1. All Individuals & HUF can choose to pay tax as per new slab rates without availing exemptions & deductions

Option has been given to all individuals/HUF to pay tax as per new slab rates (Optional tax regime) on total income computed without claiming any deductions/exemptions – As per Sec 115BAC inserted by Finance Act, 2020 -Applicable from FY 2020-21 (AY 2021-22). Below table summarizes tax rates as per optional tax regime Vs. old rates:

 

Total Income (Rs.)

Existing Tax Rates (%) New Tax Rates (Optional) (%)
0-2,50,000 0% 0%
2,50,001-5,00,000 5% 5%
5,00,001 – 7,50,000 20% 10%
7,50,001 – 10,00,000 15%
10,00,001 – 12,50,000  

30%

20%
12,50,001 – 15,00,000 25%
> 15,00,000 30%
  •  Basic exemption limit for senior citizen and super citizen individuals remains unchanged at Rs.3,00,000 and Rs.5,00,000
  • Rebate of income tax (i.e. up to Rs.12,500 if total income does not exceed Rs.5,00,000) remains unchanged and equally applicable for resident individual even if choose to opt for new tax
  • No change in surcharge rates. However, surcharge on STT paid capital gains shall not exceed 15%.

1.1 Individuals/HUF who does not have business income & choose to pay tax as per new regime, option shall be exercised for each year at the time of filing of ITR

a) Allowances/investments not eligible for claiming deductions/exemptions if opt for new tax regime

An Individual/HUF who does not have business income and opt for new tax regime shall not be eligible to claim various allowances/investments as deductions/exemptions under different heads of income and the same are summarized below:

Allowances or investments not eligible for claiming deductions or exemptions if opt for new tax regime

b) Allowances/investments eligible for claiming as deductions/exemptions if opt for new tax regime

An Individual/HUF who does not have business income and opt for new tax regime shall eligible to claim the below mentioned allowances/investments as deductions/exemptions only, under different heads of income:

Under Section

c) Other conditions

i. Option shall be exercised for every year along with filing of income tax return

ii. No exemption in respect of free coupon/meal vouchers (i.e. taxable in the hands of employee as perquisite) – Proposed to amend Rule 3 of Income Tax Rules,

1.2 Individuals/HUF having business income & choose to pay tax as per new rates, option can be exercised at any time on or before the due date of filing ITR for any AY on or after 2021-22 and applicable for subsequent AY’s also

a) Amounts not eligible for claiming as deductions under the head income from business or profession

An Individual/HUF having business income and choose to pay tax as per new rates shall  not be eligible to claim various deductions under the head PGBP and the same are summarized below:

 Amounts not eligible for claiming as deductions under the head income from business or profession

b) Eligible to claim deduction u/s 80JJAA in respect of additional employee cost

c) Not required to pay Alternate Minimum Tax (AMT) and not eligible to carry forward and set off of AMT credit, if any

  • Provisions of AMT shall not apply to Individual/HUF having business income and choose to pay tax as per new regime – Sec 115JC amended by Finance Act,
  • Individual/HUF having business income and opt for new tax regime, shall not be eligible to set off of brought forward AMT credit, if any and carry forward and set off of AMT credit, if any – 115JD amended by Finance Act,

Our Comments

  • Section 115JD deals with utilization of brought forward AMT credit against normal tax liability. Vide Finance Act, 2020, new sub-section was inserted – “the provisions of this section shall not apply to a person who has exercised the option referred to in section 115BAC/115BAD”.
  • Since, there is no time limit to opt for new tax regime, individual/HUF having brought forward AMT credit can opt for the same post utilization of unutilized

2. Time limit for loan sanction under affordable housing scheme extended till 31-Mar- 2021 for availing deduction of interest on loan taken by an individual

  • An individual is eligible to claim deduction of interest payable up to Rs.1,50,000 on loan taken for purchase of residential house property for AY 2020-21 and subsequently if the following conditions are satisfied:

> Loan taken from financial institution during 01-Apr-2019 to 31-Mar-2020 (extended till 31-Mar-2021 – Amended by Finance Act, 2020);

> Stamp duty value of the property does not exceed 45,00,000

> Individual does not own any residential house property on the date of sanction of loan

  • Deduction claimed under this section shall not be eligible to claim as deduction once again under any other section under the

3. Cumulative employer’s contribution to recognized PF, approved superannuation fund and NPS in excess of Rs.7.50 lakhs is taxable in the hands of employee as perquisite

  • To bring a uniformity in taxation between high earning and low earning salaried employees in respect of employer’s contribution to recognized PF, approved superannuation fund and National Pension Scheme, Sec 17(2)(vii) of the Act was amended vide Finance Act, 2020 by introducing a combined upper cap limit of Rs.7,50,000 and any excess contribution made by an employer shall be taxable in the hands of employee as
  • Further, clause (viia) of sub-section (2) of section 17 introduced to tax annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the accumulated balance to the extent of contribution included in total income of the individual as per section 17(2)(vii).

Below table summarises tax implications post amendment Vs before amendment:

S

No

Contribution/ Income Till FY 2019-20 W.e.f. FY 2020-21
Section Taxation Section Taxation
1 Employer’s contribution to recognized PF 17(1)(vi) Amount in excess of 12% of salary is taxable under salary  

 

 

 

17(2)(vii) – Substituted by Finance Act, 2020

Cumulative contribution to recognized PF, approved superannuation fund and National Pension Scheme (or any other scheme notified u/s 80CCD) in excess of Rs.7,50,000 is taxable as perquisite
2 Employer’s contribution to approved superannuation fund 17(2)(vii) Amount in excess of Rs.1,50,000 taxable as perquisite
3 Employer’s contribution to National Pension Scheme (NPS) 17(1)(viii) Entire contribution is taxable under salary. However, employee is eligible to claim deduction u/s 80CCD(2) up to 14% (Govt. employee) or 10% (other employees) of salary
4 Interest on PF (on employer’s contribution) 17(1)(vi) Interest in excess of 9.5% is taxable under “other sources” 17(2)(viia) – Substituted by Finance Act, 2020 Interest/dividend/an y other amount to the extent contribution included in total income as per Sec 17(2)(vii) taxable as perquisite
5 Interest on superannuation fund (on employer’s contribution) Rule 6 of Part B of Fourth Schedule Interest paid during his lifetime (other than covered u/s 10(13)) taxable at applicable rates

4. of days of stay in India reduced to 120 days to determine the residential status of Indian citizens/POI who resides outside India and comes on a visit to India and having total income other than foreign source income exceeding Rs.15 lakhs

  • Applicable w.e.f. AY 2021-22 (FY 2020-21)
  • At present, an individual being a citizen of India or a person of Indian origin (POI) who resides outside India and comes on a visit to India in any year shall become resident in India for the purpose of taxation if he stays in India;
    • for 182 days or more during the year (60 days or more – general provision for other individuals) AND
    • for 365 days or more during the period of 4years preceding that year
  • It is being noticed that above relaxation benefit is being misused by individuals who are actually carrying out substantial economic activities from India by managing their stay in India so as to remain as non-resident and not required to declare their global income in
  • In order to curb this type of practice carrying by high income earning individuals, clause (b) of Explanation 1 to clause (1) of section 6 amended by reducing the no. of days of stay in India to 120 days from 182 days to determine the residential status of Indian citizens/Person of Indian origin having total income (other than the income from foreign sources) exceeding Rs.15 lakhs during the
  • Below table summarizes the determination of residential status of Indian citizens/POI before amendment Vs post amendment
 

S No

 

No. of days of stay in India during the year

Indian Citizen/POI having Indian source income <= Rs.15 lakhs Indian Citizen/POI having Indian source income > Rs.15 lakhs
Till FY 2019-20 W.e.f. 01-Apr-2020 Till FY 2019-20 W.e.f. 01-Apr-2020
1. < 120 days Non-resident Non-resident Non-resident Non-resident
2. 120 days or more but <182 days Non-resident Non-resident Non-resident Resident
3. 182 days or more Resident Resident Resident Resident

*Assumed that other condition of 365 days or more during the period of 4 years  preceding that year is satisfied in all the cases.

Income from foreign sources: Means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).

5. An Individual citizen of India shall be deemed to be resident in India if his total income other than foreign source income more than Rs.15 lakhs during the year and not liable to tax in any other country

  • Applicable w.e.f. AY 2021-22 (FY 2020-21)
  • India broadly follows residence-based taxation. Accordingly, based on residential status of the individual, liable to pay taxes in India on the income
  • It is quite possible for an individual to arrange his affairs in such a way that helps him end up in paying no taxes in any country during the year. Typically, high net worth individuals (HNWI) will do this kind of arrangement to avoid paying taxes to any
  • In order to curb this practice by individuals, new sub-section (1A) inserted to bring citizens of India under Indian taxation purview if they are not liable to tax in any other
  • As per section 6(1A), an individual being a citizen of India shall be deemed to be resident in India if his total income other than income from foreign sources more than Rs.15 lakhs during the year and not liable to tax in any other country because of his domicile or residence or any other criteria of similar nature.
  • CBDT vide press release dated 02-Feb-2020 clarified that if a citizen of India becomes resident under this clause, income earned outside India by him shall not be taxable in India unless it is derived from an Indian business or
  • Our Comments

Based on the provision and clarification from CBDT, it is very clear that the intention of the government is not to tax all the citizens of India who are earning income and not taxed in other countries. Intention is to tax citizens of India who derives income from source in India if they are not liable to tax in other countries.

6. Definition of not ordinarily resident extended to persons covered in Point # 4 & 5

  • Applicable w.e.f. AY 2021-22 (FY 2020-21)
  • Definition of “not ordinarily resident” was extended to persons mentioned below by inserting clauses (c) & (d) to sub-section 6 of section 6;
    • a citizen of India or POI who resides outside India and stays in India for a period of 120 days or more but less than 182 days when comes on a visit to India and having total income other than income from foreign sources more than Rs.15 lakhs during the year
    • Deemed resident as per newly inserted sub-section (1A)
  • Our Comments
  • As per clause (a) & (b) of sub-section 6 of section 6, An individual or HUF shall become “not ordinarily resident” in India during the year if the individual or manager of HUF has been;
    • a non-resident in India in 9 out of 10 years preceding that year OR
    • stays in India for a period of 729 days or less during the 7 years preceding that year
  • Finance Bill and Memo, 2020 proposed to give relaxation from the above conditions as there was a proposal for reduction in no. of days to determine the residential status. Proposal of the Finance bill 2020 – An individual/manager of HUF shall become not ordinarily resident in India if they have been a non-resident in India in 7 out of 10 years preceding that year. However, no amendment in clause (a) & (b) of sub-section 6 of section 6 in the Finance Act,
  • Since there was no amendment in the Act, existing provisions will continue to apply though there was a proposal in the

7. Tax Audit turnover limit increased from Rs.1 crore to Rs.5 crore for persons carrying on business provided transactions in cash not more than 5% of total transactions

  • In order to reduce compliance burden on small and medium tax payers, proviso to section 44AB(a) inserted vide Finance Act, 2020 by increasing the turnover limit from Rs. 1 crore to Rs. 5 crores to get books of account audited (i.e. Tax Audit), provided;

> Aggregate of all amounts received including amount received for sales, turnover or gross receipts in cash during the year does not exceed 5% of total; and

> Aggregate of all payments made including amount incurred for expenditure in cash during the year does not exceed 5% of

  • Below table summarises the applicability of tax audit for persons carrying on business – covered under clause (a) of 44AB for FY 2020-21 (AY 2021-22):
 

S

No

 

Turnover or Gross Receipts

 

Profits and Gains

Till FY 2019-20

Tax Audit applicability?

W.e.f. FY 2020-21 Tax Audit Applicability?
Cash Receipts/ Payments*
44AD

Business

Other than 44AD Up to 5% of total >5% of total
 

1.

 

Up to 1 crore

 

< 8% (or 6%)

 

Yes

 

No

Yes (44AD);

No (Other than 44AD)

Yes (44AD);

No (Other than 44AD)

2. 8% (or 6%) or more No No No No
 

3.

 

 

1-2 crores

 

< 8% (or 6%)

 

Yes

Yes (44AB(a)) Yes (44AD);

No (Other than 44AD)

Yes
 

4.

8% (or 6%) or more  

No

Yes (44AB(a)) No No (44AD)

Yes (Other than 44AD)

5. 2-5 crores Any Yes Yes No Yes

*Payments include expenditure incurred also

8. Dividend Distribution Tax (DDT) is abolished and companies/mutual funds are not required to pay any DDT. However, dividend/distributed amount is taxable in the hands of recipient at applicable rates.

  • At present, companies or mutual funds are required to pay DDT on the amount of dividend declared, distributed or paid to shareholders or unit holders at specified rates. This resulted in levying tax at a flat rate on the distributed profits in the hands of companies/mutual funds irrespective of the marginal rate at which the recipient is otherwise taxed. Hence, the provisions are considered as iniquitous and
  • In view of the above, vide Finance Act, 2020, various provisions of the Act was amended to tax dividend or income from units in the hands of shareholders or unit holders at the applicable rate and domestic company or specified company or mutual funds are not required to pay any DDT.
  • Further, section 57 of the Act was amended to restrict deduction for interest expense only subject to 20% of income and no other deduction allowed against such dividend income or income in respect of units of Mutual Fund/Specified
  • Below table summarizes various amendments under the Act with respect to DDT abolishment and taxing in the hands of recipient:
S

No

Amendment regard to Section Existing

(Till 31-Mar-2020)

Amended

(W.e.f. 01-Apr-2020)

1. DDT by      domestic company 115-O(1) Amended Payable @15% in respect of dividends declared, distributed or paid on or after 01-Apr-2003 Payable @15% in respect of dividends declared, distributed or paid on or after 01-Apr-2003 but on or before 31-Mar-2020
2. Exemption in the hands of shareholder 10(34) Proviso inserted Exempt from tax (However, dividend in excess of Rs.10 lakhs taxable in the hands of resident specified assessee) No exemption for dividend received on or after 01- Apr-2020 (However, exemption continues for dividend on which tax u/s 115-O and 115BBDA has been paid)
3. Tax on dividend in excess of Rs.10 lakhs in the hands of shareholders 115BBDA (1)

Amended

Dividend in excess of Rs.10 lakhs taxable @10% in the hands of resident specified assessee on or after 01-Apr- 2017 Dividend in excess of Rs.10 lakhs taxable @10% in the hands of resident specified assessee on or after 01- Apr-2017 but on or before 31-Mar-2020
4. Tax on distributed income to unit holders by specified company/mutual fund 115R(2)          – Amended Payable at specified rate on distributed income Payable at specified rate on distributed income on or before 31-Mar-2020
5. Tax  on income received from mutual funds/ specified company in the hands of recipient 10(35)             – Proviso inserted Exempt from tax No exemption for income received on or after 01- Apr-2020 (i.e. Taxable)
6. Dividend received by a business trust 10(23FC)(b) – Amended Dividend received from specified domestic company referred to in 115-O(7) exempt from tax Clause (b) replaced with dividend received or receivable from special purpose vehicle – exempt from tax
7. Tax on distributed income – Sec 115UA received by a unit holder from the business trust 10(23FD) Amended Exempt from tax except interest income referred u/s 10(23FC)(a) or income from renting/leasing/letting out any real estate asset referred u/s 10(23FCA) Exempt from tax except (added to existing provision)

dividend income referred  u/s 10(23FC)(b) (in case where the special purpose vehicle choosen to pay tax u/s 115BAA – 22%)

8. Deduction in respect of inter-corporate dividends 80M –

Re-  introduced

 

 

 

Deduction for dividends distributed by it on or before due date against dividend received from

Any other domestic company a foreign company a business trust

 

9.

 

 

 

 

 

 

Deduction against dividend income

57(i) –

Amended and proviso inserted

Dividends, other than dividends referred to in section 115-O Substituted with dividends
 

 

 

 

 

10.

 

 

 

 

 

*No deduction except interest expense subject 20% of income against incomes mentioned below;

  • Dividend income
  • Income from units of mutual fund – sec 10(23D)
  • Income from units of specified company – explanation to sec 10(35)
11. Removal reference of section 115-O 115A, 115AC, 115ACA, 115AD, 115C, 195 Other than dividends referred to in section 115-O Removed to tax in the hands of recipient

*Our Comments

  • As per clause (i) of section 57, tax payer is eligible to claim deduction of commission or remuneration paid to release dividend. However, proviso inserted vide Finance Act, 2020 restricts tax payer to claim interest expense only as deduction against
  • In many judicial pronouncements, courts held that a proviso is subsidary to the main section and it cannot override the main section itself. In the present case, main section allows tax payer claim deduction of commission/remuneration paid to release dividend but proviso restricts to interest expense
  • In our opinion, tax payer is eligibel to claim both commission/remuneration or interest expense against income

9. Section 194 amended to include payment of dividends by an Indian Company for tax deduction and also threshold increased from Rs.2,500 to Rs.5,000 and rate of TDS prescribed @10%

  • Applicable w.e.f. 01-Apr-2020.
  • An Indian Company shall deduct tax @10% (earlier rates in force) on payment of dividends by any mode (earlier making any payment in cash or before issusing any cheque or warrant) to a shareholder reisdent in
  • However, no tax to be deductible while making payment to an Individual shareholder, if;
    • the dividend is paid by any mode other than cash (earlier by an a/c payee cheque) AND
    • the individual or total amount of dividend does not exceed 5,000 (earlier Rs.2,500)
  • Dividend – section 2(22)(a) to (e).

10.  Tax@10% to be deductible on distribution of any income to a resident in respect of units of mutual fund if such amount exceeds Rs.5,000 – Section 194K inserted

  • Section 194K newly inserted w.e.f. 01-Apr-2020.
  • Payer shall deduct tax@10% while distributing any income to a resident payee (i.e. unit holder) in respect of;
    • units of a mutual fund specified under 10(23D); or
    • units from the administrator of the specified undertaking; or
    • units from the specified company
  • However, no tax to be deductible if the amount does not exceed Rs.5,000 or if the nature of income is of capital

11. Optional corporate tax regime of 15% extended to power generation companies also

  • Applicable w.e.f. AY 2020-21
  • Explanation to clause (b) of sub-section (2) of section 115BAB amended to include business of generation of electricity under the business of manufacture or production of any article or thing

Our Comments:

Companies engaged in the distribution of electricity shall not be eligible to opt for 15% tax rate.

12. Domestic companies opt for 15%/22% tax rate are eligible to claim deduction u/s 80M in addition to 80JJAA

  • Applicable w.e.f. AY 2020-21.
  • At present, companies opt for 15%/22% tax rate are not eligible to claim any deduction under Chapter VI-A under the heading “C.- Deductions in respect of certain incomes other than u/s 80JJAA.
  • Vide Finance Act, 2020, Section 80M is re-introduced w.e.f. 01-Apr-2020 to provide for for deduction in respect of dividends distributed by the company against divided income received (i.e. inter-corporate dividend).
  • To give the above benefit to all companies, sub-section (2) of section 115BAA and 115BAB amended to provide such benefit to companies opt for new tax

13. Turnover limit for start-up exemption increased from Rs.25 crores and Rs.100 crores and exemption for 3 years out of 7 years extended to 10 years from the year of incorporation

  • Applicable w.e.f AY 2021-22.
  • Eligible start-up having income from eligible business is eligible to claim deduction of 100% of profits derived from that business for 3 consective years out of 10 years (earlier 7 years) from the year in which it is
  • Eligible start-up means a company/LLP engaged in eligible business and satisfies the following conditions;
    • Incorporated on or after 01-Apr-2016 but before 01-Apr-2021
    • Total business turnover does not exceed Rs.100 crores (earlier Rs.25 crores) in the year of deduction
    • Holds certificate of eligible business from the Inter-Ministerial Board of Certification

14. Tax on ESOP received (i.e. Perquisite) by employees of eligible start-up deferred from year of exercise of option to earliest of after expiry of 5 years or year of ceases to be an employee or year of sale

  • Applicable w.e.f 01-Apr-2020
  • Since tax on perqusite is required to be paid at the time of exercise of option, which may lead to cash flow problem for an employee as the ESOP benefit is in kind and not in
  • In view of the above and to ease the burden of taxes on employees, tax on perquisite deferred by amending provisions of section
  • Below table summarizes tax implications before amendment vs post amendment;
S No Nature of income Section Year of taxation Till FY 2019-20 Year of taxation W.e.f. 01-Apr-2020
1. Perquisite 17(2) r.w Rule 3(8)(iii)

New sub- section(1C) inserted u/s 192 for deferrment of tax

Year of exercise of option Within 14 days of earliest of;

  • After expiry of 48 months from the end of assessment year relevant to previous year in which ESOP allotted or transferred or
  • Date of sale or
  • Date on which ceases to be an employee

At rates applicable for the year in which such shares are allotted or transferred

2. Capital gain 45 Year of sale Year of sale (no change)

15. TDS on fees for technical services u/s 194J reduced from 10% to 2%

  • Applicable w.e.f. 01-Apr-2020
  • To reduce the no. of litigations on the issue of short deduction of tax between section 194C and 194J, rate of TDS on fees for technical services reduced from 10% to 2%. However, rate of TDS on professional services, royalty etc.., shall continue to apply 10%

Our Comments

Great initiative from the Govt. of India to reduce the litigation. However, litigation still continues to apply for those transactions if the payee is an Individual/HUF because as per section 194C, rate of TDS is 1% but u/s 194J it is 2%.

16. Definition of work u/s 194C amended to include raw material procured from related parties in the case of contract manufacturing

  • Applicable w.e.f. 01-Apr-2020.
  • Sub-clause (e ) to cluase (iv) of explanation to section 194C was amended to include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate – 40A(2)(b) under the definition of work (earlier but does not include purchases from other than such customer).

17. E-commerce operator has to deduct tax @1% on e-commerce transactions at the time of credit or payment to E-commerce participant – Section 194-O

  • Applicable w.e.f. 01-Oct-2020.

E-Commerce business model

E-Commerce business model

TDS Provisions

  • E-commerce operator shall deduct tax @1% on gross amount of sale of goods or provision of services or both at the time of credit or payment to e-commerce participant whichever is earlier.
  • Payment includes payment made by the customer to supplier
  • Services include fees for technical services and fees for professional
  • TDS is not applicable if the e-commerce participant is an individual/HUF and gross amount of such sale or services or both during the year does not exceed Rs.5 lakhs and furnishes PAN/Aadhaar number to the e-commerce
  • Transactions covered in this section are not subject to tax deduction under any other provisions. However, in respect of services of hosting advertisement or provision of any other services which are not in connection with the sale or services covered in this section, shall be covered under other
  • In the absence of non-furnishing of PAN/Aadhaar number, tax @5% would be applicable – Proviso to Sec 206AA(1).
  • Consequential amendments are also made in section 197 for lower TDS

18. TCS@5% to be collected by an authorised dealer on foreign remittance through Liberalised Remittance Scheme (LRS) and seller of an overseas tour programme package

  • New sub-section (1G) inserted to section 206C w.e.f. 01-Oct-2020

TCS by an authorised dealer

  • An authorised dealer shall collect tax (i.e. TCS) @5% from a person who remit an amount out of India (i.e. buyer of foreign currency) under the Liberalised Remittance Scheme (LRS) of the RBI on an amount or aggregate of the amounts being remitted in excess of Rs.7
  • An authorised dealer shall not be required to collect tax if the amount or aggregate of amount being remitted does not exceed Rs.7
  • If the amount being remitted is out of loan obtained from any financial institution for education purpose u/s 80E, TCS@0.5% to be collected instead of 5%.

TCS by a seller of an overseas tour programme package

  • A seller of an overseas tour programme package shall collect tax (i.e. TCS) @5% from a buyer on the entire

Other Points

  • Authorised dealer shall not be required collect any tax on an amount on which seller has been collected tax under this sub-section.
  • Tax shall not be required to collect under this provision, if the buyer is liable to deduct tax (i.e. TDS) under any other provisions of this Act and has deducted such

Liberalised Remittance Scheme (LRS)

In general, foreign currency remittance out of India requires approval of RBI. However, in order provide a relief to individuals, RBI introduced this scheme to remit for specified purposes like family maintenance, studies abroad, going abroad for employment etc., without approval up to a limit.

Under this scheme, all resident individuals are allowed to freely remit out of India up to permissible limit for any permissible current or capital account transaction or a combination or both.

Our Comments

Finance Memo contains “if the buyer does not provide either PAN or Aadhaar, Tax @10% to be collected”. However, neither new sub-section contains any reference nor amendment to section 206CC made in this regard.

19. Seller of goods whose business turnover during preceding year exceeds Rs.10 crores shall collect tax (i.e. TCS)@0.1% during current year on an amount in excess of Rs.50 lakhs

  • New sub-section (1H) inserted to section 206C w.e.f. 01-Oct-2020.
  • Every seller of any goods shall collect tax @0.1% from a buyer on sale consideration in excess of Rs.50
  • However, no TCS under this sub-section on;
    • export of goods,
    • goods covered under sub-section (1) (i.e. scrap, liquor, coal ,)
    • goods covered under sub-section (1F) (i.e. Motor Vehicle)
    • goods covered under sub-section (1G)
  • TCS@1% to be collected if the buyer does not provide PAN/Aadhaar number to the
  • Seller is not required to collect tax if the buyer is liable to deduct tax (i.e. TDS) under any other provisions of this Act on the goods purchased by him from the seller and has deducted such
  • Seller means a person whose total sales, gross receipts or turnover from his business exceeds Rs.10 crores during the preceding financial

20. Concessional rate of TDS@5% u/s 194LC (i.e. interest payment to non-residents) extended upto 30.06.2023 and also to bonds listed in stock exchanges in IFSC @4%

  • 194LC -TDS by an Indian company/business trust on interest payable to non-resident in respect of monies borrowed in foreign currency from a source outside India
  • Time period in respect of borrowings in foreign currency either under a loan agreement or by issue of any long-term bond or by issue of rupee denominated bond extended up to 30-Jun- 2023 from 30-Jun-2020.
  • Further, concessional rate also extended to borrowings in foreign currency by issue of any long-term bond or rupee denominated bond (RDB) on or after 01-Apr-2020 but before 01-Jul- 2023 but at a rate of TDS@4%. However, bonds should be listed only on a recognised stock exchange located in any International Financial Services Centre (IFSC).

21. Concessional rate of TDS@5% u/s 194LD (i.e. interest on certain bonds) extended up to 30.06.2023 and also extended to municipal debt securities

  • 194LD – TDS on interest payable to Foreign Institutional Investor (FII) or Qualified Foreign Investor (QFI) on investment made in certain bonds and government
  • Time period in respect of interest payable on investment made in rupee denominated bond of an Indian company extended up to 30-Jun-2023 from 30-Jun-2020.
  • Further, concessional rate also extended to interest payable on or after 01-Apr-2020 but before 01-Jul-2023 on investment made in municipal debt

22. Threshold limit for TDS on interest (other than on securities) u/s 194A increased from Rs.5,000 to Rs.50,000 for senior citizens and Rs.40,000 for other payees

  • Applicable w.e.f. 01-Apr-2020.

23. FMV of the capital asset being land or building or both as on 01-Apr-2001 shall not exceed stamp duty value, if available, on that date for the purpose of cost of acquisition – Section 55(2) amended

  • Proviso to sub-clause (ii) to clause (b) of sub-section (2) of section 55 inserted and applicable from AY 2021-22 (FY 2020-21).
  • At present, in respect of any capital asset acquired/received by any modes specified in sec 49(1) (i.e. by way of gift or will etc.,) before 01-Apr-2001, cost of acquisition of such asset for the purpose of capital gain computation can be taken either actual cost or Fair Market Value (FMV) as on 01-Apr-2001.
  • From AY 2021-22 (FY 2020-21) onwards, if the capital asset transferred is land or building or both and if assessee choose to opt for FMV as on 01-Apr-2001, such value shouldn’t exceed stamp duty value, if available, on that

24. Due date of filing of income tax return falls on 30th September changed to 31st October and also extended to all partners (earlier working partner only) of firm whose accounts are required to be audited

  • Applicable w.e.f. AY 2020-21.

25. Due date for furnishing of tax audit report changed from before the due date of filing of income tax return to at least one month prior to the due date and also changed for various reports under the Act.

  • Applicable w.e.f. AY 2020-21.
  • Due date changed to at least one month prior to the due date for furnishing tax audit report (For e.g. if the due date for filing of income tax return is 30th September then tax audit report to be furnished on or before 30th August) and reports mentioned below under the Act:-
S No Purpose/Report Form No. Section
1. Transfer Pricing Report 3CEB 92F
2. Report for claiming deduction in respect of additional employee cost 10DA 80JJAA
3. Computation of book profit and MAT liability 29B 115JB
4. Computation of adjusted total income and AMT liability 29C 115JC
5. Audit Report of PE of non-resident in India earning Royalty or Fees for technical services 3CE 44DA
6. Computation of capital gains in the case of slump sale 3CEA 50B
7. Audit Report for claiming deduction in respect of profits and gains from business 10CCB 80-IA &

80-IB

8. Audit Report – for claiming deduction by Charitable/Religious Trusts or Institutions 10B 12A(b)
9. Deduction in respect of export by undertakings established in free trade zone 56F 10A

26. Currently under different sections (i.e. 43CA, 50C, 56) for real estate transactions, stamp duty value/differential amount will be considered for tax purpose if the difference between actual consideration and the stamp duty value more than 5%. The same has been increased to 10%.

Applicable w.e.f. AY 2021-22 (FY 2020-21)

Section 43CA – Business Income (Taxable in the hands of transferor)

  • If the consideration received from transfer of an asset (not a capital asset) being land or building or both is less than stamp duty value then, stamp duty value shall be considered as consideration received/accrued for the purpose of computation of profits and gains from business or
  • However, if the stamp duty value does not exceed 110% (earlier 105%) of consideration received/accrued then, actual consideration received or accrued shall be

Section 50C – Capital Gains (Taxable in the hands of transferor)

  • If the consideration received from transfer of a capital asset being land or building or both is less than stamp duty value then, stamp duty value shall be considered as consideration received/accrued for the purpose of computation of profits and gains from business or
  • However, if the stamp duty value does not exceed 110% (earlier 105%) of consideration received/accrued then, actual consideration received or accrued shall be taken

Section 56 – Income from other sources (Taxable in the hands of transferre)

  • Where any person receives any immovable property-
  • without consideration, the stamp duty value shall be included in total income if that value is more than 50,000.
  • For a consideration and stamp duty value is more than actual sale consideration then the differential amount shall be included in total income if the differntial amount is more than higher of the following;
    • 50,000 and
    • 10% of actual sale consideration (earlier it was 5%)

27. Benefit of exempting non-residents from filing of income tax return extended to income consists of royalty or fees for technical services provided tax has been deducted as per the rates prescribed in section 115A

  • Applicable w.e.f. AY 2021-22 (FY 2020-21).
  • Currently, non-residents are not required to file income tax return in India if total income consists of only certain dividend or interest income and tax has been deducted under the provisions of Chapter XVII-B of the
  • Vide Finance Act, 2020, sub-section (5) of section 115A amended to provide benefit of such exemption from filing of income tax return if-
    • total income consists only of income referred to in section 115(1)(a) (certain dividend or interest income) or referred to in section 115(1)(b) (royalty or fees for technical services) AND
    • tax has been deducted as per the rates prescribed in section 115(1)(a) & 115(1)(b)

28. Option to has been given to resident co-operative societies to pay tax @22% without claiming specified exemption / deduction/incentive and not required to pay any AMT

  • New Section 115BAD inserted w.e.f. AY 2021-22 (FY 2020-21).
  • Option has been given to resident co-operative societies to pay tax @22% plus 10% surcharge and 4% cess on total income.
  • Total income of such societies shall be computed without claiming specified exemptions, deductions and incentives available under the Act and are not required to pay any Alternate Minimum Tax (AMT).
  • Option can be exercised for any assessment year beginning on or after 2021-22 and apply for such year and subsequent year’s also and can’t be withdrawn.

29. Penalty will be levied on a person if identified during any proceedings under the Act that books of accounts maintained by him contains false entry or omission of any entry to evade tax liability

  • New section 271AAD inserted w.e.f. 01-Apr-2020
  • Assessing office may levy penalty on a person if during any proceedings under the Act found that books of account maintained by him contains—
    • a false entry; or
    • an omission of any entry which is relevant for computation of total income of such person to evade tax
  • Penalty shall be equal to the aggregate amount of such false or omitted
  • Penalty may also be levied on any other person who causes to make a false entry or to omit any
  • False entry includes use or intention to use–
    • False invoice; or
    • GST Invoice without actual supply or receipt of such goods or services or both; or
    • GST invoice to or from a person who does not exist

30. Period of approval of affordable housing project by competent authority extended till 31.03.2021 for availing deduction u/s 80-IBA.

31. The Scope of E-assessment scheme extended to best judgement assessment u/s 144 – Section 143(3A)

32. Income Tax Appellate Tribunal (ITAT) can grant stay of demand in respect of appeal filed before it only if assessee deposits not less than 20% of disputed tax or furnishes security for such amount (earlier no such condition) – Amended section 254 of the Act

33. Central government may make a scheme for faceless appeal before CIT(A) on or before 31.03.2022 – Sub-section (6B), (6C) & (6D) inserted to section

34. Central government may make a scheme for imposing penalty (E-Penalty) on or before 31.03.2022 – Sub-section (2A), (2B) & (2C) inserted to section

35. Claiming deduction u/s 35AD in respect of investment in capital expenditure in specified business made it as an optional to the

36. Both existing and new charitable or religious trusts, institutions, funds etc., have to make a fresh application for registration and certificate of exemption can be granted for a period of 5 years at once – Section 11(7), 12A, 12AA amended and 12AB

37. Entities receiving donation shall furnish a statement to the department and issue a certificate to the donor. Failure of the same attracts fee – Section – 234G

Annexure_1 – Head-wise summary of Investments/expenses not eligible for claiming as deduction/ exemption if choose to pay tax as per new rates

S No Section/ Rule Deductions/Exemptions Head of income
1. 10(5) Leave Travel Allowance (LTA)  

 

 

 

 

Salary

2. 10(13A) House Rent Allowance (HRA)
3. 10(14) Allowances covered (for e.g. allowances to meet cost of living or to meet personal expenses etc.)
4. 10(17) Allowances to MPs/MLAs
5. 16(ia) Standard deduction of Rs.50,000
6. 16(ii) Entertainment allowance (to government employees)
7. 16(iii) Tax on employment (i.e. Professional Tax – PT)
8. Various Any exemption/deduction for allowances/perquisite
9. 24(b) Interest on housing loan (Self-occupied/Vacant Property – Sec. 23(2)) House Property
10. 57(iia) Family Pension Other Sources
11. 10(32) Deduction for clubbing of income of minor child
12. 10AA Units in SEZ  

 

 

 

Business Income (PGBP) Business Income (PGBP)

13. 32(1)(iia) Additional Depreciation
14. 32AD Investment in new plant or machinery in notified backward areas in certain States
15. 33AB Tea/Coffee/Rubber development account
16. 33ABA Site Restoration Fund
17. 35(1)(ii) Sum paid to research association or to a university/college/other institution to be used for scientific research
18. 35(1)(iia) Sum paid to a company for scientific research purpose
19. 35(1)(iii) Sum paid to research association or to a university/college/other institution to be used for social science or statistical research
20. 35(2AA) Sum paid to National laboratory/a university/an Indian Institute of Technology/specified person for scientific research part of approved programme
21. 35AD Capital expenditure on specified business
22. 35CCC Expenditure on agricultural extension project
23. 80C LIC Premium, Children Tuition Fees, PF contribution, Principal component of housing loan etc..,  

Chapter – VIA deductions (from Gross Total Income)

 

24. 80CCC Contribution to certain pension funds
25. 80CCD(1) Employee’s contribution to national pension scheme
26. 80D Health Insurance Premium/Medical Expenditure/Preventive Health-check up
27. 80DD Maintenance/medical treatment of dependent disabled person
28. 80DDB Medical treatment of specified diseases
29. 80E Interest on loan taken for higher education
30. 80EE Interest on loan taken for residential house property
31. 80EEA Interest on loan taken for residential house property (if not eligible to claim u/s 80EE)
32. 80EEB Interest on loan taken for purchase of electric vehicle
33. 80G Donation institutions to certain funds/charitable
34. 80GG Rent paid (if not eligible deduction u/s 10(13A)) to claim HRA
35. 80GGA Donations development for scientific research/rural
36. 80GGC Contributions to political parties
37. 80-IA Deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development  

 

 

 

Chapter – VIA deductions (Having income from Business)

38. 80-IAB Deduction in respect of profits and gains by an undertaking or enterprise engaged in development of SEZ
39. 80-IAC Eligible Start-up
40. 80-IB Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings
41. 80-IBA Deductions in respect of profits and gains from housing projects

Thank you for the patient reading. Hope this document has added value to your knowledge.

For feedback or comments, please write to jnr@cajvn.in

Disclaimer:

This document had been written to provide updates under Income Tax in a simple manner. The author shall not be responsible for any of the decision made based on the contents of this docum ent.

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17 Comments

  1. CA Vishnu Barman says:

    Sir,
    Undoubtedly the Article is well presented. However, I have one issue. Audit for Trusts/Institutions is governed by Section 12A and not by Section 44AB. The due date for Audit u/s 12A is “along with Return of Income u/s 139(4A). As per amended provisions, due date of 139(4A) read with Scetion 139(1) has been changed to Oct 31. However, no amendment has been made in Section 12A in this regard (like that made in 44AB). Hence, in my opinion due date of Audit for Trust should be now Oct 31 and not Sep 30. Request your opinion on this thought.

  2. P.K.Jain says:

    Sir,
    Excellent article, presentation is also excellent.
    But what about the Deductions/Exemptions on savings account interest u/s 80TTA & 80TTB. I have been reading conflicting and confusing views from so many Tax Experts, you have also skipped the matter. However, In my view the savings account interest u/s 80TTA & 80TTB will not be exempted under the new tax regime. Kindly throw some light.

    1. CA Nageswara Rao says:

      Dear Mr.P.K.Jain!
      Total income an individual who opts for new tax scheme shall be computed without claiming deductions under Chapter VI-A (except employer’s contribution to NPS & new employee cost u/s 80JJAA). Deduction u/s 80TTA & 80TTB covered under chapter VI-A and are not eligible to claim if opts for new scheme.

  3. smsheth24 says:

    please inform whether government has granted any exemption to the contribution given under
    pm care fund from income tax to the assessee i.e. salaried persons). who opts new scheme

    1. CA Nageswara Rao says:

      Vide Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, time limit for making investment for the purpose of claiming deduction has been extended till 30.06.2020.
      Donation to PM CARES Fund made till 30.06.2020 can be claimed as deduction against income declared for the FY 2019-20 (AY 2020-21) and such individual can opt for new tax scheme for the FY 2020-21 (AY 2021-22). However, he is not eligible to claim any deduction u/s 80G for the FY 2020-21 (AY 2021-22) if he opts for new scheme.

  4. Sujit Israni says:

    MR RAO
    VERY LUCID.
    All Tables especially the Tax Audit are superb.
    Most doubts are hit spot – on & cleared.
    EXCELLENT.
    MANY THANKS.

  5. P.Srinivasulu says:

    (1) Is income derived from equity investments up to 1 lakh exempt from LTCG and any amount above that is taxable @ 10% ? Is it going to be same in FY 2020-21 also ?
    (2) Do donations to PM’s CARES fund eligible for deduction only if old tax rates are chosen?

    1. CA Nageswara Rao says:

      Dear Mr.P.Srinivasulu!
      (1) No change in either tax rate or exemption value. Same treatment continues for FY 2020-21.
      (2) Vide Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, time limit for making investment for the purpose of claiming deduction has been extended till 30.06.2020.
      Donation to PM CARES Fund made till 30.06.2020 can be claimed as deduction against income declared for the FY 2019-20 (AY 2020-21) and such individual can opt for new tax scheme for the FY 2020-21 (AY 2021-22). However, he is not eligible to claim any deduction u/s 80G for the FY 2020-21 (AY 2021-22) if he opts for new scheme.

  6. GAURAV BANSAL says:

    Sir it is an excellent article but i m having some doubt regarding applicability of amendment in sec 44ab which i think that it is applicable from A.Y 2020-21. Plz provide clarification on same. Thank u

    1. CA Nageswara Rao says:

      Dear Mr.Gaurav Bansal!
      Your understanding is correct. Revised tax audit limit is applicable from FY 2019-20 (AY 2020-21) onwards.

  7. P.K.Jain says:

    Sir,
    Excellent article, presentation is also excellent.
    But what about the Deductions/Exemptions on savings account interest u/s 80TTA & 80TTB. I have been reading conflicting and confusing views from so many Tax Experts, you have also skipped the matter. However, In my view the savings account interest u/s 80TTA & 80TTB will not be exempted under the new tax regime. Kindly throw some light.

    1. CA Nageswara Rao says:

      Dear Mr.K.Venugopalan!
      Total income of an individual who opts for new scheme shall be computed without availing any deductions under Chapter VI-A. Deduction u/s 80QQB is covered under Chapter VI-A and not eligible to claim as deduction under new scheme.

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