Aspirational India, Economic Development and Caring Society are the three themes based on which our Hon’ble Finance Minister Nirmala Sitharaman deliver Union Budget 2020 on February 01, 2020.

In this article we will be discussing key proposals which FM has proposed for achieving the target of $ 5 trillion economy.

Below mentioned are the proposals:

(A) Financial Sector

a. Limit of asset size and loan size reduced from 500 crore to 100 crore and 1 crore to 50 lakhs respectively for NBFCs eligibility under SARFAESI Act, 2002 for debt

b. Sale of government stake in IDBI bank is proposed through stock

c. Insurance coverage for bank depositors to increase from 1 Lakh to 5 Lakh rupees. This will result in more trust of citizens towards banking systems of More infusion of capital through extra savings.

d. Government will sell part of its holding in LIC through

e. Separation of NPS trust for government employees from

f. App-based invoice financing for

g. Export promotion of MSME in selected sectors such as automobile,

h. MSMEs debt re-structuring window shall be opened till March 31,

(B) Financial Market

a. Deepening bond

b. Government securities shall be fully opened for Non-Resident

c. FPI limit (% of outstanding stock) in corporate bonds increased from 9% to 15%.

d. Debt-ETFs will be launched for long term investors, retail investors (like Bharat Bonds ETF).

(C)  Fiscal Management

a. Budgeted Estimates (BE) for FY 20-21:

♦ Receipts – Rs. 22.46 lakh

♦ Expenditure- Rs. 30.42 lakh

♦ Nominal GDP growth at 10%.

♦ Fiscal deficit at 3.5% (this is total of 3% estimate + 0.5% deviation allowed under FRBM Act).

♦ Net market borrowings to increase from 4.99 lakh crore to 5.36 lakh

(D) Direct Taxes

a. Optional scheme for Individuals and HUF-

Total Income Tax Rate
Up to 2,50,000 Nil
From 2,50,001 to 5,00,000 5%
From 5,00,001 to 7,50,000 10%
From 7,50,001 to 10,00,000 15%
From 10,00,001 to 12,50,000 20%
From 12,50,001 to 15,00,000 25%
Above 15,00,000 30%

♦ Person having business income has to exercise option on or before due date of filing of ROI. Option shall be valid for year of exercise and all subsequent

♦ Person having no business income has to exercise option along with filing of ROI. Option shall be valid for year of exercise only i.e. option needs to be exercise for each

♦ Above slab rates are proposed to be inserted via new Section 115BAC.

♦ Provisions of AMT shall not be applicable if person having business income exercise this option to pay taxes.

♦ Certain Specified Deductions and Exemptions have to forgo by the person under this scheme, which are as follows:

  • Leave travel concession, House Rent allowance, standard deduction, entertainment allowance, professional tax
  • 10(14) allowances except re-imbursements of conveyance, cost of travel on business tour, ordinary charges and transport allowance for divyang
  • Allowances for clubbing of minor income u/s 10(32).
  • Exemption u/s 10AA to
  • Interest deductions u/s 24 for vacant or self-occupied
  • Additional depreciation u/s 32(1) (iia), 32AD, 33AB, 33ABA, 35AD,
  • Various deductions for donations or expenditure on scientific
  • Deduction from family pension u/s
  • Any deduction of Chapter VIA for example: 80C, 80D. But deduction u/s 80CCD (employer contribution to notified pension scheme) and 80JJAA can be
  • No exemption for free food & beverage coupons provided to

♦ No changes are proposed in rates of

b. New Section 115BAD proposed to be inserted for Co-operative Societies to opt for concessional rate of tax @ 22% (with compulsory 10% surcharge and 4% education cess). AMT shall not be applicable if opted for this section. Certain exemptions and deductions have to forgo by the societies. This provision is brought under to provide parity among domestic companies and co-operative

c. In order to promote foreign investments, income from Interest, dividend, LTCG proposed to be exempted if investments made by Sovereign Wealth Fund/ wholly owned subsidiary of Abu Dhabi Investment Authority provided investments to be made in specified business and for at least period of 3

d. Threshold for tax audit has been proposed to be increased to 5 Crore for assesses having business (receipts/payments) in cash not exceeding 5% of their total business.

e. Dividend Distribution Tax (‘DDT’) abolished:

♦ Dividend income to be taxed in the hands of shareholders/unit holders as per their respective tax

♦  Section 115BBDA shall not remain in effect from 01.04.2020 i.e. no benefit of exemption of dividend income up to Rs.10 Lakh.

♦ Since dividend income would be taxed under “Other Income”, deduction for interest expenses shall be restricted to 20% of income u/s 57.

♦ Now TDS will be deducted u/s 194 @ 10% on dividend income. If distributed in other than cash, threshold of Rs.5000 shall

♦ New Section 194K to be inserted for tax deduction on income distributed by mutual funds or similar funds @ 10% subject to threshold of 5000.

f. Time limit for approval of affordable housing (for deduction u/s 80-IBA) extended up to March 31, 2021 from existing limit of March 31, 2020. Similarly, time limit for sanctioning of loan for affordable housing (for deduction u/s 80EEA) extended till March 31,

g. Concessional rate of tax @ 15% will now extend to companies involved in generation of electricity (considering as manufacturing entities) under Section 115BAB.

h. Eligible fund manager (Indian resident) can contribute either directly or indirectly up to 25 crore in an offshore fund during first three

i. Section 194LC & 194LD amended to extend the period of concessional rate of withholding tax (5%) up to July 01, 2023 from July 01,

j. Provision of interest limitation (Section 94B) would not apply to interest paid/payable on debt issued by a lender which is a Permanent Establishment of a non-resident, engaged in banking business.

k. Safe harbor limit of 5% increased to 10% under Section 43CA (other than capital asset), 50C (capital asset) and Section

l. Section 35AD is proposed to be made optional to exercise by the

m. Non-resident will no more required to file ROI in case of royalty and Fees for Technical Services (‘FTS’) income if required TDS has been deducted on such income and non-resident does not have any other income

n. Deferring point of taxation of ESOPs from existing “date of exercising” to “earliest of following:

♦ At expiry of 48 months from end of relevant A/Y or,

♦ Sale of sweat equity/ESOPs or,

♦ Date on which assesse ceased to be employee”.

o. Modification in definition of Business Trusts to include unlisted Infrastructure Investment Trusts (InvITs) under its ambit. Now, all InvITs will be eligible to take benefits of income exemption.

p. “Attribution of profits to Permanent Establishment” is proposed to include under the purview of Safe Harbor Rules (SHR, Section 92CB) & Advance Pricing Agreements (APA, Section 92CC).

q. Rate of TDS on Fees for Technical Services (payment to residents) u/s 194J proposed to be reduced to 2% from existing 10%.

r. Co-operative societies are now required to deduct Tax @ 10% u/s 194A on interest payment to members or other co-operative societies provided:

♦ Their total sales/gross receipts exceed 50 crore rupees during preceding FY and,

♦ Interest payment exceeds Rs.50000 in case of senior citizens and Rs.40000 in case of others during the financial

s. Combined upper limit of Rs.750000 has been proposed for employer contribution to NPS, recognized provident fund and superannuation fund. Any excess contribution shall be taxable in hands of employee as

t. New Section 194-O is proposed to be inserted which pose obligation on E-commerce operator to deduct tax @ 1% of e-commerce participant (supplier) from gross sale proceeds/service revenue to be paid or credited to the account of such participant.

♦ If total sales/gross receipts of any participant being Individual/HUF does not exceed Rs.5 lakh during the PY and such participant has furnished PAN/Aadhaar number to e-commerce operator, provisions of this section shall not come in force for such participant.

u. Amendment in Section 206C to widen the scope of levy of TCS:

♦ Authorized Dealer (‘AD’) to collect Tax @ 5% on amounts received in excess of Rs.7 Lakh from any person remitting such amount under LRS out of

♦ Seller of overseas tour packages shall collect tax @ 5% from buyer on receiving any amount.

(in above two cases, rate shall be 10% in no PAN/Aadhaar cases)

♦ On sale of more than 50 Lakh in a financial year to a buyer, a seller needs to collect tax @ 0.1% from buyer on consideration received. In no PAN/Aadhaar cases, rate shall be 1%.

(TCS to be collected by only those sellers whose total sales/gross receipts exceed Rs.10 Crore during immediately preceding financial year).

v. Now, a non-resident not being a company shall be eligible for Dispute Resolution Panel (‘DRP’) provisions u/s 144C.

w. Best judgment assessment proposed to be covered under e-assessment

x. Central government may notify e-appeal scheme and e-penalty scheme to enhance transparency, eliminating the interface between department and assesse to the extent

y. Insertion of “taxpayer’s charter” is proposed to be inserted under the act via Section

z. ITAT may grant stay on demand provided that assesse deposit at least 20% of the disputed amount of tax, interest, penalty, fee or any other sum

aa. Amendment proposed under Section 6:

♦ Time limit has been reduced from existing 182 days to 120 days to determine the status of non-resident visiting

♦ For determining status of “not ordinarily resident”, existing conditions have been replaced with new condition e. “Individual/manager of HUF should be non-resident in seven previous years out of ten previous years immediately preceding the year”.

♦ Indian citizen liable to tax on his income from India (business/profession) if his income is not subject to tax anywhere else in the world.

bb. Definition of Work” under Section 194C proposed to be amended. In contract manufacturing, raw material from assesse or its associates will fall under the purview of “Work” and be subject to 194C.

cc. Penalty shall be levied for fake invoicing, false entries, false evidence, invoicing without actual supplying of goods/services equivalent to the amount of such false entry, fake invoice, evidence etc.

dd. Deduction u/s 80G (Contribution to relief funds/charitable organizations) and 80GGA (donation to scientific research organizations) shall only be allowed to donor if donee furnished a statement for donations received.

ee. Deduction u/s 80GGA shall be restricted to Rs.2000 if made in cash by donor.

ff. Proposed to obsolete the requirement of issuing FORM 26AS by Income tax authorities.

New Section 285BB to be inserted which mandate IT authority to upload a statement containing all the information to which authority is in possession in the registered account of the assesse.

gg. In case of companies & LLPs, it is proposed to give powers to person authorized by board for verification of ROI. Similar amendments proposed for authorized representatives entitled to appear before any income tax authority and appellate tribunals.

hh. Under section 55 (determining cost of acquisition of capital asset), it is proposed that Fair Market Value of asset as on 01.04.2001 shall not exceed Stamp Duty Value (if available).

ii. New due dates for filing tax audit, income tax returns:

Assesses ITR Filing Due Date Tax Audit Due Date
Company, Partner of firm or Any person whose accounts are required to be audited 31st October of A/Y 30th September of A/Y (one month prior)
Any Person on which TP applicable 30th Nov of A/Y 31st October of A/Y

(E) Indirect Taxes

a. CUSTOMS DUTY

♦ Health cess introduced on import of specified medical devices at 5% of their import value.

♦ Importer to satisfy “Rules of Origin” to avail preferential tax treatment under Trade Agreements.

♦ Social Welfare Surcharge (‘SWS’) on all commercial vehicles (including electric vehicles) has been exempted if imported as completely built unit (‘CBU’).

b. GOODS & SERVICE TAX

♦ Exclusion of inter-state supply of services, exempt services and supply of services through e-commerce operator.

♦ Delinking of date of issuance of debit note with original invoice date to determine the maximum time limit of availing input tax credit (‘ITC’) in respect of such debit

♦ Tax deductor no more required to issue TDS

♦ Recipient shall be equally punishable with the person committing offence (supplier) for fraudulently availing the

♦ Availment of ITC without invoice/bill shall be cognizable and non-bailable

♦ Time limit extended up to 5 years for issuance of Removal of Difficulties

♦ Additional/Joint commissioner can extend the due date of application for revocation of cancellation of registration for a period of 30 days.

♦ Exclusions from Schedule II of The CGST Act, 2017

    • Transfer of business assets without consideration
    • Use of business assets for private purposes without

(F) “Aspirational India, Economic developments & Caring Society”

a. Kisan Rail to be set up by Indian Railways to build seamless national cold supply chain for perishables.

b. Focus on solid-waste management, source segregation and

c. Targeting diseases with designed preventive regime using Artificial Intelligence and Machine Learning.

d. New Education Policy to be launched soon.

e. Special bridge courses to be designed by Ministries of Health & Skill

f. External Commercial Borrowings (‘ECB’) and FDI to be enabled for education

g. National Police University & National Foreign Science University proposed for forensic science, policing science and cyber-forensics.

h. Five new smart cities proposed to be

i. Focus on “Zero Defect-Zero Effect” manufacturing. All ministries to issue quality standard orders.

j. New scheme “NIRVIK” to be launched for higher export

k. 100 Lakh crores to be invested in infrastructure over next 5 years.

l. National Logistics Policy to be released focusing on generating employment, skills and making MSMEs more

m. Delhi-Mumbai expressway to be completed by

n. Large solar power capacity to be set up alongside railway tracks, on railways owned

o. More ‘Tejas’ type trains to connect iconic tourist

p. Corporatizing at least one major port and its listing on stock

q. Policy to build private data center parks throughout the

r. Early life funding proposed, including a seed fund to support ideation and development of early stage start-ups.

s. Proposed to close thermal power stations with emission of carbon above

t. Contract act to

u. Development of north-east

v. National policy on official statistics to promote use of latest technologies including

w. An independent, professional and specialist National Recruitment Agency (‘NRA’) for conducting of online Common eligibility test for

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