32 Income Tax Amendments – Assessment Year 2020-21

32 Amendments relating to Assessment Year 2020-21 (Finance Act 2019) alongwith Section 111A, 112, 112A, 115JB, 115JC, 115BAA and 115BAB explained

RATES OF TAXES APPLICABLE TO ASSESSMENT YEAR 2020-2021 (FINANCIAL YEAR 2019-2020)

A. INDIVIDUAL AND HINDU UNDIVIDED FAMILY

a) Individual Below 60 years /HUF

Particulars of Taxable income	Rate a
Income up to Rupees 2.50 lakhs	NIL
Income from Rupees 2.50 lakhs to Rs.5.00 lakhs	5%
Income from Rupees 5.00 lakhs to Rs.10.00 lakhs	20%
Income above Rupees 10.00 lakhs	30%

b) Basic Exemption for Individual of age from 60 years to less than 80 years: Rupees 3.00 lakhs; above rate structure same.

c) Basic Exemption for Individual of age 80 years or more: Rupees 5.00 lakhs; above rate structure same.

d) Surcharge on Income Tax:

Taxable income	Rate
Rupees 0 to Rupees 50 lakhs	Nil
More than Rupees 50 lakhs but upto Rupees 1 Crore	10%
More than Rupees 1 Crore but upto Rupees 2 Crores	15%
More than Rupees 2 Crores but upto Rupees 5 Crores	25%
More than Rupees 5 Crores	37%

B. FIRM

Rate of Tax	30%
Surcharge If taxable income exceeds Rs. 1 crore	12%

C. DOMESTIC COMPANY

Rate of tax	30%
If turnover did not exceed Rupees 400 Crores in Financial Year 2017-2018, Rate of tax	25%
Surcharge Taxable income exceeds Rupees 1 crore but does not exceed Rupees 10 crores. Taxable income exceeds Rupees 10 crores.	7% 12%

D. TAX U/S 115JB (M.A.T) :

a) Tax Rate reduced from 18.5 % to 15% + Surcharge (on the basis of slab of income, i.e. Nil /7% / 12%) + Cess.

b) Provisions of Section 115 JB shall not apply to a person who has exercised option u/s 115BAA or u/s 115BAB. Further provisions of Section 115 JAA for carry forward of unabsorbed MAT credit shall not apply a person who has exercised option u/s 115 BAA [Section 115JAA(8)] ( e.f. Ass.Yr. 2020-21 ) .

E. TAX U/S 115JC (A.M.T) :

a) Tax Rate is 18.5% (same) + Surcharge (on the basis of slab of income for Individual/ HUF) + Cess.

b) Tax Rate is 18.5% (same) + Surcharge (on the basis of slab of income of Firm) + Cess.

F. TAX U/S 111A (Short Term Capital Gain) :

a) Short Term Capital Gain (S.T.C.G.) arising to an assessee on sale of equity shares of a company or Units of an Equity Oriented Fund / Business Trust on which Securities Transaction Tax has been paid.

b) Tax is levied @ 15% + Surcharge (on the basis of slab of income) + Cess

G. TAX U/S 112 (Long Term Capital Gain )

a) On transfer of long term capital asset by a resident Individual, H.U.F., domestic Company: Tax payable @ 20 %

b) On transfer of long term capital asset by a non-resident or foreign Company :

(i) Tax payable @ 20 % on Long Term Capital Gains arising from transfer of a long term capital asset ,except where such gain arises from Capital Asset referred to in Para (ii) hereinbelow;

(ii) In case of transfer of unlisted securities or shares of private limited company , tax payable @ 10 % on Long Term Capital Gains without giving effect to First Proviso to Section 48 [ First Proviso is applicable in the case of sale of shares / debentures of Indian Company by non-resident assessee whereby Capital Gain is calculated by converting cost of acquisition and sale consideration into foreign currency and then reconverting Capital Gain so calculated into Indian Rupees] and also Second Proviso to said Section whereby Indexation benefit is available to assessee in the case of sale of Long Term Capital Asset [ Other than sale of shares / debentures by non-resident referred to in First Proviso ] .

H. TAX U/S 112A (Long Term Capital Gain ) :

a) Transfer of Long Term Capital Asset being Equity Share of a Company or Unit of Equity Oriented Fund;

b) Securities Transaction Tax has been paid on acquisition as well as sale of Equity Share ;

c) Securities Transaction Tax has been paid on sale of Unit of Equity Oriented Fund / Business Trust;

d) Tax payable on Long Term Capital Gain exceeding Rupees One Lakh: @ 10 %.

e) This Section is applicable to all assessees.

f) This Section is effective from Assessment Year 2019-20.

Surcharge (as applicable) and Health and Education Cess @ 4% on total of Income Tax and Surcharge shall be levied in all cases.

AMENDMENTS APPLICABLE TO ASSESSMENT YEAR 2020-2021

(FINANCIAL YEAR 2019-2020)

S. N.	Section	Particulars
1	9(1)(viii)	In case where a person resident in India (Individual/HUF, Firm, LLP, Company, etc.) gives any amount to a non-resident/foreign company (other than relative defined in section 56(2)(x), the said amount shall be deemed to accrue or arise in India and as such taxable in India. (w.e.f 05.07.02019)
2	10(12A)	A person can withdraw upto 60% from National Pension System Trust referred to in section 80CCD (as against earlier 40%) without payment of tax and balance 40% will be taxed.  (w.e.f. Assessment year 2020-2021)
3	10(34A)	Any income arising to a shareholder on buy back of share of company under section 115QA, whether the company is listed or unlisted (previously only unlisted company) shall be exempt in the hands of shareholders. (w.e.f.  05.07.2019)
4	13A	To promote other electronic mode of payment, identical modifications have been made in the scheme of following sections so as to include such other electronic mode as may be prescribed in addition to the already existing permissible mode of payment (account payee cheque/account payee bank draft/electronic clearing system). Section Amount in excess of which payment/receipts required by specified mode W.E.F 35AD : Expenditure of Capital Nature Rs. 10,000 Assessment year 2020 – 21 40A(3)/(3A)/(4) : Any business expenditure Rs. 10,000 Assessment year 2020 – 21 43(1) : Actual Cost Rs. 10,000 Assessment year 2020 – 21 43CA : Consideration for transfer Full or part consideration Assessment year 2020 – 21 44AD : Turnover ——- Assessment year 2020 – 21 50C : Consideration for transfer Full or part consideration Assessment year 2020 – 21 56(2)(x) : Consideration for transfer Full or part consideration Assessment year 2020 – 21 80JJAA : Cost in case of existing business ——- Assessment year 2020 – 21 26SS : Loan or deposit Rs. 20,000 01.09.2019 269ST : Transactions Rs. 20,000 01.09.2019 269T : Repayment of loan/deposit Rs. 20,000 01.09.2019
5	16(ia)	Standard deduction allowable to salaried employees enhanced from Rupees forty thousand to fifty thousand. (w.e.f. Assessment Year 2020 – 21)
6	23(4)	Notional rent will not be required to be paid on two house properties lying vacant (previously only one vacant house property). (w.e.f. Assessment Year 2020 – 21)
7	23(5)	Annual value of property (land and building) held as stock in trade and not let-out upto two years from end of financial year in which certificate of completion of construction is obtained shall be nil. (Previously one year).  (w.e.f.  Assessment Year 2020 – 21)
8	40(a)(i)	In the case of payment/credit to non-resident/foreign company by a resident, the payer shall not be deemed to be in default if the payee (in case TDS not deducted by payer) pays amount of Tax and furnishes a certificate to this effect from a Chartered Accountant in prescribed form.  (w.e.f. Assessment year 2020 – 21)
9	43B(da)	Interest paid on loan taken from non-banking financial company shall be disallowed if such interest is not paid before due date of filing of return.      (w.e.f. Assessment year 2020 – 21)
10	54(1) (First proviso)	Exemption for Long Term Capital Gain on sale of residential house for consideration upto Rupees two crores shall be allowed if sale proceeds are invested in two residential houses. This exemption can be availed only once in life time.
11	80C	If an employee of Central Govt. contributes to his NPS (Tier-II) account and such contribution is for a fixed period of not less than three years, contribution will be deductible within overall limit Rupees one lakh fifty thousand u/s 80C. (w.e.f. Assessment year 2020 – 21)
12	80CCD(2)	Contribution by Central Govt. to its employees to National Pension Scheme account enhanced from 10% of salary to 14%. (There is no amendment pertaining to non govt. employees). (w.e.f  Assessment year 2020 – 21)
13	80EEA	Standard deduction for interest payable on loan taken by individual from any financial institution for purchase of residential house property shall be allowed up to Rupees one lakh fifty thousand subject to following:- a) loan sanctioned between period from 01.04.2019 to 31.03.2020 b) stamp duty value for residential house property does not exceed Rs. 45,00,000. c) assessee does not own any residential house property on the date of sanction of loan (w.e.f Assessment year 2020 – 21)
14	80EEB	Additional deduction shall be allowed to individual on interest of Rupees one Lakh fifty thousand payable on loan taken from financial institution for the purchase of electrical vehicle between the period 01.04.2019 to 31.03.2023.  (w.e.f Assessment year 2020 – 21)
15	87A	Deduction from Income Tax upto Rupees twelve thousand five hundred shall be allowed to an individual resident in India, where total income does not exceed rupees five lakhs. Said total income shall be computed after making deductions under chapter VIA (80C, 80D etc.). If total income exceeds Rupees five lakhs no deduction under this section shall be available. (w.e.f.  Assessment year 2020 – 21)
16	115BAA	Tax Rate in case of certain Domestic Company reduced to 22%; explanatory note attached. (w.e.f. Assessment year 2020 – 21)
17	115BAB	Tax Rate in case of new Domestic Manufacturing Company reduced to 15%; explanatory note attached.  (w.e.f. Assessment year 2020 – 21)
18	139(1) (Seventh Proviso)	In the following cases it shall be mandatory to file Income Tax Return:- a) where expenditure on foreign travelling exceeds Rupees two lakhs b) where electricity bills exceed Rupees one lakh c) where amounts deposited in current account with Bank/Co-operative Bank exceed Rupees one crore. d) where exemption u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB is claimed (Sixth Proviso) (w.e.f Assessment year 2020 – 21)
19	139A(vii)	a) Every person now who intends to enter into certain prescribed transactions and has not been allotted PAN, shall apply for PAN. b) If any person has not been allotted PAN, he may furnish his Aadhar number and there upon such person shall be allotted PAN. (w.e.f 01.09.2019)
20	139AA	PAN allotted to a person shall be deemed to be invalid in case the person fails to intimate his Aadhar number on or before 31.03.2021.  (w.e.f 01.09.2019)
21	143(1)(c )	Assessment under section 143(1) shall be made after allowing relief under section 89, besides other deductions. (w.e.f. Assessment year 2007 – 08)
22	194A(3)(i)	Limit for non-deduction of tax at source by Banks, Post Office and Cooperative Society Bank on interest payment increased from Rs. 10,000 to Rs. 40,000. In the case of Senior Citizen limit now is Rs. 50,000. In case of interest payment by person other than Bank, limit for deduction of tax at source remains at Rs. 5,000.  (w.e.f. Assessment year 2020 – 21)
23	194DA	If receipts from Life Insurance Corporation exceed rupees one lakh then Tax shall be deducted at source on the amount [other than amount exempt under section 10(10D)] @ 5% as against 1% previously. (w.e.f. 01.09.2019)
24	194I	Limit for deduction of tax on payment of Rent increased from Rupees one lakh eighty thousand to Rupees Two lakhs forty thousand.(w.e.f. 01.04.2019)
25	194IA	Consideration for the purpose of deduction of TDS @ 1% on sales consideration exceeding Rs. 50 lakhs, shall include club membership fee, car parking fee, electricity and water fee, maintenance fee, advance fee and other charges of similar nature.  (w.e.f. 01.09.2019)
26	194M	Individual / HUF shall have to deduct TDS @ 5% against payment exceeding Rs. 50 lakhs paid as commission or professional services to any resident (This is additional liability on Individual/HUF whose accounts are not subject to audit u/s 44AB). (w.e.f.  1.09.2019)
27	194N	Banking company/Co-operative Society/Post Office shall deduct TDS @ 2% on amount exceeding Rs. 1 crore paid in cash to any person; Where recipient has not filed Returns for last three years , deduction shall be @ 2 % where cash withdrawn exceeds Rs. 20 lakhs but is less than Rs. 1 crore and @ 5 %where cash withdrawn exceeds Rs.1 Crore. (w.e.f. 01.07.2020)
28	195(2)	Where person responsible for paying any amount to a non-resident considers that whole of said amount would not be income chargeable to Tax, he can make application to A.O. in manner prescribed to determine appropriate portion of some chargeable to tax and thereupon tax shall be deducted u/s 195(1) only on that portion of the amount. (w.e.f 01.11.2019)
29	197(1)	Certificate for lower deduction of tax at source shall also be applicable on sums exceeding Rupees fifty lakhs paid towards  commission /professional service to a person on which Tax @ 5% is required to be deducted under section 194M.   (w.e.f 01.09.2019)
30	269SU and 271DB	Every person whose turnover in business exceeds Rs. 50 crores shall arrange facility for accepting payment through prescribed electronic modes in addition to facility for other electronic mode provided, if any. Failure to provide said facility shall attract penalty @ Rs. 5,000 per day.  (w.e.f 01.11.2019)
31	271FAA	Penalty of Rupees fifty thousand shall be levied for furnishing inaccurate information in financial statement prescribed u/s 285BA (1).  (w.e.f 01.09.2019)
32	272B	Penalty of Rs. 10,000 shall be levied on false quoting or non-intimation of Aadhar number.  (w.e.f. 01.09.2019)

NOTE: Some amendments were made by Finance Act, 2020 which are effective from Assessment Year 2020-21 [e.g. amendment made in Section 44 AB for Tax Audit enhancing Turnover Limit to Rs. 5 crores in certain cases]. The said amendments were discussed in detail in my previous Article published on 12.2.2020 on Taxguru site, namely “Finance Bill 2020 – Analysis of 19 Important changes in Income Tax”. Accordingly said amendments have not been repeated above.

TAX RATE IN THE CASE OF CERTAIN DOMESTIC COMPANIES (SECTION 115BAA) (W.E.F ASST. YEAR 2020-2021 AND ONWARDS)

(1) A Domestic Company shall be liable to pay Tax @ 22% if following conditions are satisfied:-

i) Total Income is computed without claiming following deductions:

> tax Holiday for units in Special Economic Zones (Section 10AA)

> additional depreciation u/s 32(1)(iia)

> investment linked deduction u/s 32AD

> benefits u/s 33AB or 33ABA

> accelerated R&D allowance (Sub Clause (ii), (iia), (iii) of Sub Section (1), Sub Section (2AA) or Sub Section (2AB) of Section 35)

> allowances u/s 35AD, 35CCC or 35CCD

> deductions under Chapter VIA under the heading “C-Deductions in respect of certain income” (However deduction in respect of employment of new employees shall be allowed u/s 80JJAA)

ii) Total income is computed without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i) above.

iii) Total income is computed without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i) above.

iv) Total income is computed by claiming depreciation under any provision of section 32 [however additional depreciation under section 32(1)(iia) shall not be allowed as stated in clause (i) above].

(2) The loss and depreciation referred to in clause (ii) and clause (iii) of para (1) above shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.

Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 01.04.2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 01.04.2019 in the prescribed manner, if option under section 115BAA is exercised for financial year relevant to assessment year 2020-2021.

(3) The option is to be exercised by Company u/s 115BAA on or before due date of filling of Return u/s 139 for assessment year 2020-2021 or subsequent assessment year in Form 10 IC if the Company so desires, option once exercised shall also apply to subsequent years.

(4) Where a company which has opted for lower tax @ 15% u/s 115BAB and thereafter the company violates conditions specified in that section, then the company can exercise the option u/s 115BAA (i.e. Tax @ 22%).

(5) The company can-not withdraw option exercised u/s 115BAA for the assessment year for which exercised or any subsequent assessment year.

(6) Provisions of MAT u/s 115JB shall not apply to a company who has exercised option u/s 115BAA or Section 115 BAB.

(7)  Tax paid under this section shall be enhanced by surcharge @ 10% of such Tax and also Cess @ 4 %; Effective Tax Rate shall be 25.168 %.

TAX ON INCOME OF NEW MANUFACTURING DOMESTIC COMPANIES @ 15% (SECTION 115BAB) (W.E.F ASST. YEAR 2020-2021 AND ONWARDS)

A new manufacturing domestic company shall be liable to pay Income Tax @ 15%, if following conditions are satisfied:-

(1)  The assesse is a domestic company (this section is not applicable to other persons like Individual, Firm, LLP, etc.).

(2) The company has been setup and registered on or after 01.10.2019 and has commenced production of articles or things on or before 31.03.2023.

(3) The business of the company is not formed by splitting or reconstruction of business already in existence provided that this condition shall not apply in cases of re-establishment/re-construction/ revival u/s 33B.

(4)  i) The company does not use any machinery or plant previously used for any purpose in India.

ii) Any machinery or plant used outside India shall not be regarded as previously used if following conditions are fulfilled:-

a) such machinery/plant not used in India

b) such machinery/plant is imported from any country outside India

c) no deduction for depreciation was claimed for such machinery/plant

d) where the company uses plant/machinery previously used whose value does not exceed 20% of total value of machinery/plant used by the company, then condition for eligibility of section 115BAB shall be deemed to have been fulfilled

(5) The company does not use any building previous used as hotel/convention centre in respect of which deduction u/s 80ID has been claimed.

(6) i) The company is not engaged in any business other than business of manufacture/production of articles/things and sale of such articles/things.

ii) Business of manufacture or production shall not include following businesses:-

> development of computer software in any form in any media

> mining

> conversion of marble blocks or similar items into slabs

> bottling of gas into cylinder

> printing of books or production of cinematograph film

> any other business as may be notified by the Central Government

iii) Word `Manufacture’ has been defined in section 2(29BA) of the Act, as follows:-

“Manufacture, with its grammatical variations, means a change in a non-living physical object or      article or thing;

i) Resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use.

ii) Bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure”.

Word `Production’ has not been defined in the Act. However, Hon’ble Apex Court in various judgments has held that word production has a wider connotation in comparison to word manufacture and further held that any activity which brings a commercially new product into existence constitutes Production.

Whether manufacture or production should be on account of self or it can be out-sourced i.e. Job Work is a question which has not been answered in the Amendment Act.

(7) i) Total income of the company is computed without claiming following deductions:-

> tax Holiday for units in Special Economic Zones (Section 10AA)

>  additional Depreciation u/s 32(1)(iia)

>  investment linked deduction u/s 32AD

>  benefits u/s 33AB or 33ABA

>  accelerated R&D allowance (Sub Clause (ii), (iia), (iii) of Sub Section (1), Sub Section (2AA) or Sub Section (2AB) of Section 35)

>  allowances u/s 35AD, 35CCC or 35CCD

>  deductions under Chapter VIA under the heading “C-Deductions in respect of certain income” (However deduction in respect of employment of new employees shall be allowed u/s 80JJAA)

ii) Total income is computed without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause 7(i) above.

iii) The loss referred to u/s 72A shall be deemed to have been given full effect to and no further deduction for such loss shall be allowed for any subsequent year.

iv) Total income shall be computed by claiming depreciation under provisions of section 32 except additional depreciation under section 32(i)(iia).

(8)

(i) Where it appears to A.O., owing to close connection between company claiming Tax rate @ 15% under this section and any other person, business of said company produces more than ordinary profits, A.O. shall assess profits of the company claiming lower Tax rate as may be reasonable.

(ii) If the aforesaid arrangement involves a specified domestic transaction referred to section 92BA, the profit shall be determined having regard to arm’s length price.

(9)

(i) The option is to be exercised by Company u/s 115BAB on or before due date of filling of Return u/s 139 for assessment year 2020-2021 or subsequent assessment year in Form 10 ID , if the Company so desires.

(ii) Option once exercised for any assessment year, can-not subsequently be withdrawn for the same assessment year or any subsequent assessment year.

(10) Provisions of MAT u/s 115JB shall not apply to a company who has exercised option u/s 115BAB.

(11) Tax paid under this section shall be enhanced by surcharge @ 10% of such Tax and also Cess @ 4%; Effective Tax Rate shall be 17.16 %.

Disclaimer:

The entire contents of this article have been prepared on the basis of relevant provisions and the information existing at the time of preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, author assumes no responsibility, therefor. Users of this information are expected go through the relevant provisions of applicable laws. The user(s) of the information agrees that the information is not professional advice and is subject to change without notice. Author assumes no responsibility for the consequences of the use of said information.