The Finance Minister has proposed reduced tax rates in respect of an individual and HUF who opts to not to claim any exemption or deduction by introducing a new Section 115BAC. As per the proposal, the tax rate applicable, shall be as under, if an individual and HUF exercises an option to not to claim various exemptions or deductions provided otherwise under the Act:-

1. ALTERNATIVE TAX SLABS FOR INDIVIDUALS AND HUF:-

Sr.No Total Income Rate of Tax
1. Upto Rs.250000 NIL
2. From Rs.250000 to Rs.500000 5%
3. From Rs.500001 to Rs.750000 10%
4. From Rs.750001 to Rs.1000000 15%
5. From Rs.1000001 to Rs.1250000 20%
6. From Rs.1250001 to Rs.1500000 25%
7. Above Rs.1500000 30%

Any individual or HUF who exercises such option shall not be eligible to claim various exemptions or deductions available under the Act including the following:-

i) Standard deduction of Rs.50,000/-

ii) Leave Travel Allowance under Section 10(5)

iii) House Rent Allowance under Section 10(13A)

iv) Certain allowances under Section 10(14) as will be prescribed

v) Deduction of interest up to Rs.2,00,000/- allowable under Section 24(b) in respect of self occupied property.

vi) Deduction of one-third of family pension allowable under Section 57(iia)

vii) All deductions allowed under Chapter VI-A (except the deduction under Section 80 CCD (2) and Section 80 JJAA)including of Rs.1,50,000/- under Section 80C in respect of contribution to provident fund, life insurance premium and deduction of Rs.50,000/- as contribution to NPS under Section 80CCD (1B).

viii) Allowance for Minor Child Income allowable under Section 10(32) on clubbing of minor Income

ix) Exemption for SEZ Unit under Section 10AA

x) Additional initial depreciation in respect of plant and machinery under Section 32(1)(iia)

xi) Investment allowance in respect of new plant and machinery in notified backward areas under Section 32AD

xii) Tea/Coffee/Rubber development benefit under Section 33AB

xiii) Site restoration benefit under Section 33ABA

xiv) Various deductions for donation for expenditure on scientific research or social sciences research under section 35(1)(ii), section 35(1)(iia), section 35(1)(iiia) or under section 34(2AA)

xv) Accelerated capital deduction for specified businesses under Section 35AD

xvi) Expenditure on agricultural extension project under Section 35CCC.

However Following deductions shall be available irrespective of an Individual opts for new taxation regime or old taxation regime

i) transport allowance granted to an employee to meet expenditure for the purpose of commuting between place of residence and place of duty, conveyance allowance granted to meet the expenditure on conveyance in performance of duties of an office any allowance granted to meet the cost of travel on tour or on transfer and the daily allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty shall continue to be available to such individuals who opts to pay tax under the new section 115BAC

ii) Deduction under Section 80CCD(2) upto Rs.50000 for contribution towards national pension scheme.

iii) Deduction under Section 80JJAA in respect of payment of salary to NEW employees. This deduction on additional employee cost shall be available for three assessment years starting from the year in which the employment is provided.

2. REDUCED TAX RATE OF 22 PER CENT FOR COOPERATIVE SOCIETIES

The Finance Bill, 2020 by inserting new section 115BAD proposes to reduce the tax     rate of 30 per cent applicable to a Cooperative Society to 22 per cent + 10 per cent surcharge and 4 per cent cess to make the tax rate applicable to cooperative societies at par with the rates applicable to the companies under section 115BAA of the Act. Further the applicability of alternative minimum tax rate has also been removed from the Cooperative Societies.

3. CONCESSIONAL RATE OF 15% EXTENDED TO ELECTRICITY GENERATING COMPANIES

This benefit of 15 per cent tax rate shall also be available in the case of such companies which are incorporated on or after 1st October 2019 and are engaged in the generation of electricity. This amendment is being made retrospectively and accordingly shall be applicable from assessment year 2020-21.

4. NO CHANGE IN TAX RATES FOR OTHER TAX ENTITIES

The Finance Bill, 2020 has not proposed any other change in the tax rate applicable to partnership firms, LLP and companies, both domestic as well as foreign companies. The tax rate applicable in the case of partnership firm and LLP will be 30 per cent with surcharge at the rate of 12 per cent in case the total income of such partnership firm or LLP exceeds Rs. 1 crore. The effective tax rate on partnership firm and LLP after including surcharge and educational cess comes to 34.94 per cent.

5. DIVIDEND INCOME TO BE TAXED IN THE HANDS OF THE SHAREHOLDERS – DIVIDEND DISTRIBUTION TAX BEING ABOLISHED

The Finance Bill, 2020 has proposed to make a far reaching amendment to the system of taxing dividend income. At present, a company is required to pay dividend distribution tax under Section 115-O at the rate of 15 per cent (effective tax rate of 20.56%) on the amount of dividend declared/distributed or paid by such company. Further, under Section 115BBDA, a person resident in Indian other than a domestic company or a fund or institution eligible for exemption under Section 10(23C) or registered under Section 12A of the Income Tax Act is required to pay a further tax on divided income exceeding Rs.10 lakh at the rate of 10 per cent. Now, under the proposed amendment, the liability to pay dividend distribution tax under Section 115-O and on dividend income exceeding Rs.10 lakh under Section 115BBDA are being abolished. Instead, dividend received by any shareholder will be considered as its ordinary income and will be taxable at the rate applicable to such person and no exemption shall be allowed in respect of such dividend income. Accordingly, the exemption provided under Section 10(34) in respect of dividend income is being withdrawn.

Dividend received shall be allowed as deduction while computing its income.

In order to avoid cascading effect of tax on a shareholder which happens to be a company, old Section 80M is being revived back. As per this Section 80M, dividend income received by a domestic company from any other domestic company to the extent such dividend income is distributed by such company on or before one month prior to the date of furnishing of return of income shall be allowed as deduction while computing its income. Accordingly, in case a company receives any dividend income during the financial year, say, 2020-21 and such dividend income to the extent it is distributed on or before 30.09.2021, such company shall be allowed to deduct dividend distributed by it out of its dividend income received from the other domestic company. This will avoid cascading effect on dividend income in the hands of a company. It is to be noted that as per provision of Section 80M, it is not necessary that dividend income should be received first and out of such dividend income the dividend is to be distributed to claim deduction under Section 80M. Even if the dividend is distributed first and later on dividend income is received, the dividend so distributed to the extent of dividend income received will be eligible for deduction under Section 80M.

6. DEDUCTION OF INTEREST ON ACQUIRING FIRST HOME – EXTENSION BY 1 YEAR

Deduction to individuals in respect of interest on loan taken from any financial institution and is allowed up to one lakh fifty thousand rupees with the conditions that loan has been sanctioned by the financial institution during the period from 1st April, 2019 to 31st March, 2020.

7. EXEMPTIONS IN RESPECT OF CONTRIBUTION BY EMPLOYER TO PROVIDENT FUND, SUPERANNUATION FUND AND NATIONAL PENSION FUND RESTRICTED TO RS.7,50,000

The Finance Bill, 2020 has proposed to substitute existing sub-clause (vii) in Section 17(2) for taxing the aggregate contribution by the employer to a recognized provident fund, to an approved superannuation fund and contribution to pension scheme, in case the same exceeds Rs.7,50,000 as perquisites.

8. TAX ON ESOP OF START-UPS TO BE PAID AFTER 5 YEARS OF EXERCISING THE OPTION

At present, perquisite by way of ESOP is taxed as income in the year in which the option is exercised by the employee under section 17(2) of the Income Tax Act. The Finance Bill, 2020 considering the issue of cash flow as employee may not have the requisite funds to make payment of the tax on such perquisite which is given by way of shares in the company, has proposed to collect tax on such perquisite after 4 years from the end of the Assessment Year in which such option is being exercised. This will mean 5 years from the end of the Financial Year in which option is exercised.

9. RELAXATION IN RESPECT OF CIRCLE RATE INCREASED FROM 5% TO 10% ON SALE OF IMMOVABLE PROPERTY

As per existing provision of section 43CA/ Section 50C, while computing business income or capital gains in respect of sale of land or building or both, in case the stamp duty valuation exceeds the actual sale consideration, then the stamp duty value is considered as full consideration for computing the business income/ full value of consideration. The Finance Act, 2018 has relaxed this provision by making an amendment to the effect that where the stamp duty valuation does not exceed 105% of the actual consideration received, then the business income/Capital Gain shall be computed on the basis of the actual consideration received. The Finance Bill, 2020 has further relaxed this provision by allowing difference between the actual sale consideration and the stamp duty valuation of 10% as against 5%. Accordingly, the business income/Capital Gains under section 43CA/Section 50C shall be computed on the basis of the actual consideration received in case the stamp duty valuation does not exceed 110% of such consideration. It is to be noted that such amount of 10% is to be computed on actual consideration received and not on the stamp duty valuation. Further in case the stamp duty value does not exceed 110% of the actual consideration paid, then, there will be no deemed income in the hands of the buyer of land and building under this Section 56(2)(x). It is to be noted again that in case the stamp duty value exceed 110%, then the entire difference including 10% will be considered as income from other sources. Thus, this 10% is not a threshold exemption.

10. EXTENSION OF TIME LIMIT FOR APPROVAL OF AFFORDABLE HOUSING PROJECT FOR AVAILING DEDUCTION UNDER SECTION 80-IBA BY 1 YEAR

The Finance Act, 2016 inserted section 80-IBA to give exemption in respect of income derived from the business of developing and building affordable housing project which is approved by the competent authority between 01.06.2016 to 31.03.2019 and such project is completed within a period of three years from the date of the first approval by the competent authority

11. TENURE FOR CLAIMING DEDUCTION BY START-UPS INCREASED FROM 7 TO 10 YEARS AND TURNOVER THRESHOLD INCREASED FROM RS.25 CRORE TO 100 CRORE

The Explanatory Memorandum to the Finance Bill, 2019 proposes to amend the provision of section 80-IAC to provide that the deduction under the section 80-IAC shall be available to an eligible start-up, if the total turnover of its business does not exceed one hundred crore rupees in any of the previous years beginning from the year in which it is incorporated. However, the Finance Bill, 2019 has only proposed to amend the threshold limit of turnover of Rs.25 crore to 100 crore in the year in which deduction is being claimed and there is no such restriction that turnover should not exceed Rs.100 crore in any of the year in beginning from the year in which it is incorporated. It may be relevant to point out that in absence of any amendment to the language of section 80-IAC, the only requirement is that the turnover should not exceed Rs.100 crore in the previous years in which deduction is being claimed i.e. the 3 consecutive years out of the 10 years block. Accordingly, the turnover may exceed Rs.100 crore in other years. This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years. While the amendment is made effective from assessment year 2020-21, start-ups that have been incorporated prior to 1.04.2020 and having turnover more than Rs.25 crore but within Rs.100 crore should be eligible for such benefit. Similarly, the extended period of 10 years should be available to the start-ups incorporated prior to 01.04.2020.

12. THRESHOLD FOR TAX AUDIT UNDER SECTION 44AB INCREASED FROM RS.1 CRORE TO RS.5 CRORE

The Finance Bill, 2020 has proposed to increase the threshold for tax audit from Rs.1.0 crore to Rs.5.0 crore. As per the existing provision, every person carrying on business is required to get accounts audited if its total sales, turnover or gross receipt in business exceeds Rs.1 crore whereas a person carrying on profession is required to get accounts audited if the gross receipt in profession exceed Rs.50 lakh in the year. The Finance Bill, 2020 has proposed to increase the threshold only in respect of the person carrying on the business from Rs.1 crore to Rs.5 crore with a condition that this enhanced limit of Rs.5 crore will be applicable only where aggregate of all receipts in cash during the year does not exceed 5% of total receipts and also aggregate of all payments made in cash during the year does not exceed 5% of total payments. It is to be noted that 5% is to be computed on the basis of aggregate of receipts irrespective of the fact whether such receipts are in respect of sales, turnover or otherwise. Similarly, 5% of the total payment is to be computed in respect of all the payment made which not necessarily regarding purchases.

13. SCOPE OF E-ASSESSMENT PROCEEDINGS EXPANDED TO COVER BEST JUDGMENT ASSESSMENT UNDER SECTION 144

Section 143 were inserted to empower the Central Government to issue a scheme for implementing faceless assessments. Under the existing provision of 143(3A), the Central Government is empowered to make the scheme in relation to regular assessments made under section 143(3) of the Act. The Finance Bill, 2020 proposes to expand the scope of such scheme to best judgment assessments made under section 144 of the Act. Further, the existing provisions required the Central Government to make the scheme on or before 31.03.2020. The Finance Bill, 2020 proposes to extend such sunset date from 31.03.2020 to 31.03.2022. This amendment will take effect from 1st April, 2020.

14. TAX DEDUCTION AT SOURCE (TDS) ON DIVIDEND INCOME ON SHARES/UNITS OF MUTUAL FUNDS

The Finance Bill, 2020 has made amendment in Section 194 to provide that tax shall be required to be deducted at source at the rate of 10% in respect of the dividend to be paid or distributed by it. However, no tax shall be required to be deducted in case the aggregate of the amount of the dividend distributed or paid or likely to be distributed or paid to a shareholder who is an individual during the financial year does not exceed Rs.5,000/- and the payment is made by any mode other than cash.

Further, the Finance Bill, 2020 has proposed to insert a new Section 194K for making it obligatory to deduct tax at source at the rate of 10% on payment to a resident in respect of units of mutual fund. However, no tax shall be deducted in case the aggregate of the amount of such income credited or paid or likely to be credited or paid during the financial year to the payee does not exceed Rs.5,000.

15. RATE OF TDS IN RESPECT OF FEE FOR TECHNICAL SERVICES (FTS) REDUCED TO 2%

As per the existing provision of Section 194J of the Income Tax Act, tax is required to be deducted at source at the rate of 10% in respect of a payment to a resident by way of fees for professional services, fees for technical services, remuneration of a fee to a Director and royalty. The Finance Bill, 2020 has proposed to reduce the rate to 2% in respect of the payment to a resident for fee for technical services. This amendment is being proposed to avoid dispute which has arisen whether the services provided fall within the meaning of fee for technical services or within the meaning of works under Section 194C of the Act where tax rate applicable is 2%. There is no reduction in the tax rate applicable to fees for professional service. Considering the fact that the scope of “fees for professional services” and “fees for technical services” may overlap in case such services have been provided by an engineer or architect or technical consultant, dispute as to whether the tax rate applicable should be 2% or 10% will still continue. This amendment shall be effective from 01.04.2020 and as such, reduced rate shall be applicable from 01.04.2020.

16. SCOPE OF TDS BEING WIDENED IN RESPECT OF PAYMENT BY E-COMMERCE COMPANY

The Finance Bill, 2020 has proposed to insert a new section 194-O extending the applicability of the TDS provision on participant to E-commerce. As per the proposed amendment, an E-commerce operator shall be required to deduct TDS at the rate of 1% at the time of credit of amount of sale or service or both to the account of the E-commerce participant or at the time of payment thereof to such participant by any mode, whichever is earlier. The amount shall include the payment directly made by the purchaser of the goods or services to the E-commerce participant. However, this provision shall not be applicable for E-commerce participant if the E-commerce participant happens to be an individual or HUF and the gross amount of sales or services or both of such individual or HUF through such E-commerce operator during the year does not exceed Rs.5 lakhs and such E-commerce participant furnishes a PAN or Aadhar Number. In case the Ecommerce participant does not furnish PAN or Aadhar Number to the e-commerce operator, TDS shall be deducted at the rate of 5% under section 206AA of the Act. Thus, in respect of all persons, other than Individuals or HUF’s, selling goods or providing services through E-commerce operator such as Amazon, Swiggy, Flipkart, Uber, Walmart etc., tax shall be deducted by the E-commerce operator at the rate of 1% and there is no threshold exemption for non-deduction of TDS. However, in the case of Individuals or HUF’s making sale through such e-commerce operators, tax shall be deducted by the ecommerce operator at the rate of 1% only if the total sales or services of such Individuals or HUF’s through such e-commerce operators exceed Rs.5 lakh. It is to be noted that in case the sale amount exceeds Rs.5 lakhs, then tax is required to be deducted under this provision on the entire amount and not only on the amount in excess of Rs.5 lakhs. Further, it is to be noted that the amount on which tax shall be deducted shall also include payment directly made by a customer to such E-commerce participants.

17. TAX COLLECTION AT SOURCE ON OVERSEAS REMITTANCES UNDER LRS

The Finance Bill, 2020 has widened the scope of tax collection at source by inserting a new sub-section (1G) in section 206C whereby, every person, being an authorized dealer, who receives an amount of Rs.7 lakh or more in a financial year for remittance out of India from a buyer under Liberalized Remittance Scheme of the RBI shall be required to collect tax at source at the rate of 5% at the time of debiting the amount to the buyers or at the time of receipt of such amount from the buyer by any mode whichever is earlier. In case of non-furnishing of PAN or Aadhar by such buyer, the tax shall be required to be deducted at 10% under section 206CC of the Act. It has been clarified that in case the nature of the payment is liable for deduction at collection at source or any other provision of the Act, then tax shall not be required to be collected at source on such payment.

18. TAX COLLECTION AT SOURCE ON OVERSEAS TOUR PACKAGE

The Finance Bill, 2020 under the above new sub-section (1G) of section 206C has also proposed for collection of tax at source by the seller of overseas tour program package to collect tax at source at the rate of 5% at the time of debiting the amount to the purchase of the overseas tour program package or at the time of receipt of such amount, whichever is earlier, at the rate of 5%. In case of non-furnishing of PAN or Aadhar by such buyer, the tax shall be required to be deducted at 10% under section 206CC of the Act. It is to be noted that no threshold has been fixed in respect of overseas tour program package, meaning thereby that for every small payment made, the seller shall be required to collect tax at source. The scope of overseas tour program package is also very wide as its meaning has been defined to mean any tour program which offers visit to a country or territory outside India and include expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto. From the above definition apparently we note that TCS shall be applicable only in case of a “overseas tour package”, irrespective of the purpose of the trip. Independent activities do not constitute a package. In the literal meaning, sale of air tickets and hotel bookings done independently do not call for tax collection at source.

19. TAX COLLECTION AT SOURCE ON SALE OF GOODS:-

The Finance Bill, 2020 has proposed new sub-section (1H) under Section 206C requiring every seller whose total turnover in the business carried on exceed Rs.10 crore in the preceding financial year to collect tax at source at the rate of 0.1% of the sale consideration exceeding Rs.50 lakhs in respect of sale of any goods. Thus, under this provision, every seller whose turnover has been more than Rs.10 crore in the preceding year will be required to collect at source, from every buyer on purchase of goods by such buyer if the total purchases by such buyer exceeds Rs. 50 lakhs. It may be noted that the tax is required to be collected only in respect of the sale value exceeding Rs.50 lakhs during the year. In case such buyer does not have the PAN Number or Aadhar Number, then the rate of collection shall be 1% under Section 206CC of the Act.

OTHERS

i) Individuals and HUF’s to continue to deduct/collect tax at source in case turnover exceeds Rs. 1 crore in case of business despite increase in threshold of tax audit to Rs. 5 crore.

ii) The Finance Bill, 2020 has proposed a new section 271AAD for imposing a penalty for false entry/omitted entry in the books of accounts of the assessee. The proposed section provides that if it is found during any proceeding under the Act that in the books of accounts maintained by any person, there is a (i) false entry or (ii) any entry relevant for computation of total income of such person has been omitted to evade tax liability, then such person shall be liable to pay by way of penalty, a sum which is equal to the aggregate amounts of such false entries or omitted entry.

iii) Annual Information Statement to be issued by the Department in place of Form 26AS:-The statement to be delivered by the Department to information in respect of a person such as sale/purchase of immovable property, share transactions etc. so as to facilitate compliance and so that the same can be used by the Assessee for filing of the return of income and calculating his correct tax liability.

iv) All existing charitable trusts/institutions to apply for re-registration:-

It has now been proposed in the Finance Bill, 2020 that the provision of section 12AA shall not be applicable on or after 1st June, 2020. Further, a new clause (ac) has been inserted in section 12A w.e.f. 1st October, 2020 providing that where the trust or institution is registered under Section 12A or under Section 12AA, it shall be required to make an application in the prescribed form to the Principal Commissioner or Commissioner for registration of trust within three months from 1st October 2020 and such trust or institution should obtain registration under section 12AB. Thus, all existing trusts or institutions which are registered under Section 12A or Section 12AA will mandatorily be required for re-registration within a period of three months starting from 1st October, 2020 i.e. upto 31st December, 2020 and obtain registration under Section 12AB

v) Approval under Section 80G also to be obtained again:-The Finance Bill, 2020 has proposed similar amendment in respect of the approval under section 80G. As per the amendment, all trusts or institutions which have obtained approval for the purpose of the deduction under section 80G shall be required to apply again for seeking approval within three months from the first day of October, 2020 i.e. 31st December, 2020. In case such approval is not applied, then donation made to such trust or institution shall not be eligible for deduction under Section 80G. Such approval shall be for a period of 5 years and has to be applied again at least 6 months prior to the expiry of the period of registration. The Commissioner shall follow the same process as is proposed for renewal of registration under section 12AB i.e. calling for document and information, making enquiry about the genuineness of the activities of the trust or institution and fulfilment of all the conditions stated in Section 80G(5).

vi) Obligation on Trust or Institution to file annual statement of donation :-The Finance Bill, 2020 has proposed to insert Clause (viii) and (ix) in Section 80G (5) requiring trust or institution approved under section 80G to file statement of donation received and also to issue the certificate to the donor. It has been further stated that deduction on account of donation under section 80G shall be allowed to the donor only on the basis of the statement filed by the donee trust or institution. The statement has to be filed in the prescribed form and within such time as may be prescribed by the Rules. In case of delay in filing such statement a late fee of Rs.200 per day shall be applicable under newly inserted section 234G of the Act. Further, a penalty under Section 271K, which shall not be less than Rs.10,000/- and which may extend up to Rs.1.0 lakh shall be leviable if the trust or institution fails to file such statement.

vii) Scientific research association, university, college approved under Section 35(1) also to intimate for renewal of registration and file annual statement:- The Finance Bill, 2020 has proposed similar amendment, as in the case of trusts under section 80G, in respect of scientific research association, universities, colleges approved for accepting contribution under section 35(1) requiring such scientific research association, universities or colleges, as the case may be, to intimate the income tax authority in the prescribed form and manner within a period of three months from 1st October, 2020 i.e. 31st December, 2020 and upon such intimation, the approval already provided shall be valid for a period of 5 years beginning from AY 2021-22. Further, it has been provided that any notification issued by the Central Government, after the date on which Finance Bill, 2020 receives ascent, to provide approval to a scientific research association or university or a college as the case may be shall not be valid for a period exceeding 5 years. Further, such associations shall also be required to file a statement of the contribution received by it in the prescribed form by the prescribed date, similar to trusts or institutions as proposed under section 80G, and in case of delay in filing such statement, it shall also be liable to pay fee of Rs.200 per day under Section 234G of the Act and also be liable for penalty under Section 271K which shall not less than Rs.10,000/- and which may extend to Rs.1 lakh. The benefit of deduction to the contributor shall be allowed on the basis of the statement filed by such association.

viii) Donation for scientific research in cash not to exceed Rs.2,000:- The Finance Bill, 2020 has proposed to amend Section 80GGA for deduction in respect of donation for scientific research or rural development. As per the present sub-section (2A) of the Section 80GGA, no deduction is allowed in respect of any sum exceeding Rs.10,000/- paid in cash. This amount is being reduced to Rs.2,000/-. Accordingly, no deduction shall be allowed in respect of any amount exceeding Rs.2,000/- under the section in respect of donation for scientific research unless such sum is paid by any mode other than cash.

The above Amendments shall take place w.e.f. 01st April, 2020. However few announcements made by Finance Minister Nirmala Sitharaman on 14th May,2020 in view of the COVID-19 pandemic. Hence following changes shall be applicable from 14th May, 2020 to 31st March, 2021.

1. Extension of due date for filing Income Tax Returns to 30th November,2020:-Due to COVID-19 pandemic, it will be difficult for Taxpayers to calculate and pay their taxes along with file their returns on or before the normal due dates. Hence a major relief has been announced that due dates Individual filing their Income tax returns for Assessment Year 2020-2021 has been extended to 30th November,2020 as compared to the normal due date for 31st July,2020 and 31st October,2020.

2. Extension of Tax Audit deadline to 31st October,2020:- Assessee’s who are required to file their Tax Audit report have been granted an extension for a month i.e due date for filing Tax Audit report is 31st October,2020 for Assessment Year 2020-21 as compared to the earlier due date of 30th September,2020.

3. Reduction in TDS and TCS by 25%:-The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21. Payment for contract, professional fees, interest, rent, dividend, commission, brokerage, etc shall be eligible for this reduced rate of TDS.

4. Vivad Se Vishwas extension:-Period of Vivad Se Vishwas Scheme for making payment without additional amount will be extended to 31st December 2020. The scheme was introduced to reduce income tax pending litigation and generate timely revenues for the government. It aims to help taxpayers end their tax disputes with the department by paying disputed tax and get a waiver from payment of interest and penalty

5. Cash withdrawals and Foreign Remittances:-Cash withdrawals over Rs 1 crore and foreign remittances have been kept out of the purview of the TDS cut. Cash withdrawals and foreign remittances have also been kept out of the rate reduction ambit to promote digital transactions and restrict larger outflow of money.

6. No TDS rate cuts on payments made for Salary:-The TDS on salary has not been reduced in order to prevent the salaried people from facing heavy tax burden at the time of filing returns and paying the full quota of taxes for the year.

The above article is written by CA Suyash Tripathi and can be reached at tripathi.r.suyash@gmail.com

Author Bio

Qualification: CA in Practice
Company: Suyash Tripathi & Co. Chartered Accountants
Location: MUMBAI, Maharashtra, IN
Member Since: 18 May 2020 | Total Posts: 10

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2 Comments

  1. Dolly says:

    I read two articles by Suyashandco, one with the title, “TCS on overseas tour package ” and other titled ” Income tax changes for FY 2020-21″. In the former for tcs on overseas tour package, it says individual activities like buying ticket or booking hotel alone, will not attract the tcs provision, whereas the latter article says any independent activity will also be liable to TCS. Can it be clarified?

    1. casuyashandco says:

      Independent Activity w.r.t International travel do not attract TCS provision. TCS provision are applicable only when there’s involvement of complete tour package.

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