Finance Minister Smt. Nirmala Sitharaman presented the first Union Budget of the third decade of the 21st century. The Union Government has spearheaded radical fiscal measures to ensure that India’s economy continues to tread the path of high growth.

The Finance Minister said that in continuation of the reform measures already taken so far, the tax proposals in this budget introduce further reforms to stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations. In order to provide significant relief to the individual taxpayers and to simplify the Income-tax law, new and simplified personal income tax regime is inttroduced wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions.

Personal Income Tax- Individual/HUF
The proposed changes in tax slabs are listed in the following table:

Taxable Income Slab	Existing Tax Rates	New Tax Rates
Upto 2,50,000	Nil	Nil
₹2,50,001 – ₹5,00,000	5%	5%
₹5,00,001 –₹7,50,000	20%	10%
₹7,50,001 – ₹10,00,000	20%	15%
₹10,00,001 – ₹12,50,000	30%	20%
₹12,50,001 – ₹15,00,000	30%	25%
₹15,00,001 and above	30%	30%

 
Notes:

• Deductions, exemptions and carried forward losses restricted, with certain conditions in the new regime.
• Exemption limit for individuals reaching 60 and 80 years remains unchanged at ₹3,00,000 and ₹5,00,000 respectively.
• Considering the above tax rates structure, there will be no tax for those having income upto ₹5 lakh as there is a rebate availability ₹12,500 or tax whichever is lower.
• Surcharge remains unchanged for Individual/HUF/AOP/BOI:
  on income exceeding ₹50 Lakhs to ₹1cr- 10 %
  on income exceeding ₹1cr to ₹2cr – 15 %
  on income exceeding ₹2cr to ₹5cr – 25 %
  on income exceeding ₹5cr – 37 %

 
However, surcharge on STT paid capital gains for Resident shall not exceed 15 %.

• Home buyer (not owning any other property at the time of sanction of loan) can claim deduction for interest on home loan up to Rs. 1,50,000/- up to march 2021.
• Dividend Distribution Tax has been abolished and taxability of dividend income shifted to the hands of recipient.

 
Option to shift to New Tax Regime:
The government introduced new tax regime with lower tax rate slabs for individuals and HUFs which prima-facie seems like government is giving certain concessions to reduce tax rates for individual and Hindu undivided family (HUF), deepening and widening of the tax base, removing difficulties faced by taxpayers, curbing tax abuse and enhancing the effectiveness, transparency and accountability of the tax administration.

Particulars of computation of an Individual Having Total Income ₹10 Lakhs and ₹20 Lakhs under the Existing slab rates

Particulars	₹ 10,00,000.00	₹ 20,00,000.00
Gross Total Income	10,00,000.00	20,00,000.00
Less: Deduction (u/s-80c)	2,00 ,000.00	2,00 ,000.00
Total Taxable Income	8,00,000.00	18,00,000.00
Slab Rate Applicable
Upto 250,000 Exempt	Nil	Nil
₹2,50,001 – ₹5,00,000 @5%	12,500.00	12,500.00
₹5,00,001 – ₹10,00,000 @20%	60,000.00	1,00,000.00
₹10,00,001 and above @30%		2,40,000.00
Total Tax Liability	72,500.00	3,52,500.0
Add: Cess@4%	2,900.00	14,100.00
Total Tax Payable	75,400.00	3,66,600.00

 
Particulars of computation of an Individual Having Total Income ₹10 Lakhs and ₹20 Lakhs under the New Tax Regime

Particulars	₹ 10,00,000.00	₹ 20,00,000.00
Gross Total Income	10,00,000.00	20,00,000.00
Total Taxable Income	10,00,000.00	20,00,000.00
Slab Rate Applicable
Upto 250,000- Exempt	Nil	Nil
₹2,50,001 – ₹5,00,000 @5%	12,500.00	12,500.00
₹5,00,001 –₹7,50,000 @10@	25,000.00	25,000.00
₹7,50,001 – ₹10,00,000 @15%	37,500.00	37,500.00
₹10,00,001 – ₹12,50,000 @20%		50,000.00
₹12,50,001 – ₹15,00,000 @25%		62,500.00
₹15,00,001 and above @30%		1,50,000.00
Tax Liability	75,000.00	3,37,500.00
Add: Cess @4%	3,000.00	31,500.00
Total Tax Payable	78,000.00	3,51,000.00

 
The decreased Slab rates under the New Tax Regime contain certain conditions and restrictions in Deductions, exemptions and carried forward losses. On satisfaction of certain conditions, an individual or HUF shall, from assessment year 2021-22 onwards, have the option to pay tax in respect of the total income under new tax regime.

• The option shall be exercised for every previous year where the individual or the HUF has no business income.
• In other cases (i.e having any Business Income) the option once exercised for a previous year shall be valid for that previous year and all subsequent years. (If once opted, have to perpetually followed)
• Following Exemption, Deductions and set off of loss shall not be entitled under the New Tax Regime:
  • Leave travel concession as contained in clause (5) of section 10;
  • House rent allowance as contained in clause (13A) of section 10;
  • Exempted allowance as contained in clause (14) of section 10;
  • Allowance for income of minor as contained in clause (32) of section 10;
  • Exemption for SEZ unit contained in section 10AA;
  • Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
  • 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;
  • Additional deprecation under clause (iia) of sub-section (1) of section 32
  • Deductions under section 32AD, 33AB, 33ABA;
  • Various deduction for donation for or expenditure on scientific research under section 35;
  • Deduction under section 35AD or section 35CCC;
  • Deduction from family pension under clause (iia) of section 57;
  • 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.

 
Rationalisation of provisions relating to tax audit in certain cases.
 
In order to reduce compliance burden on small and medium enterprises, the threshold limit for a person carrying on business from One crore rupees is increased to Five crore rupees in cases where:

• Aggregate of all receipts in cash during the previous year does not exceed 5% of such receipt; and
• Aggregate of all payments in cash during the previous year does not exceed 5% of such payment.

Further, to enable pre-filling of returns in case of persons having income from business or profession, it is required that the tax audit report may be furnished by the said assessees at least one month prior to the due date of filing of return of income.

Further, the due date for filing return of income under sub-section (1) of section 139 is amended by: –

• providing 31st October of the assessment year (as against 30th September) as the due date for an assessee
• referred to in clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act;
• removing the distinction between a working and a non-working partner of a firm with respect to the due date as
• mentioned in sub-clause (iii) of clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act.

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

COMPANY:
 
Tax Rate Applicable in case of domestic company for the AY 2021-22

Domestic Company	Assessment Year 2021-22
Where its total turnover or gross receipt during the previous year 2018-19 does not exceed Rs. 400 crore u/s 115BA	25%
Where it opted for Section 115BAA	22%
Where it opted for Section 115BAB	15%
Power generation companies	15%
Any other domestic company	30%

 
Surcharge for Domestic Company:

• Surcharge is 7% of Income tax if net income is greater than Rs. 1 Crore but less than Rs. 10 crore
• Surcharge is 12% of Income tax if net income of the domestic company exceeds Rs. 10 crore
• Surcharge is 10% irrespective of amount of total in case of a company opting for taxability under Section 115BAA or Section 115BAB.

 
Surcharge for Foreign Company:

• Surcharge is 2% of Income tax if net income of the international company is greater than Rs. 1 Crore but less than Rs. 10 crore
• Surcharge is 5% of Income tax if net income of the international company exceeds Rs. 10 crore

 
Surcharge for Others:

• Surcharge is 12% in other cases (including sections 92CE, 115-O, 115QA, 115R, 115TA or 115TD),

Cess:

• Health & Education Cess of 4%

 
Concessional Tax Rate of 22% (U/S-115BAA)

• While computing the total income of such company no deduction on account of

Section-

10AA (SEZ)

32(1)(iia)- Additional depreciation@20%

32AC- Investment allowance in respect of New plant and Machinery

33AB- Tea Development Benefit

35- Scientific Research benefit

35AD- Capital deduction for specified business.

35CCC- agriculture extension project benefit

35CCD- Skill Development Project.

Benefit available under provisions of chapter VI-A i.e 80IA, 80IB, 80IC etc.

• Such company shall not be eligible to set off any loss carried forward from any earlier AY if any loss is attributable to any of the above deductions.
• It was also provided that such company shall not be subjected to Minimum Alternate Tax (MAT) under section 115JB of the Act and that, the carry forward and set off of MAT credit, if any, under section 115JAA of the Act would not be allowed.

 
Note: For claiming concessional rate of 22%, such company shall require to furnish the return u/s 139(1).
 
Note: Option once exercise cannot be subsequently withdrawn.
 
Note: The dividend or income from units are taxable in the hands of shareholders or unit holders at the applicable rate and the domestic company or specified company or mutual funds are not required to pay any DDT.

 
Concessional Tax Rate of 15% (U/S-115BAB)

• Companies setup and registered on or after 1st October, 2019 engaged in manufacturing or production of any article.
• Provision shall be applicable while computing total income same as U/S-115BAA
• Above mention Concessional Tax Rate of 15% shall also be applicable to Power Generation Company

 
RESIDENTIAL STATUS

• The period to determine residential status of Individual/HUF is modified as under:
• Time limit for computing the residential status of a Citizen of India/Person of Indian origin, who is on a visit to India reduced from 182 days to 120 days.
• For qualifying as `Not Ordinarily Resident`, the assesse needs to be a non-resident in India in 7 out of 10 previous years as against the dual conditions earlier namely-
• He has been a non-resident in India in 9 out of 10 previous years,

or

• He has been in India for 72 days or less in 7 previous years.
• An Individual, who is a citizen of India and not liable to tax in any other country, shall be deemed to be Resident in India

 
TRANSFER PRICING
 
Due date for filing of Form 3CEB advanced by a month to October 31 (as against 30th November).
 
Interest paid/payable to permanent establishment of a non- resident bank in India is not subject to any restriction.
 
Other Highlights:
 
Insertion of Section 194K:

• Any person responsible for paying to a resident any income in respect of:
• units of a Mutual Fund specified under clause (23D) of section 10; or
• units from the Administrator of the specified undertaking; or
• units from the specified company, 45 shall, at the time of credit of such income to the
• account of the payee or at the time of payment thereof by any mode, whichever is earlier,

Shall deduct income-tax there on at the rate of 10% if threshold limit exceeds Rs 5,000/-

Insertion of Section 194-O:

• Any person being E-commerce operator facilitating sale of good or provision of services of an E-commerce Participant through its digital or electronic Facility or platform shall:
• Deduct Income-Tax at the rate 1% on the gross amount of sales or services or both.
• In Absence of Pan/Aadhaar, Income-Tax shall be deducted @5%
• No Income-Tax to be deducted, were e-commerce Participant is Individual or HUF and gross amount of such sale or services or both during the previous year does not exceed Five lakh rupees AND e-commerce participant furnished Permanent Account Number or Aadhaar number to the e-commerce operator.

Tax holiday of another one year to affordable housing developers.

Govt. proposes 100 % tax concession to sovereign wealth funds on investment in infra projects.

‘Vivad se Vishwas’ scheme for direct tax payers whose appeals are pending at various forum. 4.83 lakh direct cases pending in various appellate forums. “Under the scheme, taxpayer to pay only amount of disputed tax. They will get complete waiver on interest and penalty if scheme is availed by March 31, 2020.

Aadhaar-based verification of taxpayers is being introduced; 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.

Written by
gkkedia