List of recent changes in Direct Tax
To increase liquidity in the hands of an Individual and Corporates and battle Corona Virus and reduce financial distress, the Government announced various relief measures in last one year from an Income tax perspective. Following are measures which would benefit Indian taxpayers.
1. Introduction of Section 115BAA (reduction in corporate tax rates) in the Income Tax Act,1961:-
Section 115BAA provided for reduction in corporate tax rate for all existing domestic companies. It, inter alia, provided a concessional tax regime of 22% for all existing domestic companies from FY 2019-20 if they do not avail any specified exemption or incentive. Further, such companies have also been exempted from payment of Minimum Alternate Tax (MAT).
2. Introduction of Section 115BAB (Incentive for new manufacturing domestic companies) in the Income-tax Act,1961
In order to boost Make In India Initiative of the Government, another new provisions was inserted in the Income Tax Act,1961 w.e.f FY 19-20 which allows any new domestic company incorporated on or after 01.10.2019 making fresh investment in manufacturing, an option to pay income-tax at the rate of 15%. This benefit is available to companies which do not avail any exemption/incentive and commences their production on or before 31.03.2023. The effective tax rate for these companies is 17.01% inclusive of surcharge & cess. Also, such companies are not be required to pay MAT.
3. Reduction in MAT Rate
In order to provide relief to the company assessee which continues to avail exemption/deduction and pay tax under MAT, the rate of MAT has also been reduced from 18.5% to 15%
4. Exemption from income-tax to individuals earning income up to Rs.5lakh
The Finance Act, 2019 exempted an individual taxpayer with taxable income up to Rs.5 lakh by providing 100% tax rebate. This was done to provide complete relief from payment of income-tax to individuals earning taxable income up to Rs.5 lakh
5. Abolition of Dividend Distribution Tax (DDT)
In order to increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors in whose case dividend income is taxable at the rate lower than the rate of DDT, the Finance Act, 2020 removed the Dividend Distribution Tax under which the companies are not required to pay DDT with effect from 01.04.2020. The dividend income shall be taxed only in the hands of the recipients at their applicable rate.
6. Expansion of scope of TDS/TCS and reduction in TDS rates
For widening the tax base, several new transactions were brought into the ambit of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS). These transactions include huge cash withdrawal, foreign remittance, purchase of luxury car, e-commerce participants,sale of goods, acquisition of immovable property, etc. Further, the TDS rates for all non-salaried payment to residents, and tax collected at source rate is reduced by 25 percent of the specified rates for the period 14.05.2020 till 31.03.2021. Such measures would leave more cash in the hands of deductee and would ultimately lead to generation of demand and growth for the economy.
7. Extension of Due Dates
The returns of income which are required to be filed by 31.07.2020 and 31.10.2020 can be filed upto 30.11.2020. Consequently, the date for furnishing tax audit report has also been extended to 31.10.2020.In order to provide relief to small and middle class taxpayers, the date for payment of self-assessment tax in the case of a taxpayer whose self-assessment tax liability is upto Rs.1 lakh has also been extended to 30.11.2020.
8. Extension of Time limit in Capital Tax Savings Instruments
The date for making investment/ construction/ purchase for claiming roll over benefit/ deduction in respect of capital gains under sections 54 to 54GB has also been further extended to 30.09.2020.Similar benefit extended for compliance of section 10AA of the Income-tax Act,1961.
The above article is written by Suyash Tripathi and can be reached at [email protected] or at Linked https://www.linkedin.com/in/suyash-tripathi-b3b80371/
2. The Chartered Accountants Journal-2020