Article explains Key Changes in Union Budget 2020 which not found a place in Speech of Honourable Finance minister which includes- TDS on Technical Services under section 194J @ 2%, TDS under section 194A for Co-operative Soceity, TDS Under Section 194C, New Section 194-O introduced for TDS over E-Commerce Operator, Scope of Tax Collection at Source widened, Section 44AB (Tax Audit), Section 139(1) (Due Date for Income Tax Return Filing) and Taxability of Employer Contribution to NPS, RPF and SPF.
1. TDS on Technical Services under section 194J @ 2%
It is proposed to reduce rate for TDS in section 194J in case of fees for technical services (other than professional services) to two per cent from existing ten per cent. The TDS rate in other cases under section 194J would remain same at ten per cent.
2. TDS under section 194A for Co-operative Soceity:
A co-operative society referred to in clause (v) or clause (viia) of said sub-section (3) shall be liable to deduct income-tax in accordance with the provisions of sub-section (1), if-
(a) the total sales, gross receipts or turnover of the co-operative society exceeds fifty crore rupees during the financial year immediately preceding the financial year in which the interest referred to in sub-section (1) is credited or paid;
(b) the amount of interest, or the aggregate of the amount of such interest, credited or paid, or is likely to be credited or paid, during the financial year is more than fifty thousand rupees in case of payee being a senior citizen and forty thousand rupees, in any other case.
3. TDS Under Section 194C :
It is proposed to amend the definition of “work” under section 194C to provide that in a contract manufacturing, the raw material provided by the assessee or its associate shall fall within the purview of the ‘work’ under section 194C.
4. New Section 194-O introduced for TDS over E-Commerce Operator :
It is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of one per cent. with the following key points:
- The TDS is to be paid by e-commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform;
- E-commerce operator is required to deduct tax at the time of credit of amount of sale or service or both to the account of e-commerce participant or at the time of payment thereof to such participant by any mode, whichever is earlier.
- The tax at one per cent is required to be deducted on the gross amount of such sales or service or both.
- Any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant shall be deemed to be amount credited or paid by the e- commerce operator to the e-commerce participant and shall be included in the gross amount of such sales or services for the purpose of deduction of income-tax.
- The sum credited or paid to an e-commerce participant (being an individual or HUF) by the e-commerce operator shall not be subjected to provision of this section, if the gross amount of sales or services or both of such individual or HUF, through e-commerce operator, during the previous year does not exceed five lakh rupees and such e-commerce participant has furnished his Permanent Account Number (PAN) or Aadhaar number to the e-commerce operator.
- A transaction in respect of which tax has been deducted by the e-commerce operator under this section or which is not liable to deduction under the exemption discussed in the previous bullet, there shall not be further liability on that transaction for TDS under any other provision of Chapter XVII-B of the Act. This is to provide clarity so that same transaction is not subjected to TDS more than once. However, it has been clarified that this exemption will not apply to any amount received or receivable by an e-commerce operator for hosting advertisements or providing any other services which are not in connection with the sale of goods or services referred to in sub-section (1) of the proposed section.
- Consequential amendments are being proposed in section 197 (for lower TDS), in section 204 (to define person responsible for paying any sum) and in section 206AA (to provide for tax deduction at 5 per cent. in non-PAN/ Aadhaar cases).
5. Scope of Tax Collection at Source widened:
It is proposed to amend section 206C to levy TCS on overseas remittance and for sale of overseas tour package, as under:
- An authorised dealer receiving an amount or an aggregate of amounts of seven lakh rupees or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS, if he receives sum in excess of said amount from a buyer being a person remitting such amount out of India, at the rate of five per cent. In non PAN/Aadhaar cases the rate shall be ten per cent.
- A seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of five per cent. In non-PAN/ Aadhaar cases the rate shall be ten per cent.
- The above TCS provision shall not apply if the buyer is,-
1. liable to deduct tax at source under any other provision of the Act and he has deducted such amount.
2. the Central Government, a State Government , an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.
Further, it is proposed to amend section 206C to levy TCS on sale of goods above specified limit, as under:
- A seller of goods is liable to collect TCS at the rate of 0.1 per cent. on consideration received from a buyer in a previous year in excess of fifty lakh rupees. In non-PAN/ Aadhaar cases the rate shall be one per cent.
- Only those seller whose total sales, gross receipts or turnover from the business carried on by it exceed ten crore rupees during the financial year immediately preceding the financial year, shall be liable to collect such TCS.
- Central Government may notify person, subject to conditions contained in such notification, who shall not be liable to collect such TCS.
- No TCS is to be collected from the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to conditions as prescribed in such notification.
- No such TCS is to be collected, if the seller is liable to collect TCS under other provision of section 206C or the buyer is liable to deduct TDS under any provision of the Act and has deducted such amount.
6. Section 44AB (Tax Audit)
In order to reduce compliance burden on small and medium enterprises, it is proposed to increase the threshold limit for a person carrying on business from one crore rupees to five crore rupees in cases where,-
(i) aggregate of all receipts in cash during the previous year does not exceed five per cent of such receipt; and
(ii) aggregate of all payments in cash during the previous year does not exceed five per cent of such payment.
7. Section 139(1) (Due Date for Income Tax Return Filing) :
The due date for filing return of income under sub-section (1) of section 139 is proposed to be amended by:-
(A) providing 31st October of the assessment year (as against 30th September) as the due date for following assessee :
(i) a company ; or
(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or
(iii) a working or non-working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,
Note : Distinction between Working and Non Working partners of a firm has been removed. Now, even non-working partner of the firm will have a due date of 31st of October of the Assessment Year.
8. Taxability of Employer Contribution to NPS, RPF and SPF :
It is proposed to provide a combined upper limit of seven lakh and fifty thousand rupee in respect of employer’s contribution in a year to NPS, superannuation fund and recognised provident fund and any excess contribution is proposed to be taxable. Consequently, it is also proposed that any annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme may be treated as perquisite to the extent it relates to the employer’s contribution which is included in total income.