Changes in Income tax Act proposed in Finance Bill, 2020

The Union Finance Minister Nirmala Sitharaman delivered budget speech breaking all previous records w.r.t. time. The budget speech began with a homage to late Mr Arun Jaitley with emphasis on Sabka Saath, Sabka Vikas, Sabka Vishwas.

Synopsis of budget proposals in direct tax has been categorized here under:

Direct tax rate card:

  • New tax scheme for Individual & HUF (without considering prescribed exemptions/deductions):
Income New Regime – with exemptions# New Regime – without deductions#
Up to 250,000 Nil Nil
250,000 – 500,000* 5% 5%
500,000 – 750,000 10% 20%
750,000 – 1,000,000 15% 20%
1,000,000 – 1,250,000 20% 30%
1,250,000 – 1,500,000 25% 30%
Above 1,500,000 30% 30%
# Surcharge and Education Cess extra
*Deduction upto Rs.12,500 for taxable income upto Rs. 500,000
  • Concessional tax rates for co-operative societiesat the rate of 22% plus 10% surcharge and 4% cess without any exemption.
  • Domestic company or mutual funds shall not be required to pay any Dividend Distribution Tax (DDT). Dividend shall be taxable in the hands of recipient.
  • For tax purposes, citizenship check to prevail over domicile check
  • Indian Citizens/ PIO stay in India restricted to 120 days instead of 182 days
  • Safe harbour limit of 5% under Section 43CA, 50C and 56 has been extended to 10%.

Deductions & Exemptions:

  • Exemption to a wholly- owned subsidiary of Abu Dhabi Investment Authority (ADIA) and Sovereign Wealth Fund
  • Withdrawal of exemption for Union Pubic Services Commission (UPSC) Chairman and CEC
  • Entities receiving donation shall be required to file a statement of the donation received and shall issue a certificate to donor.
  • Extension of time limit for approval of affordable housing project under section 80-IBA to 31-03-2021.
  • The condition on period of sanctioning of loan by the financial institution under section 80EEA to be extended to 31-03-2021.
  • Rationalization of taxation of start-ups by increasing turnover limit for claiming exemption under section 80-IAC to 100 Crores
  • Exemption in respect of income accruing or arising to Indian Strategic Petroleum Reserves Limited (ISPRL)
  • An assessee, who is engaged in the specified business, is allowed to claim deduction of capital expenditure under section 35AD.

Changes in TDS & TCS provisions:

  • Fees for technical services shall be subject to 2% TDS under Section 194J.
  • Co-operative society having gross receipts or turnover exceeding Rs.50 crore in the previous financial year is also required to deduct tax from interest if it exceeds Rs. 50,000 in case of a senior citizen and Rs. 40,000 in other cases.
  • E-commerce transaction now subject to 1% TDS.

Return of Income:

  • Due date for filing of return for Tax Audit extended to October 31 of the Assessment year.
  • Non-residents do not have to File ITR in respect of income from Royalty and FTS.
  • Increased threshold limit for Tax Audit from Rs. 1 crore to Rs. 5 crores.

Assessment & Appeals:

  • Faceless appeal is proposed up to CIT(A)
  • Expansion of e-assessment scheme as to include the proceedings under Section 144.
  • Approval of CIT/Director is required to conduct Survey.
  • No stay by ITAT unless 20% of the disputed tax is deposited.
  • New e-Penalty scheme is proposed to be notified.
  • Penalty via section 271AAD for fake GST invoices to claim the input tax credit.

This content is meant for information only and should not be considered as an advice or opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Mitika Batta

AKGVG & Associates

Leave a Reply

Your email address will not be published. Required fields are marked *