INDIA
UNION BUDGET 2020-21
I.
Economic
Indicators
- Economic growth projected at 5 percent in FY 2020.
- The
Economic Survey 2020 expects growth to rebound in H2 of FY 2020-21 and annual
growth to be in the range of 6-6.5 percent.
- Further rate cuts expected to be on hold. Further
rate cut dependent on the RBI’s inflation expectation.
II. Direct Tax
1.
Individual taxation
An individual/HUF tax payer can opt for simplified
regime with lower tax rates.
Income slabs (in INR)
|
Optional (New) Existing (Old)
|
Up to
250,000
|
NIL NIL
|
250,000
to 500,000
|
5 5
|
500,000
to 750,000
|
10 20
|
750,000
to 1,000,000
|
15 20
|
1,000,000
to 1,250,000
|
20 30
|
1250000
to 1,500,000
|
25 30
|
Above
1,500,000
|
30 30
|
If the taxpayer has opted for this simplified tax regime (Optional-New),
such taxpayer will not be eligible for certain deductions / exemptions such as:
-
- Chapter VIA (other than employers’ contribution to NPS under section 80CCD
(2) and deduction for employment of new employees under section 80JJAA).
- - Section 10 such as LTA, HRA, income of minor child, and certain
exemptions provided under section 10(14), etc.
- - Standard deduction.
- - Professional tax.
- - Interest paid on housing loan on self-occupied house property.
- - Standard deductions for family pension under section 57(iia).
- - Set-off of loss from house property with any other heads of income.
- - Certain eligible deduction against business income.
Important Note:
The option to select any one method of tax computation should be adopted by the
employee in the beginning of the financial year by providing a
declaration/undertaking to the employer.
2.
Employer contributions to retrials (Retirement Benefits) in excess of specified
limits now liable to tax [Section 17(2)]
Currently, employer contributions
to following retirals are liable to tax only if:
•Provident Fund contribution is in excess of 12
percent of the salary
•NPS contribution is in excess of 14 percent of
salary for the Central Government employees and 10 percent of salary in any
other case
•Superannuation Fund contribution is in excess of
INR 150,000
Also, employee is not taxable on accruals on such
contributions.
Proposed Amendment
It is proposed to introduce an aggregate monetary
limit of INR 750,000 in respect of employer contribution to above schemes.
Any
contribution in excess of such monetary limit would be taxable as perquisite in
the hands of the employee.
Further the annual accretion on these contributions
(in excess of monetary limits) will be treated as a perquisite.
3.
Corporate taxation
Corporate Tax Rates remains unchanged and the same
will be as follows:
Type of
Companies
|
Rate of Income
Tax
|
Domestic
Companies with Turn Over less than INR 400 Crores.
|
25%
|
Other Domestic
Companies.
|
30%
|
Foreign
Companies.
|
40%
|
Domestic
Companies Regd after 1st Oct19 and commencing manufacture on or
before 31st Mar23.
|
15%
|
Other
Domestic Companies not claiming Chapter VIA deductions.
|
22%
|
Note: Surcharges & Cess shall be applicable over
and above the said rates.
4.
Dividend Distribution Tax (DDT) abolished and taxability of dividend income
shifted to the hands of recipient.
-
It is
proposed to abolish DDT on dividends declared, distributed, or paid on or after
1st April 2020.
-
Dividend
is now proposed to be taxed in the hands of the recipient of income, i.e.
shareholders / unit holders.
-
Section
57 has been amended to provide that other than deduction for interest expenses,
no other deduction shall be allowed from dividend income or income in respect
of units of mutual fund. Also, the deduction shall not exceed 20 percent of the
dividend income.
5.
Rationalisation of tax deduction for donations - Amendment in Section 80GGA
-
Section
80GGA provides for deduction in respect of donations given to an approved
research association, university, college, or another institution for specified
purposes.
-
To
further promote the agenda of digitalisation and less cash economy, the
existing threshold of INR 10,000 for cash donations has been reduced to INR
2,000.
-
Further
deduction under section 80GGA to a donor shall be allowed only if the
prescribed statement is furnished by the donee in respect of donations
received. In the event of failure to do so, a fee or penalty shall be levied.
- The
amendment is proposed to be effective from 1st June 2020.
6.
Withholding Tax (TDS & TCS)
-
As
per the newly inserted section 194O, an e-commerce operator is liable to
withhold tax at the rate of 1% on the value of goods/services made through its
digital platform. This section shall not apply to an Individual/HUF if the
payment does not exceed INR 500,000/- and the PAN/Aadhaar has been provided to
the e-commerce operator.
- WHT
for Works Contract to include manufacturing or supplying a product by a
contractor, using the raw material supplied by an associate of the customer.
-
Tax
withholding on “Fees for Technical Services” to residents under section 194J,
reduced from 10% to 2%. (Not applicable to Section 195).
To widen the tax net, it is proposed to amend
section 206C to levy TCS on overseas remittance and overseas tour package as
under:
·
Authorised Dealer (dealing in foreign exchange)
receiving an amount of INR 0.7 million or more in financial year for remittance
under LRS of RBI, shall be liable to collect TCS at the rate of 5 percent on
sum received from a buyer remitting such amount out of India.
·
A seller of an overseas tour package shall be liable
to collect TCS at the rate of 5 percent on any amount received from buyer of
such package.
·
In both the above cases, if the buyer does not have
PAN/Aadhaar, the rate of applicable TCS shall be 10 percent.
It is proposed to amend section 206C to levy TCS on
sale of goods above specified limit stated below:
·
A seller, whose turnover from business exceeds INR
100 million during the immediately preceding financial year, shall be liable to
collect TCS at the rate of 0.1 percent on consideration received from a buyer
in excess of INR 5 million. In non-PAN/Aadhaar cases, the rate shall be 1
percent.
·
The above TCS provision shall not be applicable on
certain buyers, such as government authorities and other buyers notified by the
Government.
·
The above amendment will take effect from 1st
April 2020.
7.
International Taxation
Existing “Significant Economic Presence” criteria
for determining business connection is abolished. New provisions to be
introduced shortly.
Exemption to NRs from filing return of income - It
is proposed that the exemption from the requirement to file a return of income
in India will be applicable to income in the nature of specified royalty and
fees for technical services, besides interest and dividend income as existing.
The amendment will take effect from AY 2020-21.
8.
Tax Returns & Transfer Pricing
The due date for filing income tax return for
companies and other assesses (whose accounts are required to be audited under
the Act) is proposed to be extended from 30th September to 31st
October.
Due date for filing of Form 3CEB advanced by a month
to October 31.
Consequently, for FY 2019–20, the due date for
maintaining the contemporaneous TP documentation will also be 31st
October 2020.
Safe Harbour rules & Advance Pricing Agreement,
now available on the Income attributable to Permanent Establishment.
9.
Insertion of taxpayer’s charter
·
To build trust between the taxpayers and the tax
administration, it is proposed to insert a new section 119A in the Act to
empower the CBDT to:
− Adopt
and declare a taxpayer’s charter; and
− Issue
such orders, instructions, directions, or guidelines to other income-tax
authorities, as it may deem fit for the administration of the charter.
10.
Rationalisation of provisions relating to tax audit
To
reduce compliance burden for MSMEs, the threshold limit for getting the
accounts audited under section 44AB of the Act has been enhanced from a
turnover of INR 10 million to a turnover of INR 50 million for a person
carrying on business. However, cash receipts and cash payments of such a
person should not exceed 5% of his/her total receipts or total payments during
the year, respectively.
- This
amendment apply with effect from AY 2020-21.
III.
Indirect Tax & Customs
Important announcements on Customs
·
Customs duty exemptions will be comprehensively
reviewed by the Government by September 2020.
·
Customs law and procedures will be reviewed for
their alignment with needs of changing times and ease-of-doing business.
Suggestions from trade and industry will be solicited on these aspects.
·
Facility of “Electronic Duty Credit Ledger” will be
provided in customs’ automated system to enable duty credit in lieu of duty
remission to be given for exports Customs Act 1962 or any other benefit. Such
duty credit can be used by a person to whom it is issued or transferred in a
manner to be prescribed.
Importer to satisfy “Rules of Origin”, to avail
preferential tax treatments under the Free Trade Agreements (FTAs).
Few key aspects are as follows:
·
Importer to provide declaration that goods qualify
for FTA benefit.
·
Importer to possess sufficient information regarding
origin criteria, value addition content, etc. apart from COO.
·
The Importer may have to collect the costing
calculation from the supplier based on the percentage of RM inputs used for the
manufacture of the product.
·
Authorities can temporarily suspend preferential
tariff treatment pending verification per rules of FTA. Goods imported with
undue benefit under FTA are liable for confiscation. Goods may be released on
furnishing of security or deposit of differential duty in cash ledger if there
is any mismatch in submitted documents.
Important announcements on GST
The budget announcements including the following:
-
Introduction
of new simplified returns from 1 April 2020.
- Implementation
of e-invoicing in phased manner.
- Aadhaar
based verification of taxpayers.
- Dynamic
quick response code for B2C invoices.
- Use
of data analytics and AI tools for crackdown on fraudulent cases, including
input tax credit and refunds.
- Review
of GST rate structure to address issues, such as inverted duty structure.
Input tax credit: The
time limit for availing input tax credit on debit notes is relaxed. This is
done by delinking the date of issuance of debit note from the date of original
invoice.
Offences
and penalties: The
provisions governing offences and penalties are made more stringent. This has
been done by broadening the scope of penal and prosecution provisions wherein,
the beneficiaries are gaining benefits out of the specified offences and at
whose instance such offences are conducted/committed will be:
-
Liable
for penalty equivalent to tax evaded or credit availed/passed on.
-
Liable
for imprisonment with fine.
- Fraudulent
availment of input tax credit without an invoice or bill is now prescribed to be
cognizable and non-bailable offence.
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