The Amendments made to the Income Tax Act in respect of Individual , HUF , Domestic Companies for Assessment Year 2020-21 , Previous Year 2019-20 by way off.
1. The Finance Act 2019
2. The Finance Act (No.2) 2019
3. The Tax Ordinance Act 2019
4. The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance,
(For easy reference and to make understand under which act the changes are made I have tried using various colours for various acts for example changes made in Finance Act 2019 will be written in red & Finance Act (No. 2) in green & so on)
A- Individual
General
- There is no change in Tax Rate
- Surcharge :
- 10% of Tax if Taxable Income >50 Lakhs but upto 1
- 15% of Tax if Taxable Income >1 Cr but upto 2
- Taxable Income >2 Cr but Upto 5
- For STCG & LTCG the surcharge will be @ 15%
- For remaining income surcharge will be 25%
- Taxable Income >5 Cr .
- For STCG & LTCG the surcharge will be @ 15%
- For remaining income surcharge will be 37%
- Maximum Marginal Rate 42.744% except 115TD
- To avail Rebate U/s. 87A the NTI must be upto Rs.500000/-then the rebate will be Rs.12500/- or the tax amount which-ever is
Suppose a person having Net Taxable Income upto Rs.5,00,000/- The tax will be Rs. Nil/- & if the NTI is Rs. 5,00,010/- the tax would be Rs.12500/-+Cess.
Capital Gain
- Under Section 54 (sale of residential house property – purchase of residential house property), The Amendment in this section is If LTCG is upto 2crs than assessee can acquire TWO residential house properties in the prescribed time limit. The benefit of purchase of 2 house property is available only once in life
- Under 54GB (Transfer of residential property/plot – Subscription of equity shares) , the eligible start up can now sell computers / computer software acquired by the eligible start up, after 3 years instead of 5 years & even the share holding in that eligible start up has been reduced to 25%
Chapter VI – A
- Deduction under 80C – By employee of CG as a contribution to a specified account of pension scheme referred in section 80CCCD for a fix period of 3yrs or more
- A New Deduction under Sec 80EEA :- Deduction in respect of interest on house property
- Amount of Deduction – 150000/-
- Conditions
- Loan Should be taken from banks or financial institutions for acquisition of residential house property
- Stamp Duty Value of house property should be upto Rs.45 lakhs
- Loan should be sanctioned between 01/04/2019 to 31/03/2020
- Assessee should not own any residential property on the date of sanction of loan
- This Deduction will be on the remaining amount after Sec 24(b)
- A New deduction Under Section 80EEB – Deduction in respect of interest on electric vehicle
- Amount of Deduction – 150000/-
- Conditions
- Loan Should be taken from banks or financial institutions for acquisition of residential house property
- Loan should be sanctioned between 01/04/2019 to 31/03/2023
Salary’s
- Standard Deduction for Salary Is now 50000/-
House Property
- Now 2 Self occupied property are exempted from paying tax , before if a person has 2 house property than 1 would be treated as Self occupied property & the other will be treated as deemed to be let out and tax would have to be
- Maximum Deduction under Interest for House property for self-occupied
- House property 1 – Max. Interest allowed 150000/-
- House property 2 – Max. Interest allowed 150000/-
- But Maximum Can be 200000/-
B- HUF
General
- Surcharge :
- 10% of Tax if Taxable Income >50 Lakhs but Upto 1
- 15% of Tax if Taxable Income >1 Cr but Upto 2
- Taxable Income >2 Cr but Upto 5
- For STCG & LTCG the surcharge will be @ 15%
- For remaining income surcharge will be 25%
- Taxable Income >5 Cr .
- For STCG & LTCG the surcharge will be @ 15%
- For remaining income surcharge will be 37%
- Maximum Marginal Rate 42.744% except 115TD
Capital Gains
- Under Section 54 (sale of residential house property – purchase of residential house property), The Amendment in this section is If LTCG is upto 2crs than assessee can acquire TWO residential house properties in the prescribed time limit. The benefit of purchase of 2 house property is available only once in
- Under 54GB (Transfer of residential property/plot – Subscription of equity shares) , the eligible start up can now sell computers / computer software acquired by the eligible start up, after 3 years instead of 5 years & even the share holding in that eligible start up has been reduced to 25%.
C- Domestic Companies
General
- Now for companies to avail rate @ 25% the turnover or gross receipts of PY17-18 must be upto 400
- Earlier on Buy back of unlisted company shares the tax has to be paid @ 23.296% on the distributed income but after the amendment
- It is applicable to all shares listed or unlisted this amendment is applicable from 05- 07-2019
- This won’t apply if the public announcement was made before 05-07-2019
- The Company who have opted for 115BA can now opt out from it and avail the benefit of 115BAA (Anx.1)
- New Section 115BAA has been added which prescribes the tax rate of 22% subject to few conditions (Anx.1)
- New Section 115BAB has been added which prescribes the tax rate of 15% subject to few conditions for Manufacturing Companies (Anx.1)
- NO MAT Credit for the companies availing 115BAA
- MAT Rate will be 15% instead of 18% + Surcharge + Cess
- No MAT for a person who has exercised the option to pay tax under 115BAA & 115BAB
D- Common Changes Applicable for all
General
- The person (other than partnership firm & company) will be required to file return if this GTI (before claiming exemption u/s. 54,54B,54D,54EC,54F,54G,54GA,54GB)> Basic Exemption.
- Last date to link Aadhar will be 31-12-2020
- Mandatory to File return .
- Conditions
- He has deposited amount more than 1 cr in aggregate in one or more of current account maintained with banks or co-operative
- He has incurred foreign expenditure of more than Rs.200000/- for himself or any other person
- He has incurred electricity expenditure of more than 1 lakh
- Conditions
- Every person who is required to furnish or intimate or quote his PAN and who has
- Not allocated pan but possess the Aadhar No. , he may furnish or intimate or intimate or quote his Aadhar in lieu of PAN & such person will be allocated pan
- He has allocated pan and who has linked his Aadhar number , he may furnish or intimate or quote his Aadhar
- Only Aadhar will now be sufficient to get PAN Card
- If you have made any investment, deposit, payment, acquisition, purchase or construction by whatever name called for the purpose of claiming deduction, exemption or allowance which was falling due during 20-03-2020 to 29-06-2020 & if made up to 30-06-2020 than it shall considered as if it is made for FY 19-20 can take the benefit in the Income Tax return for FY 19-20.
- If payment of any amount towards tax or levy (i.e. advance tax , TDS , TCS) which falls due during the period 20-03-2020 to 29-06-2020 but paid before 30-06-2020 than interest will be charged at 0.75% p.m. & no penalty shall be
Business & Profession
- The depreciation on motor vehicles
- For hire business if acquired and put to use in between 23-08-2019 to 31-03-2020 than the rate of depreciation will be 45%
- For other than hire business if acquired and put to use in between 23-08-2019 to 31- 03-2020 than the rate of depreciation will be 30%
- Section 43B – Expenses allowed only on payment basis
- Interest on any loan or borrowing from a deposit taking non- banking financial company or systematically important non deposit taking NBFC
TDS
- Under Sec 194A , The TDS to be deducted by bank or co-op. banks only if the interest is more than Rs.40000/- (for other than senior citizen) & Rs.50000/- for senior citizens
- TDS for Rent shall now be Rs.2,40,000/- instead of 1,80,000/-
- Tax will be charged under section 56(2)(x) even if gift is made outside India by the resident person to Non-resident person
- Exception to Sec 40(a)(ia) , if any amount is paid or credit to a resident / NONRESIDENT payee without deduction of TDS but if such payee furnishes the return than the payer will not be treated as assessee in default. & that expenditure will be allowed
- New Section 194M – Contractor, Commission , Brokerage
- Payer – Individual (other than 194C,194H,194J)
- Payee – Any Resident Person
- Rate – 5%
- Amount – >50Lakhs
(This section makes mandatory to deduct TDS on personal expenditure)
- New Section 194N – TDS on cash withdrawal
- Payer – Bank Co Operative Bank
- Payee- Any person
- Rate – 2%
- Amount – Amount withdrawn – 1Cr
Deduction
- Sec 80CCD(2) Employers contribution to NPS , the rate has been increased from 10% to 14% of the salary for government contribution (central )
- A Deduction in respect of Developing & Building housing projects
- The Donations made to PM Care Fund which is exempt under 80G till 30-06-2020 can be considered for claiming deduction for FY 19-20.
Anx. 1 Comparisons between Section 115BA , 115BAA , 115BAB
This Comparison is in a view to understand how each section is different from other , Even the Complete Section is reproduced after the Table.
| S.no | Point of Comparison | Section 115BA | Section 115BAA | Section 115BAB |
|
1 |
Deals with |
Tax on Income of Certain Domestic Manufacturing Company. | Tax on Income of Certain Domestic Companies | Tax on Income of Certain New Domestic Companies |
| 2 | When company must be set up and registered to qualify for availing the benefit under the Section | on or After 01-03- 2016 | Irrespective of the date of Set up & registration | On or after 01-10-2019 |
| 3 | Tax Rate | 25% | 22% | 15% |
| 4 | Rate of Surcharge Applicable | 7% if Company’s total income exceeds 1 cr but not 10 cr & 12% if company’s total income exceeds 10 Crs. | 10% | 10% |
| 5 | Effective tax including surcharge & health & education cess | 26% if company s total income is Rs. 1 Cr or less ; 27.82% if company’s total income exceeds Rs. 1 cr but not 10 cr ; 29.12% if company’s total income exceeds Rs. 10 Cr | 25.17% | 17.16% |
|
6 |
Whether conditions regarding new undertakings not formed by splitting up existing business applicable under this section | No | No | Yes |
|
7 |
whether stipulations regarding non-use of 2nd hand plant & machinery is applicable under the section | No | No | Yes |
|
8 |
whether stipulations regarding non-use of building earlier used as hotel or convention centre is applicable | No | No | Yes |
| 9 | Exemption from MAT u/s. 115JB | No | Yes | Yes |
| 10 | when option for benefits under section should be exercised | On or before the due date specified under Sec 139(1) for furnishing the 1st return of income which the assessee is required to furnish under the provisions of the act | On or before the due date specified under Sec 139(1) for furnishing the return of income for any previous year relevant to the assessment yr. commencing on or after 01-04-2020 | On or before the due date specified under Sec 139(1) for furnishing the 1st return of income which the assessee is required to furnish under the provisions of the act |
| 11 | whether company can opt to claim exemption and pay tax at pre amended rate and opt for the concessional tax regime after the expiry of their tax holiday / exemption period | No, since the option to avail the section has to be exercised on or before the due date specified under sec 139(1) for furnishing the first return of income which the assessee is required to furnish under the provisions of the act | Yes. See point No.10 above the table | No, since the option to avail the section has to be exercised on or before the due date specified under sec 139(1) for furnishing the first return of income which the assessee is required to furnish under the provisions of the act |
| 12 | Whether existing company can mitigate from section 115BA to the new section | Yes, the company which has opted for section 115BA can irrevocably opt for section 115BAA and thereupon withdraw the option exercised for section 115BA | No Company which has opted for section 115BA cannot opt for Section 115BAB | |
| 13 | What happens to the existing unutilized MAT credit | Company can carry forward and utilize it as per Sec 115JAA | unutilized MAP credit lapses if company opts for section 115BAA (as clarified by CBDT s Circular No. 29/2019 dt. 02/10/2019 | No question of unutilized MAT credit as section applies to new companies |
Tax on income of certain manufacturing domestic companies.
115BA. (1) Notwithstanding anything contained in this Act but subject to the 3[other provisions of this Chapter] 4[, other than those mentioned under section 115BAA and section 115BAB], the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2017, shall, at the option of such person, be computed at the rate of twenty-five per cent, if the conditions contained in sub-section (2) are satisfied.
(2) For the purposes of sub-section (1), the following conditions shall apply, namely:—
(a) the company has been set-up and registered on or after the 1st day of March, 2016;
(b) the company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it; and
(c) the total income of the company has been computed,—
(i) without any deduction under the provisions of section 10AA or clause (iia) of sub- section (1) of section 32 or section 32AC or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub- section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AC or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A under the heading “—Deductions in respect of certain incomes” other than the provisions of section 80JJAA;
(ii) without set off of any loss carried forward from any earlier assessment year if such loss is attributable to any of the deductions referred to in sub-clause (i); and
(iii) depreciation under section 32, other than clause (iia) of sub-section (1) of the said section, is determined in the manner as may be
(3) The loss referred to in sub-clause (ii) of clause (c) of sub-section (2) shall be deemed to have been already given full effect to and no further deduction for such loss shall be allowed for any subsequent
(4) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner5 on or before the due date specified under sub-section (1) of section 139 for furnishing the first of the returns of income which the person is required to furnish under the provisions of this Act:
Provided that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
Following second proviso shall be inserted after the existing proviso to sub-section (4) of section 115BA by the Taxation Laws (Amendment) Act, 2019, w.e.f. 1-4-2020:
Provided further that where the person exercises option under section 115BAA, the option under this section may be withdrawn.
Tax on income of certain domestic companies.
115BAA. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAB, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall, at the option of such person, be computed at the rate of twenty-two per cent, if the conditions contained in sub-section (2) are satisfied:
Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.
(2) For the purposes of sub-section (1), the total income of the company shall be computed,—
(i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub- section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A under the heading “—Deductions in respect of certain incomes” other than the provisions of section 80JJAA;
(ii) 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);
(iii) 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); and
(iv) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.
(3) The loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) 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 1st day of April, 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2019 in the prescribed manner, if the option under sub-section
(5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020.
(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.
Explanation.—For the purposes of this sub-section, the term “Unit” shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).
(5) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years:
Provided that in case of a person, where the option exercised by it under section 115BAB has been rendered invalid due to violation of conditions contained in sub-clause (ii) or sub-clause
(iii) of clause (a), or clause (b) of sub-section (2) of said section, such person may exercise option under this section:
Provided further that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
Tax on income of new manufacturing domestic companies.
115BAB. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAA, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall, at the option of such person, be computed at the rate of fifteen per cent, if the conditions contained in sub-section (2) are satisfied:
Provided that where the total income of the person, includes any income, which has neither been derived from nor is incidental to manufacturing or production of an article or thing and in respect of which no specific rate of tax has been provided separately under this Chapter, such income shall be taxed at the rate of twenty-two per cent and no deduction or allowance in respect of any expenditure or allowance shall be allowed in computing such income:
Provided further that the income-tax payable in respect of the income of the person deemed so under second proviso to sub-section (6) shall be computed at the rate of thirty per cent:
Provided also that the income-tax payable in respect of income being short term capital gains derived from transfer of a capital asset on which no depreciation is allowable under the Act shall be computed at the rate of twenty-two per cent:
Provided also that where the person fails to satisfy the conditions contained in sub-section
(2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply to the person as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.
(2) For the purposes of sub-section (1), the following conditions shall apply, namely:—
(a) the company has been set-up and registered on or after the 1st day of October, 2019, and has commenced manufacturing or production of an article or thing on or before the 31st day of March, 2023 and,—
(i) the business is not formed by splitting up, or the reconstruction, of a business already in existence:
Provided that this condition shall not apply in respect of a company, business of which is formed as a result of the re-establishment, reconstruction or revival by the person of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in the said section;
(ii) does not use any machinery or plant previously used for any
Explanation 1.—For the purposes of sub-clause (ii), any machinery or plant which was used outside India by any other person shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:—
(A) such machinery or plant was not, at any time previous to the date of the installation used in India;
(B) such machinery or plant is imported into India from any country outside India; and
(C) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant by the person.
Explanation 2.—Where in the case of a person, any machinery or plant or any part thereof previously used for any purpose is put to use by the company and the total value of such machinery or plant or part thereof does not exceed twenty per cent of the total value of the machinery or plant used by the company, then, for the purposes of sub-clause (ii) of this clause, the condition specified therein shall be deemed to have been complied with;
(iii) does not use any building previously used as a hotel or a convention centre, as the case may be, in respect of which deduction under section 80-ID has been claimed and
Explanation.—For the purposes of this sub-clause, the expressions “hotel” and “convention centre” shall have the meanings respectively assigned to them in clause (a) and clause (b) of sub-section (6) of section 80-ID;
(b) the company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by
Explanation.—For the removal of doubts, it is hereby clarified that the business of manufacture or production of any article or thing referred to in clause (b) shall not include business of,—
(i) development of computer software in any form or in any media;
(ii) mining;
(iii) conversion of marble blocks or similar items into slabs;
(iv) bottling of gas into cylinder;
(v) printing of books or production of cinematograph film; or
(vi) any other business as may be notified by the Central Government in this behalf; and
(c) the total income of the company has been computed,—
(i) without any deduction under the provisions of section 10AA or clause (iia) of sub- section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub- section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A under the heading “C.—Deductions in respect of certain incomes” other than the provisions of section 80JJAA;
(ii) without set-off of any loss or allowance for unabsorbed depreciation deemed so under section 72A where such loss or depreciation is attributable to any of the deductions referred to in sub-clause (i);
Explanation.—For the removal of doubts, it is hereby clarified that in case of an amalgamation, the option under sub-section (7) shall remain valid in case of the amalgamated company only and if the conditions contained in sub-section (2) are continued to be satisfied by such company; and
(iii) by claiming the depreciation under the provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.
(3) The loss referred to in sub-clause (ii) of clause (c) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss shall be allowed for any subsequent year.
(4) If any difficulty arises regarding fulfilment of the conditions contained in sub-clause (ii) or sub-clause (iii) of clause (a) of sub-section (2) or clause (b) of said sub-section, as the case may be, the Board may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty and to promote manufacturing or production of article or thing using new plant and
(5) Every guideline issued by the Board under sub-section (4) shall be laid before each House of Parliament, and shall be binding on the person, and the income-tax authorities subordinate to
(6) Where it appears to the Assessing Officer that, owing to the close connection between the person to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the person more than the ordinary profits which might be expected to arise in such business, the Assessing Officer shall, in computing the profits and gains of such business for the purposes of this section, take the amount of profits as may be reasonably deemed to have been derived therefrom:
Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm’s length price as defined in clause (ii) of section 92F:
Provided further that the amount, being profits in excess of the amount of the profits determined by the Assessing Officer, shall be deemed to be the income of the person.
(7) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the first of the returns of income for any previous year relevant to the assessment year commencing on or after 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years:
Provided that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
Explanation.—For the purposes of section 115BAA and this section, the expression “unabsorbed depreciation” shall have the meaning assigned to it in clause (b) of sub-section (7) of section 72A.
For Any Further improvements or suggestions or clarifications Feel free to contact CA Ajay Kumar Mundada oPh. 8019716430 | Email.id :- [email protected]
Author Bio
Sir,
I became a senior citizen as on (1.04.2020). I have retired from govt. service on 31.3.2020.
Am I a senior citizen while filing ITR for the financial year 2019-20?