Union Budget 2020 – Union Budget 2020 Direct Taxes Highlights. Finance Minister – Smt. Nirmala Sitharaman, on 1st February 2020 presented Budget for 2020-2021 with an aim at energizing the Indian economy through a combination of short-term, medium-term, and long term measures.
Income Tax
Income tax rates for Individual
- Nil for income up to Rs. 2,50,000 lakhs
- 5% for income between Rs .2,50,001–Rs.5,00,000 lakhs
- 10% for income between Rs 5,00,001 – Rs. 7,50,000 lakhs
- 15% for income between Rs 7,50,001– Rs. 10,00,000 lakhs
- 20% for income between Rs 10,00,001– Rs. 12,50,000 lakhs
- 25% for income between Rs 12,50,001– Rs. 15,00,000 lakhs
- 30% for income more than Rs 15,00,001 lakhs onwards
Section 115BAC –
Taxpayers have been provided with an option whether they want to pay taxes according to the new regime or if they want to continue paying taxes according to the existing regime.
[However, a few taxpayers may not be able to switch back to the existing tax slab once they opt to follow the new one.]
- To simplify the tax system and lower tax rates, around 70 of more than 100 income tax deductions and exemptions have been removed
- Even such taxpayers will also not be subject to AMT
The total income shall be calculated without any deduction and exemptions as follows:
| Section 10(5) | Leave travel concession |
| Section 10(13A) | House rent allowance |
| Section 10(14) | Some other allowances except specified below Following allowances notified under section 10(14) of the Act to the Individual or HUF exercising option under the proposed section shall be allowed:
|
| Section 10(17) | Allowances to MPs/MLAs |
| Section 10(32) | Allowance for income of minor |
| Section 10AA | Deduction for units established in Special Economic Zones (SEZ) |
| Section 16 | Standard Deduction, Entertainment allowance and employment / professional tax |
| Section 17 rule 3 | Free Food and Beverage through vouchers provided to the employee |
| Section 24(b) | Interest on House Loan |
| 32(1)(iia) | Additional Depreciation |
| Section 32AD | Deduction for investment in new plant and machinery in notified backward areas |
| Section 33AB | Deduction in respect of tea, coffee or rubber business |
| Section 33ABA | Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India(site restoration fund) |
| Section 35(1)(ii) | Deduction for donation made to approved scientific research association, university college or other institutes for doing scientific research which may or may not be related to business |
| Section 35(1)(iia) | Deduction for payment made to an Indian company for doing scientific research which may or may not be related to business |
| Section 35(1)(iii) | Deduction for donation made to university, college, or other institution for doing research in social science or statistical research |
| Section 35(2AA) | Deduction for donation made to National Laboratory or IITs, etc. for doing scientific research which may or may not be related to business |
| Section 35AD | Deduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc. |
| Section 35CCC | Deduction for expenditure on agriculture extension project |
| Section 57(iia) | Deduction from family pension |
| Any Provision of Chapter VI-A | Any Deduction specified under this chapter except section 80CCD(2) [employer contribution in NPS] and section 80JJAA [for new employment] |
The total income shall be calculated without set off any loss
c/f depreciation u/s 32
Loss under head house property. This means loss under the head house property can be set off against income under the head “House Property “ but can not be set off against income under the head in order to avail income tax rates u/s 115BAC
- To boost power generation capacity, government has announced that New power generation companies will have to pay just 15% tax under the new corporate tax regime.
- Tax on cooperative societies reduced to 22% (plus 10% surcharge and 4% cess) without exemptions as against 30% at present.
- Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).
- To amend I-T Act to allow faceless appeals.
- To launch new direct tax dispute settlement scheme with a deadline of 30th June, 2020, to reduce litigations in direct taxes — Vivaad se Vishwaas scheme.
- Interest and penalty will be waived for those who wish to pay the disputed amount till March 31.Additional amount to be paid if availed after 31st March 2020
- Aadhaar-based verification of taxpayers is being introduced to weed out dummy or non-existent units; instant online allotment of PAN on the basis of Aadhaar.
- Registration of charity institutions to be made completely electronic, donations made to be pre-filled in IT return form to claim exemptions for donations easily.
- FPI limit in corporate bonds raised to 15% from 9%.
- Expand Exchange Traded Fund by floating a Debt ETF, consisting primarily of govt. securities.
- Instant PAN to be allotted online through Aadhaar.
- Unique registration number (URN) to be issued to all new and existing charity institutions.
Threshold limit of Tax Audit
- Limit has been increased from Rs 1 crore to Rs 5 crore [subject to condition is that maximum 5% of all sales/receipts and all purchases/expenditure is made in cash.]
- Payment made in the P.Y in cash does not exceed 5%. For such taxpayers, the due date for tax audit has been extended to the 31st of October from the 30th of September.
Section 80EEA
Tax holiday for affordable housing extended by 1 year. Additional deduction of Rs.1.5 lakh for interest paid on home loans will be allowed for the loans sanctioned till the 31st of March 2021.
Dividend Distribution Tax
DDT will not be applied to companies. Individuals are required to pay tax on such income at applicable rates. Deduction allowed for dividend received by holding company from subsidiary.
Section 6-(Change in provision of residential status)
1. As of now a person will be treated as Resident in India if he fulfils either of the two conditions
- stay in India for 182 days or more during the financial year
- stay in India for 60 days or more during the financial year and 365 days or more during the 4 previous financial years.
Amendment in this Budget –
A person will be treated as Resident in India if he stays in India for 120 days or more during the financial year Insert clause (1A) to provide that a citizen of India will be deemed to be a resident of India if he is not liable to pay tax in any country outside India on account of his domicile, residence, or any other criteria of a similar nature.
2. As of now a person who has been a non-resident for 9 out of 10 Financial Years preceding the relevant year or has stayed in India for less than 730 days during the seven Financial Years preceding the relevant year is regarded as ‘not ordinarily resident’ in India.
Amendment in this Budget –
Individual or a manager of a HUF who has been a ‘non-resident’ in India for 7 out of 10 preceding years will now be regarded as a ‘not ordinarily resident’
Section 234G
Late fee amounting to Rs. 200 per day to be paid for default in furnishing statement or certificate under section 35 by research association, university, college, company or any other institution..
Section 43CA
If value adopted for the purpose of stamp duty does not exceed 105% of the actual consideration received, then consideration so received shall be deemed to be the full value of the consideration for computing profits and gains on transfer of such asset other than capital assets
Amendment in this Budget –
If value adopted for the purpose of stamp duty does not exceed 110% of the actual consideration received, then consideration so received shall be deemed to be the full value of the consideration for computing profits and gains on transfer of such asset other than capital assets.
Section 50C
In case of transfer of capital asset being land or building or both, if value adopted for the purpose of stamp duty does not exceed 105% of the actual consideration received, then consideration so received shall be deemed to be the full value of consideration for computing capital gains on transfer of such capital assets.
Amendment in this Budget –
In case of transfer of capital asset being land or building or both, if value adopted for the purpose of stamp duty does not exceed 110% of the actual consideration received, then consideration so received shall be deemed to be the full value of consideration for computing capital gains on transfer of such capital assets.
Impact on Real Estate Sector
- Presently, for computing the income arising from transfer of land or building or both under the head business or profession, capital gains and income from other sources, the consideration for such transfer is deemed to be the value adopted for stamp duty purposes. If the sale consideration is less than the stamp duty valuation.
- The deeming provisions to substitute actual consideration with stamp duty valuation are not applicable, if the difference between actual sale consideration and stamp duty valuation does not exceed a safe harbor of 5%
- It is now proposed to expand the harbour of 5% to 10% by amending the provisions of Section 43CA, Section 50C and Section 56(2)(x).
TDS
- Section 194J (fees for technical services) Rate of TDS has been reduced to 2% from 10%.
- Section 194 Dividend paid by Indian companies, to a shareholder, who is resident in India if the dividend amount exceeds Rs. 5000 during the FY Rate of TDS -10%
- Section 194K Dividend paid by Mutual Fund to a resident only if the dividend amount exceeds Rs. 5000 during the FY Rate of TDS -10%
- Section 194-O: The operator will be responsible to deduct TDS whenever the Payment made by E-commerce operator to the participant if the annual amount paid or credited exceeds Rs 5 lakh Rate of TDS -1%
Non Furnishing of PAN – The operator will be responsible to deduct TDS whenever the Payment made by Ecommerce operator to the participant if the annual amount paid or credited exceeds Rs 5 lakh Rate of TDS – 5% [Previously it was 20%]