Income Tax Rates
IN ORDER TO SIMPLIFY INCOME TAX SYSTEM FINANCE MINISTER HAS PROPOSED NEW SIMPLIFIED TAX REGIME, CURRENTLY THERE ARE MORE THAN 100 EXEMPTIONS AND DEDUCTIONS OF DIFFERENT NATURE ARE PROVIDED IN INCOME TAX ACT,1961. FM HAS REMOVED AROUND 70 OF THEM IN THE NEW SIMPLIFIED REGIME.
*In Exercise of Option II Assessee shall not be allowed for below Exemption/ Deduction
(i) Leave travel concession as contained in clause (5) of section 10;
(ii) House rent allowance as contained in clause (13A) of section 10;
(iii) Some of the allowance as contained in clause (14) of section 10;
(iv) Allowances to MPs/MLAs as contained in clause (17) of section 10;
(v) Allowance for the income of minor as contained in clause (32) of section 10;
(vi) Exemption for SEZ unit contained in section 10AA;
(vii) Standard deduction, the deduction for entertainment allowance and employment/professional tax as contained in section 16;
(viii) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section
(2) of section 23. (Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);
(ix) Additional deprecation under clause (iia) of sub-section (1) of section 32;
(x) Deductions under section 32AD, 33AB, 33ABA;
(xi) Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
(xii) Deduction under section 35AD or section 35CCC;
(xiii) Deduction from family pension under clause (iia) of section 57;
(xiv) (xiv) Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed. As many allowances have been provided through notification of rules, it is proposed to carry out amendment of the Income-tax Rules, 1962 (the Rules) subsequently, so as to allow only following allowances notified under section 10(14) of the Act to the Individual or HUF exercising option under the proposed section: (a) Transport Allowance granted to a divyang employee to meet expenditure for the purpose of commuting between place of residence and place of duty (b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office; (c) Any Allowance granted to meet the cost of travel on tour or on transfer; (d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
• Assessee should not set off any brought forward losses and unabsorbed depreciation of past years which is attributable to any deduction specified above. Also, the assessee is also not allowed to set off loss from house property with any other head of income.
• This option can be exercised only when return is furnished under section 139(1).
• The option can be withdrawn only once where it was exercised by the individual or HUF having business income for a previous year other than the year in which it was exercised (i.e. First Year) and thereafter, the individual or HUF shall never be eligible to exercise option under this section again.
Requirement of getting the books of accounts audited has been relaxed for persons having business (not profession) turnover up to 5 crores whose;
? Aggregate of all amount received in cash does not exceed 5 percent of such amount and
? Aggregate of all payments made in cash does not exceed 5 percent of such amount
Note: Cess of 4% shall be levied over and above the above taxes.
*Reduced rate of 25% shall be applicable where total turnover / receipts in the last P.Y. does not exceed Rs 400 Cr
**Further reduced tax rate of 22% plus 10% surcharge applicable for companies opting for section 115BAA
*** Further reduced tax rate of 15% plus 10% surcharge applicable for manufacturing and power generating companies opting for section 115BAB
• The person would be resident if stays in India 120days or more instead of 182 days or more days.
• The person would be NOR (Non-Ordinary resident) if resident in India on 7 years out of 10 years from earlier 9 years after 10 years.
• The person of Indian origin shall be deemed to be resident of India if he is not liable to tax in any other country by reason for his residence or domicile.
• An Indian citizen, shall be deemed to be resident in India for tax purposes (i.e. Income from Indian business & profession is liable to tax in any other country or territory by reason of domicile or residence.
• Authorized dealer is liable to deduct TCS @5% for remittance made out of India under LRS of RBI (if the amount remitted is INR 7 Lakhs or more)
• A Seller of International tour package is liable to deduct TCS @5% on money receives for International tour package
• A Seller (whose total turnover exceeds INR 10 crores in previous year) is liable to deduct TCS @0.1% of goods (other than goods covered under existing TCS provisions) for the value exceeding INR50 lakhs in a year
Tax Deducted at Source (Section wise)
|194||TDS on payment of divided||No TDS|
|194A||Co-operative Society Engaged in banking only||Co-operative Society other than banking also included|
|194C||Earlier- Manufacturing and suppling of product by using material purchased from customer||Now Purchase from customer and its associate (Under Contract of manufacturing)|
|194J||TDS @ 10% on technical & professional services||Now 2% on Professional services|
|194K||-||Any person while making payment to resident shall deduct Tds @10% if such payment in respect of- units of a mutual fund specified under section 10(23D); or units from the Administrator of the specified undertaking; or units from the specified company- No TDS is required to be deducted if the payment does not exceed INR 5,000.|
|194LBA||A business trust shall while distributing income, to a non-resident or a foreign company, being in the nature defined under section 10 (23FC) (a)- Interest to Special Purpose Vehicle (SPV), Deduct TDS at 5%.||Now Along with this provision, TDS shall be deducted at 10% on section 10 (23 FC) (b)- Dividend Income.|
|194O||-||An E-Commerce operator shall at the time of credit of the amount for sale of goods or provision of service to an E Commerce participant deduct TDS at 1%. If the sale amt exceed INR 500000|
|196||Exempted||TDS is applicable on dividend distributed to non- resident, ? 196A 20% on any income respect of units of a Mutual Funds, ? 196C 10% for dividend on Global Depository Receipts. ? 196D 20% for specified income for Foreign institutional investors|
|194LC||-||TDS @4% shall also be deducted on interest received by a non-resident from a long-term debt or a rupee dominated bond which is listed on a recognized stock exchange located on any International Financial Service Centre.|
|194LD||-||TDS@ 5% on Income by way of interest shall also include interest received between 1st April 2020 and 1st July 2023 in respect of municipal debt securities and also under the said section time period in respect of interest received on rupee dominated bond of an Indian company or a government security has been extended to 1st July 2023.|
Deferring TDS or tax payment in respect of ESOP’s from START-UPS
- As per the current tax regime, TDS is applicable or tax is leviable on Employee Stock Options (ESOP’s) at the time of exercise of option as salary income by way of perquisites.
- With amendment in section 192, it is proposed to defer such tax levy within 14 days from the earliest of the following:
o Expiry of 48 months from the end of the AY in which such ESOPs were allotted to employees; o Date of sale of such ESOPs;
- Date of Employee ceasing to be employee of such start-up.
- Section 191 (Direct payment of tax in case of no TDS) & Section 156 (for notice of demand) have been rationalized to provide effect of the above.
|12AB||Registration of Charitable Trust||- Effective from June 1, 2020 for online registration of trust for claiming deduction 11 and 12 of Income Tax Act, 1961. - Registration under the said section will be valid for 5 years only.|
|35 ADS||Deduction in respect of Expenditure on specified business||It has been proposed in section 35AD to make said deduction optional for the assessee so that the taxpayer opting for concessional tax rate of 22% can claim normal depreciation under section 32.|
|43CA, 50C, 56||Safe Harbour Limit||Safe harbour limit of variation in sales consideration of land or building increased from 5% to 10% - in case of capital asset, being land or building or both acquired before April 1, 2001 the fair market value of such asset on April 1, 2001 shall not exceeds the stamp duty value of such assets on said date - difference in transaction value and value adopted by specified authority up to 10% is acceptable (earlier it was 5%)|
|72AA||Allowing Carry- forward of losses or depreciation in Certain amalgamations||Applies to amalgamation of: - one or more corresponding new bank with another corresponding new bank - one or more general insurance government company with any other general insurance company.|
|80EEA||Interest exemption on loan taken for affordable house||- At present, assessee can avail benefit of interest up to INR 1.5 Lacs, on loan sanctioned between period 1st April, 2019 to 31st March, 2020 under affordable housing scheme - Now, This loan sanction period is extended to 31st March, 2021.|
|80G, 80GGA||Donations||- Donation under section 80G and 80GGA shall be allowed only if statement is furnished by the donee in respect of donations received with effect from 1st June 2020. - Cash donation for scientific research or rural development under section 80GGA has been reduced to INR 2,000 from INR 10,000|
|80IAC||Tax exemption on start-ups||- 100% tax exemption shall be allowed for 3 consecutive years out of 10 years (earlier it was 7 years) - For the purpose of eligible start-up, turnover of entity does not exceed INR 100 crores (earlier it was INR 25 crores)|
|80IBA||Deduction in respect of profits and gains from Housing Projects||- 100% tax exemption shall be allowed for 3 consecutive years out of 10 years (earlier it was 7 years) - For the purpose of eligible start-up, turnover of entity does not exceed INR 100 crores (earlier it was INR 25 crores)|
|80M||Deduction in respect of certain intercorporate dividends||- Companies availing concessional tax rates under section 115BAA and 115BAB can now claim deduction under new section 80M i.e. Deduction for dividends distributed by the Company subject to the amount of dividend distributed by it.|
|115O||Tax on distributed profit of Domestic Company||- DDT levied on dividend distributed by domestic companies is proposed to be abolished beginning from 1st April, 2020|
|115R||Tax on Distributed profits of Domestic Company||- Tax on distributed income by mutual Funds is proposed to be abolished beginning from 1st April, 2020.|
|271K||Penalty on Charitable Trust||- A new penalty has been proposed u/s 271K to enable the AO to levy penalty not less than Rs.10,000 to Rs.1,00,000 on charitable institutions who failed to provide the details of the donor within prescribed time.|
Goods & Service Tax
- AADHAAR based verification of taxpayers being introduced to identify dummy or non-existent units.
- Electronic invoices to capture critical information in a centralized system to be implemented in a phased manner.
- Simplified return with features like SMS based filing for nil return and improved input tax credit flow to be implemented from 1 April 2020 as a pilot run
- Dynamic QR code proposed for consumer invoices GST parameters will be captured when payment for purchases is made through the QR code
- To curb the practice of obtaining fake GST invoices so as to claim the input tax credit, a new section 271AAD has been proposed to be inserted to levy a penalty of an amount equal to the aggregate amount of such fake invoices.
|Footwear- 25% to 30%||Calcined petroleum coke- 10% to 7.5%|
|Furniture Goods- 20% to 25%||BCD on Specified part of microphones is being exempted|
|5 % health cess to be imposed on the imports of Medical Devices, exempt those exempt from BCD||Import of newsprint and lightweight coated paper- 10% to 7.5%|
|Completely Built Units (CBUs) of commercial electrical vehicles-25% to 40%||Bunker fuel-10% to NIL|
|Semi- Knocked Down (SKD) forms of electric passenger vehicles, Three-Wheeler- 15% to 30 %||Calendared Plastics Sheet used in Smart Cards- 10% to 5%|
Other Important Changes
- Bank deposit Insurance cover has been increased from INR 100000 to INR 500000 per depositor.
- sells LIC’s part stake via Public Offering (IPO).
- ‘Vivad Se Vishwas’Scheme
In the past Government has taken several measures to reduce tax litigations. In the last budget, Sabka Vishwas Scheme was brought in to reduce litigation in indirect taxes. It resulted in settling over 1,89,000 cases. Currently, there are 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court. a scheme similar to the indirect tax Sabka Vishwas for reducing litigations even in the direct taxes named Vivad Se Vishwas’Scheme is being introduded as a separate bill.