Budget 2020 - an Analysis by team Arun Valera
DIRECT TAX
Personal
Tax
Option
A - New Regime under section 115BAC for personal taxation
For Individuals and
HUFs
Income
|
Tax Rate (%)
|
Upto Rs. 2,50,000
|
0%
|
Rs. 2,50,001 to Rs. 5,00,000
|
5%
|
Rs. 5,00,001 to Rs. 7,50,000
|
10%
|
Rs. 7,50,001 to Rs. 10,00,000
|
15%
|
Rs. 10,00,001 to Rs. 12,50,000
|
20%
|
Rs. 12,50,001 to Rs. 15,00,000
|
25%
|
Above Rs. 15,00,000
|
30%
|
Ø Option
parameters:
Eligible assessees
|
Exercise of option
|
Earning income other than business income
|
Option can
be exercised in every previous year
|
Earning business income
|
Option once
exercised in a previous year shall be valid for subsequent assessment years.
Further, the option may be withdrawn only once, after which the assessee
shall never be eligible to exercise the option
|
Ø Under
New Regime, Individuals and HUFs shall pay tax at reduced slab rates subject to
foregoing of certain exemptions and deductions (#1).
Ø Such
Individual and HUF shall not be allowed to set off any brought forward loss or
unabsorbed depreciation, which pertains to foregone exemption and deduction.
Ø No
set off of losses under the head house property shall be allowed under any
other head of income.
Ø Depreciation
claim permitted as per normal provisions
Ø Provisions
of alternate minimum tax (AMT) shall not be applicable to Individual or HUF
exercising this option.
#1
Following exemptions and deductions to be foregone to avail reduced tax rates:
§ 10(5) – Leave travel concession
§ 10(13A) – House Rent Allowance
§ 10(14) – Covers special allowance
detailed in Rule 2BB (such as children education allowance, hostel allowance,
transport allowance, per diem allowance, uniform allowance, etc.)
§ 10(17) – Daily allowance / any other
allowance received by MP, member of state legislature, etc.
§ 10(32) – Clubbing benefit of Rs.
1,500 per minor child
§ 10AA – Exemption to SEZ unit
§ Section 16 – Standard Deduction from
salaries and tax on employment
§ 24(b) – Interest on borrowed loan for
a Self Occupied property (rented property not covered)
§ 32(1)(iia) – Foreign Motor Car
§ 32AD – Investment Allowance for
investment in Andhra Pradesh / Telangana / Bihar / West Bengal
§ 33AB – Tea / Coffee / Rubber Development
allowance
§ 33ABA – Site Restoration Fund
§ 35(2AA) – deduction for Payment to
National Laboratory or University or IIT
§ 35AD – Deduction in respect of
specified business
§ 35CCC – Expenditure on agricultural
extension project
§ 57(iia) – Family pension
§ Any provision of chapter VI-A
[excluding section 80CCD(2) and section 80JJAA]
Option
B - Old Regime for Personal Taxation
The tax rates have
remained the same as in the earlier year as follows:
(A) For Individuals,
HUFs, AOPs, BOIs [not covered in (B) & (C) below]
Income
|
Tax Rate (%)
|
Upto Rs. 2,50,000
|
0%
|
Rs. 2,50,001 to Rs. 5,00,000
|
5%
|
Rs. 5,00,001 to Rs. 10,00,000
|
20%
|
Above Rs. 10,00,000
|
30%
|
(B) Resident Senior
Individuals (Age 60 years or more)
Income
|
Tax Rate (%)
|
Upto Rs. 3,00,000
|
0%
|
Rs. 3,00,001 to Rs. 5,00,000
|
5%
|
Rs. 5,00,001 to Rs. 10,00,000
|
20%
|
Above Rs. 10,00,000
|
30%
|
(C) Resident Very
Senior Individuals (Age 80 years or more)
Income
|
Tax Rate (%)
|
Upto Rs. 5,00,000
|
0%
|
Rs. 5,00,001 to Rs. 10,00,000
|
20%
|
Above Rs. 10,00,000
|
30%
|
Surcharge
for Individuals, HUFs, AOPs, BOIs
Existing Surcharge*
|
Proposed Surcharge*
|
||
Total
Income
|
Rate of surcharge
|
Total Income
|
Rate of surcharge
|
Upto Rs. 50,00,000
|
0%
|
Upto Rs. 50,00,000
|
0%
|
Rs. 50,00,001 - Rs. 1,00,00,000
|
10%
|
Rs. 50,00,001 - Rs. 1,00,00,000
|
10%
|
Rs.1,00,00,001 - Rs.2,00,00,000
|
15%
|
Rs.1,00,00,001 - Rs.2,00,00,000
|
15%
|
Rs. 2,00,00,000 - 5,00,00,000
|
25%
|
Rs. 2,00,00,000 - 5,00,00,000
|
25%#
|
Rs. 5,00,00,000+
|
37%
|
Rs. 5,00,00,000+
|
37%#
|
[*Note: However,
assessee would be eligible for Marginal Relief]
[#Note: The Surcharge
shall not exceed 15% in case of STCG u/s 111A and LTCG u/s 112A]
Health and Education
Cess @ 4% of Tax and Surcharge shall be levied. The same is applicable to all
assessees.
Rebate
for Resident Individuals
Rebate u/s 87A of Rs.
12,500/- shall be available for resident individuals whose total income does
not exceed Rs. 5,00,000/-.
The
amount of rebate shall be lower of the actual tax payable or Rs. 12,500/-.
Corporate Tax
Ø There is no change proposed in this Finance Bill for Tax Rates
applicable on Domestic Companies and Foreign Companies.
Ø 15% concessional corporate tax rate will now is extended to new
domestic companies engaged in generation of electricity.
Ø Abolishment of Dividend Distribution Tax (DDT):
v Currently domestic companies are subject to DDT and dividend
income is exempt in the hands of the shareholders. Similar is the case of
income distributed by mutual funds.
v DDT is proposed to be abolished effective from Assessment Year
2021-22.
v Moving to classical system of taxing dividend in the hands of
shareholders / unit-holders.
v To remove the cascading effect, deduction will be allowed in
respect of certain inter-corporate dividends.
v Consequential amendments in the relevant tax withholding
provisions.
Our Comments:
ü Small investor’s cash flows likely to increase due to this
amendment.
ü Non-residents will be able to claim foreign tax credit in their
home country of the taxes paid in India.
Ø Relief to start-ups:
v Turnover threshold for start-ups eligible to claim 100%
deduction increased from Rs. 25 crores to Rs. 100 crores.
v Period for availing the aforesaid deduction extended to any 3
years out of 10 years (as against 7 years).
International Tax
Ø Tax
residency redefined:
v Non-Resident
Indian Citizens, who are not liable to tax in any other country shall be deemed
to be resident in India.
v Accordingly,
if any Indian is holding Indian passport, he needs to establish residential
status of other country if he claims to be a non-resident. Such Indian Citizen
shall be required to pay tax on global income.
v However,
a clarification has been issued in this regards subsequently. In order to avoid any misinterpretation, it
is clarified that in case of an Indian citizen who becomes deemed resident of
India under this proposed provision, income earned outside India by him shall
not be taxed in India unless it is derived from an Indian business or
profession.
v Indian
Citizens or Persons of Indian Origin, visiting India for determining residential
status the stay period of 182 days has been reduced to 120 days.
v An
Individual or HUF would be not ordinarily resident in India if the individual
or karta has been a non-resident in India in 7 out of 10 year preceding the
relevant previous year (as against present condition of 9 out of 10 preceding
years).
Ø Exemption
to non-residents in filing Return of Income if the total income consists of
Royalty and FTS on which appropriate tax has been deducted (earlier only
dividend and interest were covered for exemption from filing ROI).
Ø TCS
@ 5% on foreign remittance under LRS exceeding Rs. 7 Lakhs.
Ø TCS
@ 5% on overseas tour package.
Ø E-commerce
operators to withhold tax at the rate of 1% in case of sale of goods or
provision of services exceeding Rs. 5 Lakhs. In the absence of PAN the
withholding tax rate would be 5%.
Ø DRP
forums to be allowed to non-resident for all disputes and not just transfer
pricing issues.
Ø Significance
Economic Presence to be deferred to Assessment Year 2022-23.
Ø The
source rule is being amended in line with global consensus that the source
country / country of market should also have a taxing right. Accordingly, the
income attributable to operations carried out in India shall include income
from advertisement that targets Indian customers or income from sale of data
collected from India or income from sale of goods and services using such data
collected from India.
Ø A
specific preamble text alongwith adoption of Multilateral Instrument (MLI) has
been incorporated in section 90.
Ø Definition
of Royalty proposed to be amended to include even consideration received from
sale, distribution or exhibition of cinematographic films.
Ø Provisions
restricting interest deduction u/s 94B not to apply in case of borrowing from
branch of a foreign bank.
Ø Concessional
TDS provisions u/s 194LC and 194LD extended upto 30.06.2023.
Ø There
will be liberalization of investment related conditions in the special taxation
regime for offshore funds.
Ø Indian
Tax Administration will have the power to frame rules and procedures for
arriving at the income of the non-resident.
Ø Foreign
portfolio investments will be aligned for exemption from taxability on account
of indirect transfer of assets with amended scheme of SEBI.
Other
tax proposals:
Ø Rationalising tax audit and tax return filing:
v Threshold limit for tax audit increased as under:
Particulars
|
Existing threshold (Rs)
|
Proposed threshold (Rs)
|
Total sales, turnover or gross receipt from the business
|
> 1 crore
|
> 5 crore
|
Gross receipts in case of profession
|
> 50 lakhs
|
> 50 lakhs
|
v The increase is subject to a condition that cash transactions
are less than 5%.
v Tax audit report to be furnished at least one month prior to the
due date of filing of return of income to enable pre-filled income tax return.
v Tax return filing due date extended from September 30 to October
31.
Ø Due date for transfer pricing audit preponed to October 31.
Ø Similar to corporates, option to avail concessional tax rate
extended to co-operative societies.
Ø Variance allowed between stamp duty value and actual sale
consideration on sale of a land or building increased from 5% to 10%.
Ø Withholding
taxes on Fees for technical services (other than professional services) paid to
a resident reduced under section 194J from 10% to 2%.
Ø Faceless appeal will be introduced to eliminate human interface
during appeals.
Ø Vivad se Vishwas Scheme will be introduced to reduce litigations
in direct tax.
Ø Taxpayers’ Charter will be institutionalized in statute to avoid
any harassment for taxpayers.
Ø There is an introduction of process for instant allotment of PAN
based on Aadhaar.
Ø Tax on ESOPs arising at the time of exercise in the hands of
employees of eligible startups can now be deferred.
Ø Employer’s aggregate contribution in excess of Rs. 7.5 lakhs
towards RPF, NPS and ASF shall be taxable in the hands of employees. Any
accretion on such amount shall also be taxable.
Ø Filing of statement of donation by donee to cross-check claim of
donation by donor.
TDS Rates
A. On payments to Residents
Section
|
Nature of Payment for Domestic
Transactions
|
Threshold Limit
|
Individual / HUF
|
Others
|
(Rs)
|
TDS Rate
|
TDS Rate
|
||
192
|
Salaries and ESOP issued by
eligible startups
|
N.A.
|
As per slabs
|
N.A.
|
192A
|
Premature withdrawal from EPF
|
50,000
|
10%
|
-
|
193
|
Interest on Securities
|
10,000
|
10%
|
10%
|
194
|
Dividends distributed by Domestic Company
|
5,000
|
10%
|
10%
|
194A
|
Bank Interest to other than
Resident Sr. Citizen
|
40,000
|
10%
|
10%
|
194A
|
Bank Interest to Resident Senior
Citizen
|
50,000
|
10%
|
10%
|
194A
|
Other Interest
|
5,000
|
10%
|
10%
|
194B
|
Winning from Lotteries
|
10,000
|
30%
|
30%
|
194BB
|
Winning from Horse Races
|
10,000
|
30%
|
30%
|
194C
|
Contractor – Single Transaction
|
30,000
|
1%
|
2%
|
194C
|
Contractor – Aggregated Transaction
during the F.Y.
|
1,00,000
|
1%
|
2%
|
194D
|
Insurance Commission
|
15,000
|
5%
|
5%
|
194DA
|
Life insurance Policy
|
1,00,000
|
5%
|
5%
|
194EE
|
NSS
|
2,500
|
10%
|
10%
|
194F
|
Repurchase Units by MFs
|
-
|
20%
|
-
|
194G
|
Commission – Lottery
|
15,000
|
5%
|
5%
|
194H
|
Commission / Brokerage
|
15,000
|
5%
|
5%
|
194I
|
Rent of Land and Building / F&F
|
2,40,000
|
10%
|
10%
|
194I
|
Rent of Plant / Machinery /
Equipment
|
2,40,000
|
2%
|
2%
|
194IA
|
Transfer of certain immovable
property other than agriculture land
|
50,00,000
|
1%
|
1%
|
194IB
|
Rent by Individual / HUF (w.e.f. 01.06.2017)
|
50,000/PM
|
5%
|
-
|
194IC
|
Monetary Payment in respect of Joint Development Agreement
|
-
|
10%
|
10%
|
194J
|
Professional Fees / Royalties /
Fees for Technical Services
|
30,000
|
10%
|
10%
|
194J
|
Payment to Call Centre Operator and
FTS (not being professional fees)
|
30,000
|
2%
|
2%
|
194K
|
Income of units issued by Mutual Funds or Unit Trust of India
|
5,000
|
10%
|
10%
|
194LA
|
Compensation on compulsory acquisition of immovable
property other than agricultural land
|
2,50,000
|
10%
|
10%
|
194LBA
|
Interest distributed from SPV distributed by Business
Trusts i.e. REITs & INVITs
|
-
|
5%
|
5%
|
194LBA
|
Dividend distributed from SPV distributed by Business
Trusts i.e. REITs & INVITs
|
-
|
10%
|
10%
|
194LBB
|
Income other than business income distributed by an
Alternate Investment Fund (Category I and II)
|
-
|
10%
|
10%
|
194LBC
|
Income in respect of investment in Securitization Trust
|
-
|
25%
|
30%
|
194M
|
Payments to Contractors/ Professionals (Other than those
covered in 194C, 194H &194J)
|
50,00,000
|
5%
|
-
|
194N
|
Payment by a Banking company /Banking Institution/
Cooperative society engaged in banking business/ post office.
|
1,00,00,000
|
2%
|
2%
|
194O
|
E-commerce operator to E-commerce participant in respect
of sale of goods / provision of services facilitated through its platform
|
5,00,000
|
1%
|
1%
|
Note:
Above rates are subject to other provisions of the Act (Eg. TDS at higher rate
in case of no PAN) and reading of bare text of the law.
B. On payments to Non-residents
Section
|
Nature of Payments to Nonresident
Payee
|
Criteria / Conditions for Deduction
|
Tax Rates
|
111A
|
Tax on Short Term Capital Gains
|
On sale of shares or units of mutual funds where STT is
paid
|
15%
|
45
|
Tax on Short Term Capital Gains
|
On sale of shares or units of mutual funds where STT is
not paid
|
40% for companies 30% for persons
other than companies
|
112
|
Tax on Long Term Capital Gains
|
Not being long term capital gains referred to section
10(33), 10(36) and 10(38) ie. on listed shares, units of an equity oriented
fund, or units of business trust i.e. REITs & Invits [Except for
transactions covered u/s 112(1)(c)(iii)]
|
20%
|
112
|
Tax on Long Term Capital Gains
|
On income by way of long-term capital gains from
unlisted securities u/s 112(1)(c)(iii)
|
10%
|
112A
|
Tax on Long Term Capital Gains on Transfer of Equity
Share in company or a unit of equity oriented mutual fund or a unit of Business
Trust
|
(i) STT is applicable on acquisition/ transfer (except
Transfer on a recognised stock exchange located in any International
Financial Services Centre and consideration is received in foreign currency)
(ii) Tax on Long Term Capital Gains exceeding Rs. 1,00,000/-
|
10%
|
194B
|
Winning From Lotteries crossword puzzles, card games and
other games of any sort
|
Payment in excess of Rs. 10,000/-
|
30%
|
194BB
|
Winning From Horse Race
|
Payment in excess of Rs. 10,000/-
|
30%
|
115A(1)(b)
|
Tax on royalty or copyrights or on fees for technical
services matters included in industrial policy or under approved agreements
by an Indian concern or by Government of India
|
Agreements made or entered into after 31st
March, 1976
|
10%
|
115A(1)(a)
|
Tax on Interest
|
On borrowings in foreign currency by an Indian concern
or by Government of India other than interest referred in (b) or (c) below
|
20%
|
194LB
|
Tax on Interest
|
On borrowings in foreign currency On notified
infrastructure debt fund
|
5%
|
194LC
|
Tax on Interest
|
On borrowings in foreign currency By Specified Companies
or Business Trusts (REITs & Invits) under a loan agreement or any long
term bond
|
4%
|
194LC
|
Tax on Interest
|
Other than above
|
5%
|
194LBA
|
Income by way of interest from SPV distributed by
Business Trusts (REITS & INVITs)
|
No Threshold Limit
|
5%
|
195
|
Income by way of Rent from SPV distributed by REITs
|
No Threshold Limit
|
Rates in force
|
194LBB
|
Income other than business income distributed by an Alternate
Investment Fund (Category I & II )
|
No Threshold Limit
|
Rates in force
|
194LBC
|
Income in respect of Investment in Securitization Trust
|
No Threshold Limit
|
Rates in force
|
194LD
|
Income by way of interest to FII or QFI
|
On Rupee denominated Bonds of Indian Company and
Government Securities.
|
5%
|
194E
|
Payments to Non-Resident Sportsmen/Entertainer/Sports Association
|
Other than to a non-resident being an Indian citizen
|
20%
|
-
|
Other income
|
(a) In case of non-resident companies
|
40%
|
-
|
Other income
|
(b) In case of non-residents other than foreign
companies
|
30%
|
-
|
Dividends distributed by Domestic Company
|
2nd proviso to section 195 has been deleted,
thereby dividend distributed and received by a non-resident would be covered
under section 195
|
Rates in force
|
-
|
Equalisation Levy
|
for online advertisement / digital advertising space
services provided by a non-resident to a resident or a permanent
establishment of non-resident in India.
|
6%
|
#1 Surcharge and Cess, as applicable, shall be
levied additionally.
#2 Beneficial Treaty rate shall apply only if TRC
is produced.
#3 TDS @ 20% applies in all cases, if PAN is not
quoted by the deductee except Interest, Royalties, FTS, Capital Gains (Rule
37BC) and Interest U/s 194LC.
#4 “Rates in force” means rate as per the Act or
DTAA, whichever is more beneficial.
#5 Lower deduction certificate can be applied for
section 195.
#6 Above rates are subject to other provisions of
the Act (Eg. TDS at higher rate in case of no PAN) and reading of bare text of
the law.
TCS
Nature of Goods/Contract/Licence /Lease
|
Criteria for Collection
|
Rate (%)
|
Alcoholic Liqour for Human Consumption
|
No Threshold
Limit
|
1%
|
Tendu Leaves
|
No Threshold
Limit
|
5%
|
Timber obtained under a Forest Lease
|
No Threshold
Limit
|
2.5%
|
Timber obtained by any mode other than under a
Forest Lease
|
No Threshold
Limit
|
2.5%
|
Any other Forest produce
|
No Threshold
Limit
|
2.5%
|
Scrap
|
No Threshold
Limit
|
1%
|
Minerals, being Coal or Lignite or iron ore
|
No Threshold
Limit
|
1%
|
Motor Vehicle
|
Payment in
excess of Rs. 10,00,000/-
|
1%
|
Cash Sale of Bullion
|
Payment in
excess of Rs. 2,00,000/-
|
1%
|
Cash Sale of any other goods (other than
bullion and jewellery) or Providing any service for Cash
|
Payment in
excess of Rs. 2,00,000/-
|
1%
|
Transfer of right or interest in any Parking
Lot or Toll Plaza or Mining and Quarrying (other than of mineral oil) under
any contract, licence and lease
|
No Threshold
Limit
|
2%
|
Amount received by an Authorised Dealer from
Buyer for Remittance out of India under the Libralised Remittance Schemen of
the Reserve Bank of India
|
Rs. 7,00,000/-
|
5%
|
Amount received by Seller from Buyer in respect
of overseas tour program package
|
No Threshold
Limit
|
5%
|
Amount received by Seller as consideration for
sale of any goods other than the goods covered in sub-section (1) or
sub-section (1F) or sub-section (1G)
|
Only on amount
exceeding Rs. 50,00,000/-
|
0.1%
|
Note: Above rates are subject to other provisions
of the Act (Eg. TCS at higher rate in case of no PAN) and reading of bare text
of the law.
INDIRECT TAX - GST
Ø Definition
of Union Territory to include (i) Dadra and Nagar Haveli and Daman & Diu
(as one territory) and (ii) Ladakh.
Ø Taxable
persons engaged in following would not be eligible to opt for composition
scheme -
¨ Supplying
of services not leviable to tax
¨ Inter-state
supply of services
¨ Supply
of services through e-commerce operators
Ø There is a relaxation in
restriction of 30th September - the annual return deadline for input tax credit
on debit notes with it now being linked to the debit note date instead of the
original invoice date.
There are
financial benefits for many businesses; especially where price adjustments are long drawn.
Ø Punishment for offences has
been extended to person who causes to commit offence and retains the benefit
arising from such offence.
Ø Fraudulent availment of input
tax credit without invoice has been made cognizable and non-bailable offence.
Ø Penalty provisions extended to
cover persons who retain the benefits and at whose instance the following
offences are committed:
¨ Supplies without issuing
invoice or issuing false invoice
¨ Issue of invoice without
supply in violation of the provisions of the GST law
¨ Availing or utilising input
tax credit without actual receipt of goods or services
¨ Taking or distributing input
tax credit in contravention of provisions of input service distributor (ISD)
These
amendments should help check tax evasion and control fake invoicing or availment of credits.
Ø Refund of compensation cess
due to inverted duty structure on tobacco products has been retracted (made
retrospectively effective for the period 1 July 2017 to 30 September 2019).
Ø Invoice and ITC matching is
being done. Deep data analytics and artificial intelligence tools are being
used for ITC, refund and other frauds.
Ø A simplified new return system
to be introduced from April 1, 2020. It will have features like SMS based
filing of nil returns, return pre-filling and improved ITC flow.
Electronic Invoice is to be introduced effective from
April 1, 2020, for entities having turnover in excess of specified limit and
issuing invoices to registered persons. Dynamic QR code to be used for consumer
invoices.
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