The Finance Minister Nirmala Sitharaman while presenting the Budget 2020 on Saturday has proposed the following changes are as follows:
1) Here’s a list of the main exemptions that tax payers will have to forgo if they opt for the new regime.
(i) Leave travel allowance exemption which is currently available to salaried employees twice in a block of four years.
(ii) House rent allowance normally paid to salaried individuals as part of salary. This could be claimed as tax exempt upto certain
specified limits if the individual was staying in rented accommodation.
(iii) Standard deduction of Rs 50,000 currently available to salaried tax payers.
(iv) Deduction for entertainment allowance and employment/professional tax as contained in section 16.
(v) Tax benefit on interest paid on housing loan taken for a self occupied or vacant house property: Interest paid on housing loan for such a property could be claimed as a deduction from income from house property
which resulted in a loss from house property (as the property was self/occupied or vacant). This loss could be set off against salary income thereby reducing the individuals’ taxable income and net tax liability. This comes under section 24 .
(vi) Deduction of Rs 15000 allowed from family pension under clause (iia) of section 57.
(vii) The most commonly claimed deductions under section 80C will also go. This includes the commonly availed section 80C
deductions claimed for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF etc.
However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme—mostly NPS) and section 80JJAA (for new employment) can still be claimed.
(viii) The deduction claimed for medical insurance premium under section 80D will also not be claimable.
(ix) Tax benefits for disability under sections 80DD and 80DDB will not be claimable.
(x) Tax break on interest paid on education loan will not be claimable-section 80E.
(xi) Tax break on donations to charitable institutions available under section 80G will not be available
All deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) will not be claimable by those opting for the new tax regime.
(2) Amendments to TDS provisions:
The Finance Minister Nirmala Sitharaman while presenting the Budget 2020 on Saturday has proposed some changes in TDS:
(i) TDS u/s 194K: TDS of 10% on Capital Gains from Mutual Funds along with the TDS on Dividends for Resident Individuals whose income from such funds exceeds Rs. 5,000. It has been proposed for insertion of new section 194K which states:
Any person responsible for paying to a resident any income in respect of:
(a) units of Mutual Fund specified under (23D) of section 10; or
(b) units from the Administrator of the specified undertaking; or
(c) units from the specified company, shall at the time of credit of such income to the account of payee or at the time of payment by any mode, whichever is earlier, deduct tax at source
Provided the provisions of this section shall not apply where the amount of income or as the case may be the aggregate of the amounts of such income credited or paid during the financial year by the person responsible for making payments to the account of payee does not exceed Rs 5000. (Five Thousand Rupees).
Currently, the TDS is deducted on NRI’s on the capital gains from Mutual Funds but not on the resident individuals. The latter have to calculate and pay tax on self- assessment basis.
(ii) TDS u/s 194J: TDS under section 194J breaks into two rates i.e. 2% for Technical services and 10% for Professional servcies. Section 194J presently provides for tax deduction at 10% without making any distinction between fees for professional service or technical service. In order to minimize the litigation where the taxpayers deduct tax at 2% in the case of technical service, the Finance Bill, 2020 proposes an amendment. Thus where any sum is paid by way of fee for technical services (not being a professional service) tax is deductible at source @ 2% instead of 10%.
(iii) TDS u/s 194C: The Finance Bill 2020 proposed to amend the definition of “work” under section 194C. It is proposed to amend the definition of work to provide that in contract manufacturing i.e. raw material provided by the assesses or its associate shall also fall within the purview of “work” under section 194C.
(iv) TDS u/s 194A: In the Finance Bill 2020, an amendment proposed in section 194A related to Co-operative societies. Now the society required to deduct TDS on interest paid if the turnover of the society exceeds Rs 50 Crores. (Rupees Fifty Crores) in previous Financial Year and where the interest amount exceed Rs. 50000 for Senior Citizens and Rs. 40,000 in any other case.
(3) Vivaad se Vishwas Scheme: The Finance Minister has introduced a Scheme called” Vivaad Se Vishwas Scheme” where the assesses have to pay only the disputed tax amount before 31st March 2020,the interest and penalty will be waived. The assesses can also pay the disputed tax after 31st March 2020 with some additional amount till 30th June 2020 and all the cases pending in dispute at any level will be cleared.
(4) Dividend Distribution Tax has been abolished. Now any amount of dividend credited to the shareholders or the investors, the dividend will be taxable in their hands not in the hands of the Companies.
(5) Tax Audit limit has been increased from Rs 1 crore to 5 crores provided the taxpayer has received all the amounts including amount received for sales, turnover or gross receipts in cash which does not exceed 5% of the total amount and all payments including payments incurred for expenditure in cash does not exceed 5% of the total amount.