientific research or rural development restricted to INR2,000 from INR 10000 like other eligible donations.
Amendments in [Section 115A] Relief to non-resident from filing of return of Income As per existing provision under this section Relief has been granted to non- resident assessee from filing of return of income in case having sources of income only in the form of Interest or Dividend and applicable taxes has been deducted on sources on receipts of the same. Now the said benefit has also been extended to all non-residents assessee having the source of income from royalty or fees for technical services (FTS)
New Section 80M has been inserted- Deduction of dividend income Where Domestic Company receives dividend from domestic company during the Previous year and also distributed dividend on or before one month prior to the due date of furnishing of Income tax return, a deduction of an amount equal to so much of the amount of income by way of dividends received from such other domestic company as does not exceed the amount of dividend distributed by the first mentioned domestic company
New section 271AAD inserted (to be effective from April 1, 2020) Penalty for fake invoice or false entry 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 a (i) false entry or (ii) any entry relevant for computation of total income of such person has been, to evade tax liability. The penalty payable by such person shall be equal to the aggregate amount of false entries or omitted entry. It is also proposed to provide that any other person, who causes in any manner a person to make or cause to make a false entry or omits or causes to omit any entry, shall also pay by way of penalty a sum which is equal to the aggregate amounts of such false entries or omitted entry.
The false entries is proposed to include use or intention to use forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or invoice in respect of supply or receipt of goods or services or both to or from a person who do not exist.
Amendment/Insertion of TDS Sections Section Transaction/Event Rate of TDS Section 194J Fee for technical services 2% (with effect from 01.04.2020) Section 194K Payment of any income in respect of a) Units of a Mutual Fund as per Section 10(23D) b) Units from the administrator c) Units from specified company 10% Section 194-O Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform. 1% Non-PAN at 5%
Tax Collection at Source Section 206C has been amended as under Person Liable to collect tax Transaction/Event Rate of TCS Authorised Dealers (AD Bankers) Remittance under Liberalised Remittance Scheme exceeding Rs 700,000 in a financial year 5% (10% for non- PAN / non Aadhar cases) Seller of an overseas tour program package Sale of overseas tour package 5% (10% for non- PAN / non Aadhar cases) Seller of goods (whose gross receipts / turnover exceed Rs 10 Cr in a financial year) Sale of goods exceeding 50 lacs in a financial year 0.1% (1% for non-PAN / non Aadhar cases)
Amendments in [Section 80IAC] Tax exemption for start-ups entities 100% tax exemption will be available for eligible start-up entities in any three consecutive assessment years out of 10 assessment years from the start up instead of existing 7 years. Turnover limit is also increased from 25 crore to Rs. 100 crore Amendments in [Section 254 (2A)] - ITAT power to grant stay on demand ITAT is powered to grant stay for 180 days on the condition of deposit 20% of such disputed tax, interest, penalty, etc. The maximum stay with extension to be granted shall not exceed 365 days at any case. New section 250(6A) inserted New Scheme of E-Appeal The Central Government by notification to be issued on or before 31 March 2022 directing for Faceless appeal proceeding Taxation on ESOP ESOPs will be taxed earlier of 5 years or leaving the Company or sell of shares.
Amendments in [Section 11 & 12] Registration u/s. 12AA becoming inoperative The registration to the charitable / religious trust, institutions etc. is presently given u/s. 12AA of the Income Tax Act ( Act ) without expiry date. Now, w.e.f. 01stJune, 2020 it is proposed to make this section ineffective and to give registration under new section 12AB for five years only however can be reobtained. The institutions etc. which are already registered under existing section 12AA or earlier section 12A / approved under existing provisions of section 10(23C) or section 80G will also be required to obtain fresh registration / approval under new section 12AB / amended section 10(23C) / amended section 80G. The application for fresh registration of already registered u/s. 12AA is required to be filed u/s. 12AB till September 2020 and consequently fresh application for exemption u/s. 10(23C) or 80G who will get provisional registration for 3 years .
Amendments in [Section 204] Changes in person responsible for paying (Chapter XVII) By inserting clause (v), person responsible for paying under chapter XVII and Section 285 (liaison office) is amended that in the case of a person not resident in India, the person himself or any person authorised by such person or the agent of such person in India including any person treated as an agent under section 163.
Amendments in [Section 194LC] Extension in Period for Rupee Denominated Bond Period for issuance of rupee denominated bond to raise fund by a domestic company from outside India is extended from 1st July 2020 upto 1st July 2023 TDS on interest thereon is reduced from 5% to 4%.
The Direct Tax Vivad Se Vishwas Bill,2020 Ms. Nirmala Sitharaman tried to impress the Tax Payer by introducing the mechanism to clear the 5 lakh cases pending in appeals for around Rs. 10 lakh cores. The scheme is available to the appellant for the income tax or corporation tax cases including DRP matters lying in the Supreme Court, the High Courts, the Income Tax Appellate Tribunals, and the Commissioner (Appeals). Eligibility Appeals pending as on 31.01.2020 Orders doe which time for filing appeal has not expired on 31.01.2020 Cases pending with DRP on 31.01.2020 Direction of DRP issued on or before 31.01.2020 but no order is passed Cases for revision (section 264) filed on or before 31.01.2020 Search cases where disputed tax is less than RS. 5 crore. The appeals / writ filed by tax payer or the department Cases in arbitration in India or abroad.
Disputes covered - Disputed tax, penalty, interest, fees, TDS and TCS Given below table with details of Amount payable for resolution of disputes Disputes relating to Payable before March 31, 2020 Additional amount payable after March 31, 2020 Payment of tax Amount of disputed tax (any interest or penalty associated with such tax will be waived) 1) 10% of the amount of disputed tax, or 2) interest and penalty relating to that tax, whichever is lower Payment of fee, interest, or penalty 25% of the amount under such dispute Another 5% of the amount under such dispute In the case of departmental appeal, the assessee can avail the scheme by paying 62.50% of tax in search cases, 50% of tax in other cases, 12.50% of interest and penalty if paid before 31.03.2020 and will be 5% additional id paid between April to June 2020.
Waiver of rights: For dispute resolution, the appellant is required to furnish an undertaking waiving his rights to seek any remedy or claim in relation to that dispute under any law, including the Income Tax Act, 1961 (IT Act). All such claims already filed in relation to the dispute must be withdrawn before filing the declaration. Immunity to appellant: Once a dispute is resolved, the designated authority cannot levy interest or penalty in relation to that dispute. Further, no appellate forum can make a decision in relation to the matter of dispute once it is resolved. Such matters cannot be reopened in any proceeding under any law, including the ITAct. Disputes not covered: The proposed mechanism will not cover: (i) where prosecution has been initiated before the declaration is filed, (ii) which involve persons who have been convicted or are being prosecuted for offences under certain laws (such as the Indian Penal Code), or for enforcement of civil liabilities, and (iii) involving undisclosed foreign income or assets.
