Various Relaxations Under the Income Tax
Written by Vaibhav Bansal & Sunil Pandit Dt. August 27th, 2020
At G.K. Kedia & CO., we provide you all the information regarding the various relaxations given by Government in order to boost up the Country’s economy in these testing conditions of the global outbreak of COVID-19 pandemic. These relaxations would play a major role in increasing the cash flow in the economy.
The reliefs given are as follows:-
Finance Minister Shrimati Nirmala Sitharaman has announced on 13th May, a slew of direct tax measures as part of the Covid-19 relief package announced by Prime Minister Narendra Modi :-
TDS/TCS Rate Reduction:-
- A 25 percent reduction in existing rates for tax deducted at source for specified non-salary payments which are made to residents. Payment for transactions like contract, professional fees, interest, rent, dividend, commission, brokerage, will be eligible for reduced TDS rates. These reduced rates come in effect from 14th May, and are applicable till 31st Mar, 2021.These can be tabulated as below:-
|S. No||Sections of the Income- tax Act,1961||Nature of Payment||Existing Rate of TDS||Reduced rate from 14/05/2020 to 31/03/2021|
|1||193||Interest on Securities||10%||7.5%|
|3||194A||Interest other than interest on securities||10%||7.5%|
|4||194C||Payment of Contractors and sub-contractors||1% (individual/ HUF) 2% (others)||0.75% (individual/ HUF) 1.5% (others)|
|6||194DA||Payment in respect of life insurance policy||5%||3.75%|
|7||194EE||Payments in respect of deposits under National Savings Scheme||10%||7.5%|
|8||194F||Payments on account of re-purchase of Units by Mutual Funds or UTI||20%||15%|
|9||194G||Commission, prize etc., on sale of lottery tickets||5%||3.75%|
|10||194H||Commission or brokerage||5%||3.75%|
|11||194-I(a)||Rent for plant and machinery||2%||1.5%|
|12||194-I(b)||Rent for immovable property||10%||7.5%|
|13||194-IA||Payment for acquisition of immovable property||1%||0.75%|
|14||194-IB||Payment of rent by individual or HUF||5%||3.75%|
|15||194-IC||Payment for Joint Development Agreements||10%||7.5%|
|16||194J||Fee for Professional or Technical Services (FTS), Royalty, etc.||2% (FTS, certain royalties, call centre) 10% (others)||1.5%(FTS, Certain royalties, call centre) 7.5%(others)|
|17||194K||Payment of dividend by Mutual Funds||10%||7.5%|
|18||194LA||Payment of Compensation on acquisition of immovable property||10%||7.5%|
|19||194LBA(1)||Payment of income by Business trust||10%||7.5%|
|20||194LBB(i)||Payment of income by In- vestment fund||10%||7.5%|
|21||194LBC(1)||Income by securitisation trust||25% (Individual/ HUF) 30% (Others)||18.75% (Individual/ HUF) 22.5%(Others)|
|22||194M||Payment to commission, brokerage etc. by Individual and HUF||5%||3.75%|
|23||194-O||TDS on e-commerce participants||1% (w.e.f. 1.10.2020)||0.75%|
- Further ,the tax collection at source (TCS) for the following specified receipts has also been reduced by 25% for the period from 14th May,2020 to 31th march ,2021:-
|S. No||Section of the In- come-tax Act||Nature of Receipts||Existing Rate of TCS||Reduced rate from 14/05/2020 to 31/03/2021|
|(a) Tendu Leaves||5%||3.75%|
|(b)Timber obtained under a forest lease||2.5%||1.875%|
|(c) timber obtained by any other mode||2.5%||1.875%|
|(d) Any other forest produce not being timber/tendu leaves||2.5%||1.875%|
|(f) Minerals, being coal or lignite or iron ore||1%||0.75%|
|2||206C(1C)||Grant of license, lease, etc. of (a) Parking lot||2%||1.5%|
|(b) Toll Plaza||2%||1.5%|
|(c) Mining and quarrying||2%||1.5%|
|3||206C(1F)||Sale of motor vehicle above 10 lakhs||1%||0.75%|
|4||206C(1H)||Sale of any other goods||0.1% (w.e.f 01.10.2020)||0.75%|
- Therefore, TDS/TCS on the amount paid or credited during the period from 14th May, 2020 to 31st March, 2021 shall be deducted at the reduced rates specified in the table above. Similarly, the tax on the amount received or debited during the period from 14th May, 2020 to 31st March, 2021 shall be collected at the reduced rates specified in the table above.
- It is further stated that there shall be no reduction in rates of TDS or TCS , where the tax is required to be deducted or collected at a higher rate due to non-furnishing of Pan/Aadhar.
Due Dates Extended:-
- Due date for all income tax returns for FY2019-20 has been extended from July 31 and Oct. 31 to Nov. 30.
- Tax audit due date has been extended from Sept. 30 to Oct. 31. Date of assessments getting barred on Sept. 30 has been extended to Dec. 31.
- Similarly, assessments getting barred on March 31, 2021 are extended till the end of September 2021.
- Window for making payments under ‘Vivaad se Vishwas Scheme’—a tax dispute resolution mechanism—without any additional amount has been extended till Dec. 31.
Pending Income Tax Refunds released:-
- Refunds to charitable trusts and non-corporate businesses like sole proprietorships, limited liability partnerships and cooperative societies will be issued immediately by the government.
Investments done in order to avail Deductions for the FY 2019-20:-
- Individuals can now use the extended window up to 30 June, to make tax saving investments such as contributions to PPF, NSC etc and can claim benefits under Section 80C for FY 2019-20.
- Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) has been set up to provide relief to affected areas and people. The contributions made by individuals to this public charitable trust will be eligible for 100 percent exemption for income tax purposes. This will enable individuals to avail the opportunity of helping the nation as well as benefitting from a tax perspective. With the extension of time line up to 30 June, individual taxpayers now have the option to choose to avail the tax benefit for this, either for FY 2019-20 or FY 2020-21.
Belated or revised return:-
- The due date for filing of belated tax returns for FY 2018-19 has been extended to Sep 30, 2020 from March 31, 2020. This could help individuals defer their tax payments to optimise on their cash flow. While interest is due to be paid on such delayed tax payments, the rate of interest is lower at 0.75 percent per month for this period, as against the regular interest rate of 1 percent per month.
Income tax rates under new tax regime for FY 2020-21:-
|Total income (Rs)||Income tax rate|
|Up to 2.5 lakh||Nil|
|From 2,50,001 to Rs 5,00,000||5 percent|
|From 5,00,001 to Rs 7,50,000||10 percent|
|From 7,50,001 to 10,00,000||15 percent|
|From 10,00,001 to Rs 12,50,000||20 percent|
|From 12,50,001 to 15,00,000||25 percent|
|Above 15,00,000||30 percent|
The new income tax slabs and rates have come into effect from April 1, 2020 for FY 2020- 21 for Individual Taxpayers of all Age Group :-
The Union Budget 2020 introduced a new income tax regime with reduced tax rates for those willing to forego 70 tax-exemptions and deductions under it. This new tax system has been made optional and continues to co-exist with the old one that comprises of three tax rates and various tax exemptions and deductions available to a taxpayer
- Individuals with a net taxable income of up to Rs 5 lakh in a financial year will be able to avail tax rebate of Rs 12,500 under section 87A in both the existing and new tax regimes. Effectively, this means that individual taxpayers with net taxable income of up to Rs 5 lakh will continue to pay zero tax in both the tax regimes.
- However, individuals who have opted for the new tax regime would not be able to avail common tax breaks such as deductions under section 80C for maximum of Rs 1.5 lakh by investing in specified instruments, section 80D for medical insurance paid, house rent allowance, leave travel allowance etc.
- On the other hand, individuals who have opted for the existing tax regime will continue to pay tax on their income at the same rates in FY 2020-21 as they did in FY 2019-20
Under the existing tax regime, the basic tax exemption limit for an individual depends on their age and residential status. According to their age, resident individual taxpayers are divided into three categories:
- Resident individuals below the age of 60years
- Resident senior citizens above 60 years but below 80years
- Resident super senior citizens above the age of 80years
Here is a look at the latest income tax slabs for FY 2018-19, FY 2019-20 and FY 2020-21under the old Tax Regime:-
Income tax slabs for resident individuals below 60 years of age for FY 2019-20, 2020-21:-
|Income Tax slabs||Income tax rate and cess|
|Up to Rs 2.5 lakh||Nil|
|Rs 250001 to Rs 500000||5% of (Total income – Rs 250000)+ 4%Cess|
|Rs 500001 to Rs 100000||Rs12500 +20% of (Total Income – 500000) + 4% cess|
|Rs 1000001 and above||Rs112500 + 30% of (Total Income – Rs 1000000) + 4%cess|
Income tax slab for residential individual for age between 60 to 80 years (Senior citizen) for F.Y.- 2019-20 and 2020-21.
|Taxable income slabs||Income tax rates and cess|
|Up to Rs 3 lakh||Nil|
|Rs 3,00,001 to Rs 5,00,000||5% of (Total income minus Rs 3,00,000) + 4% cess|
|Rs 5,00,001 to Rs 10,00,000||Rs 10,000 + 20% of (Total income minus Rs 5,00,000) + 4% cess|
|Rs 10,00,001 and above||Rs 1,10,000 + 30% of (Total income minus Rs 10,00,000) + 4% cess|
Income tax slabs for resident individual above 80 years of age (Super Senior Citizen) FY 2019-20, 2020-21:-
|Taxable income slabs||Income tax rates and cess|
|Up to Rs 5 lakh||Nil|
|Rs 5,00,001 to Rs 10,00,000||20% of (Total income minus Rs 5,00,000) + 4% cess|
|Rs 10,00,001 and above||Rs 1,00,000 + 30% of (Total income minus Rs 10,00,000) + 4% cess|
Further, new surcharge rates have been introduced in the Finance Budget 2020, which shall be applicable from F.Y. 2019-20 onwards. The same has been tabulated below:
|Income above Rs 50 lakh but below Rs 1crore||10|
|Income above Rs 1 crore but below Rs 2crore||15|
|Income above Rs 2 crore but below 5crore||25|
|Income above Rs 5 crore to Rs. 10 Crores||37|
|Exceeding Rs. 10 Crores||37|
Vaibhav Bansal & Sunil Pandit