||Alterations to Tax Residency Rules for Non-Residents:
* “income from foreign sources" means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).
||Modifications in personal tax provisions:
||Major corporate tax amendments:
- Anomaly in 35AD(4) removed to allow depreciation u/s 32 to 115BAA and 115BAB companies.
- 80M to remove cascading effect of dividend.
- 80M (dividend cascading) extended to 115BAA and 115BAB.
- 80IBA – Affordable housing projects approval extended to 31 March 2021.
- 115BAB to include electricity generation corporates.
- Dividend income from domestic company or income from units of mutual fund taxable in hands of shareholders instead of DDT.
The Finance Act, 2020 has widened the scope of Equalization Levy. An equalization levy @ 2% shall be imposed on amount received/receivable by non-resident e-commerce operator for e-commerce supply or services made or provided or facilitated by it on or after 1 April 2020 to a:
- Person resident in India
- Non-resident in relation to
- sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India.
- sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India.
- to a person who buys such goods or services or both using internet protocol address located in India.
The equalization levy shall be deposited quarterly.
“E-commerce operator" means a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both
“E-commerce supply or services" means—
Exceptions from the levy:
- Online sale of goods owned by the e-commerce operator; or
- Online provision of services provided by the e-commerce operator; or
- Online sale of goods or provision of services or both, facilitated by the e-commerce operator; or
- Any combination of activities listed in clause (i), (ii) or clause (iii);
- E-commerce operator making or providing or facilitating e-commerce supply or services has a PE in India and such supply or services are effectively connected with such PE.
- Equalization levy is leviable under section 165 (online advertisement and related activities).
- Sales, turnover or gross receipts of the e-commerce operator from such supply or services is less than 2 crore during the previous year.
||Tax Deducted at Source (TDCS) provisions:
||In case of the domestic company declaring dividend to residents the companies are obligated to withhold tax@ 10%, if dividend exceeds 5,000
||TDS on interest by cooperative societies applicable where –
- Total receipt of society exceeds 50 cr in previous year, and
- Estimated interest payable exceeds 40,000 (50,000 for senior citizen) in a year
||In case of works contract @2% to cover cases where contract manufacturing involves raw material provided from related parties
||Withholding tax on technical services (to non-professionals) or royalty in nature of consideration for sale, distribution or exhibition of cinematographic films be reduced to 2% from 10%
||TDS @ 10% on income from units of Mutual Funds/administrator of specified undertaking/specified company exceeding 5,000 (not applicable on capital gains upon redemption)
||TDS on interest on long-term bonds and RDBs issued after 1 April 2020 reduced to 4% from 5%
- Substituted old section - Cash withdrawal from banking company, co-operative society carrying banking business, or post office
- Filed returns for all 3 years (for which due date has expired) preceding the year in which payment is made - @ 2% of cash exceeding 1 Cr
- Not filed
- @2% of cash withdrawn between 20 lacs to 1 Cr
- @ 5% for cash withdrawal exceeding 1 Cr
- W.e.f. 1 Oct 2020, ecommerce operator to deduct TDS @1% (@5% for non-PAN) for sale of goods/services on the portal
- Individual and HUF participants with less than Rs 5 lakh turnover are exempted upon furnishing PAN/Aadhar
- No TDS to be made again on which deduction made under this section, except for payments for hosting advertisements or providing any other services
- E-commerce operator to be deemed to be person responsible for paying to e-commerce participant
||TDS on dividend to Non-residents capped at 20% (max surcharge 15%)
||Tax Collected at Source (TCS) provisions:
- On foreign remittances under LRS
W.e.f. 1 Oct 2020, in liberalized Remittance scheme the authorized dealers is to collect tax @5% (10% for non-PAN) on remittances made outside India with following exceptions:
- TCS on payment for overseas tour package to be collected by seller
- Payments (except for overseas tour package) upto 7 lacs in a year
- Payments (except for overseas tour package) upto 7 lacs where amount exceeds 7 lacs in a year
- @0.5% of the education loan remitted outside India (covered under 80E)
- TCS already collected by seller
- TDS deducted by buyer on purchase
- Others as may be notified
On sale of goods
With respect to TCS on sale of goods,
W.e.f. 1 Oct 2020, TCS @ 0.1% (1% for non-PAN) of sale shall be collected by sellers (with sales exceeding 10 cr.) receiving any consideration in excess of 50 lakhs from a buyer. The stated provisions shall not be applicable on:
- Goods exported out of India
- Goods imported into India
- TDS deducted by buyer on purchase
- Liquor, tendu, forest produce, scrap, minerals [206C(1)]
- Motor vehicle [206C(1F)]
- Foreign remittance [206C(1G)]
||Alterations in international taxation provisions:
- Section 9 – SEP deferred to AY 2022-23.
- 94B – Thin capitalization rules not to apply in case of Indian branch of foreign bank.
- 115A - No need to file return, if TDS is deducted as per Income tax Act on FTS and royalty income of foreign companies.
- Safe harbor to be applicable on transfer price or income, deemed to accrue or arise under section 9(1)(i), declared by the assessee. Safe harbor rules and APA provisions to be extended to attribution of profits to a PE.
- Dispute resolution panel route under section 144C now is also available for Non-Residents as well as where return was not filed.
- Government purpose of entering into DTAA aligned with MLI by stipulating the central government can enter into agreement with any country outside India or specified country for avoidance of double taxation and reduced taxation through tax evasion.
||Provisions related to start-ups:
- Tax on ESOPs to employees of start-ups has been deferred. The same to be collected within 14 daysof the earliest of the following:
- 5 years from end of year of exercise
- Sale of ESOP
- Assessee ceases to be employee of the start-up
- For the start-ups to qualify for the tax holiday:
- The total business turnover limit has been increased from 25 crore to 100 crore.
- Eligibility period for the claiming such deduction in three consecutive years has been expanded to 10 years from incorporation from the existing 7 years.
||Amendment to assessments and dispute resolution conditions:
- In case of information received form the prescribed authority, survey operations can now be conducted with the prior approval of the Joint commissioner or Joint Director.
- Faceless e-assessment will eliminate the interface between the commissioner(appeals) and appellant , help optimize resources and create dynamic jurisdiction system.
- E penalty would eliminate the interface between AO and the assessee and impart greater efficiency and transparency in levy of penalty.
- Penalty to be imposed in case of false entry or entry omitted in the books (to evade tax) equivalent to the amount of entry in the hands of the Assessee as well as the person who caused the false entry or omission.
- ITAT can grant stay with a minimum deposit/ security of 20% tax , interest, penalty, fee, etc.
- Taxpayers to pay only the disputed tax and can get the complete waiver of interest and penalty if such taxes are paid by 30 June 2020 under the New Dispute Resolution Scheme (Vivad se Vishwas Scheme). Scheme to be applicable for all types of appeals pending at any level.
- Turnover limit for tax audit increased from 1 cr to 5 cr for those assessee whose:
- Aggregate of the cash receipts does not exceed more than 5 % of total sales or turnover and
- Aggregate of the cash payments must not exceed 5% of all payments.
- For Non-TP corporates and tax audit assesses (extended to all partners)
- Date of furnishing Form 3CD, MAT certificate – 30 September
- Date of filing tax audit ITRs – 31 October
- For TP corporates
- Date for furnishing Form 3CD, MAT certificate - 31 October
- Date for furnishing Form 3CEB - 31 October
- Date of furnishing ITR– 30 November
- Return of income can now be verified by any other person as may be verified by the CBDT in addition to the current signatories.
|Addressing the anomalies of the Finance Bill as introduced vide budget 20-21, The Finance Act, 2020 provides ingenious yet substantial transformation in income tax provisions.