Article explains Major Changes In Income Tax Law for Assessment Year (AY) 2020-21/ Financial Year (FY) 2019-20 and AY 2021-22/FY 2020-21 which includes changes in Tax Rates, TDS Rates, Depreciation Rates, Widening of Scope of Form 26AS, Changes in the provisions related to NRIs, Tax Treatment of Dividends Changed, Fresh Registration of Trust and Educational Institutions, Reporting of the donations received by Trust etc.
|Individual/ HUF/ AOP, BOI and Artificial Juridical Person (Other than senior and super senior citizen)||Senior Citizen (who is 60 years or more at any time during the previous year)||Super Senior Citizen (who is 80 years or more at any time during the previous year)|
|Net Income Range||Rate of Income-tax||Net Income Range||Rate of Income-tax||Net Income Range
|Rate of Income-tax|
|AY 2021-22||AY 2020-21||AY 2021-22||AY 2020-21||AY 2021-22||AY 2020-21|
|Up to Rs. 2,50,000||–||–||Up to Rs. 3 Lakh||–||–||Up to Rs. 5 Lakh||–||–|
|2,50,000 to Rs. 5,00,000||5%||5%||Rs. 3 Lakh to Rs. 5 Lakh||5%||5%||Rs. 5 Lakh to Rs. 10 Lakh||20%||20%|
|5,00,000 to Rs. 10,00,000||20%||20%||Rs. 5 Lakh to Rs. 10 Lakh||20%||20%||Above Rs. 10 Lakh||30%||30%|
|Above Rs. 10,00,000||30%||30%||Above Rs. 10 Lakh||30%||30%|
The Finance Act, 2020, has provided an option for Individuals and HUF for payment of taxes at the following reduced rates from Assessment Year 2021-22 and onwards:
|Total Income (Rs)||Rate||Conditions to be satisfied|
|Up to 2,50,000||Nil||1. The option to pay tax at lower rates shall be available only if the total income of assessee is computed without claiming exemptions or deductions
2. Total income of the assessee is calculated after claiming depreciation under section 32. Further, loss under the head house property can’t be set off against other heads of Income. Moreover, such loss and depreciation will not be carried forward.
3. In case the assessee has business or professional income, this option shall be exercised on or before the due date for furnishing the returns of income. Once the assessee has exercised the option for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. The option once exercised for any previous year can be withdrawn only once in subsequent previous year (other than the year in which it was exercised) and thereafter, he shall never be eligible to exercise this option again except where such person ceases to have any business income.
4. Assessee opting for this scheme has been kept out of the purview of Alternate Minimum Tax (AMT). Further the provision relating to the computation, carry forward and set off of AMT credit shall not apply to these assessees.
|From 2,50,001 to 5,00,000||5%|
|From 5,00,001 to 7,50,000||10%|
|From 7,50,001 to 10,00,000||15%|
|From 10,00,001 to 12,50,000||20%|
|From 12,50,001 to 15,00,000||25%|
Surcharge: Surcharge is to be levied on the amount of income-tax at following rates if total income of an assessee exceeds specified limits:-
|RATE OF SURCHARGE
Assessment Year 2020-21 and 2021-22
|Range of Income|
|Rs. 50 Lakhs to Rs. 1 Crore||Rs. 1 Crore to
Rs. 2 Crores
|Rs. 2 Crores
to Rs. 5 Crores
|Rs. 5 crores to Rs.10 Crores||Exceeding Rs. 10 Crores|
Health and Education Cess: Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.
Alternate Minimum Tax (AMT): Tax payable cannot be less than 18.5% (+HEC) of “adjusted total income” computed as per section 115JC
Note: A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. The amount of rebate is 100 per cent of income-tax or Rs. 12,500, whichever is less. Suppose a person is having Net Taxable Income(NTI) upto Rs.5,00,000/- The tax will be Rs. Nil & if the NTI is Rs. 5,00,010/- the tax would be Rs.12500/- + Cess.
Tax Rate: @ 30%.
Surcharge : @ 12% on the amount of income-tax where net income exceeds Rs. 1 Crore.
Health and Education Cess: @ 4% on the amount of income-tax plus surcharge.
Alternate Minimum Tax (AMT): Tax payable cannot be less than 18.5% (+HEC) of “adjusted total income” computed as per section 115JC.
Now the companies have choice of 3 different options for taxation, for the AY 2020-21 onwards:
|S. No||Conditions||Section 115BA||Section 115BAA||Section 115BAB|
|1||When company must be set up and registered to qualify ?||on or After 01-03- 2016||Irrespective of the date of Set-up & registration||On or after 01-10-2019|
|2||Nature of Activity||Manufacturing Company||Any Company||New Manufacturing Company|
|3||Effective tax (Tax + surcharge + health & education cess)||a) Total income is Rs. 1 Cr or less = 26% (25% + Nil+4%)
b) Total income exceeds Rs. 1 cr but not 10 cr = 27.82% (25% + 7% + 4%)
c) Total income exceeds 10 cr = 29.12% (25% + 12% + 4%)
(22% +10% +4%)
(15% + 10% + 4%)
|4||Whether stipulations regarding non-use of 2nd hand plant & machinery is applicable under the section||No||No||Yes (2nd Hand not allowed beyond 20%)|
|5||Exemption from MAT||No (MAT Rate will be 15% instead of 18% + Surcharge + Cess)||Yes||Yes|
|6||What happens to the existing unutilized MAT credit||Company can carry forward and utilize it as per Sec 115JAA||MAT Credit lapses||No question of unutilized MAT credit being a new company|
|7||When to exercise option||Any previous year||Any previous year||First Tax Return|
Nature of Payment
|Threshold Limit (Rs)||1st April, 2020 to 13/05/2020||From 14/05/2020|
|Section 192: Payment of salary||–||Normal Slab Rate||Normal Slab Rate|
|Section 194: Dividend on Shares||5, 000 (w.e.f. 1/4/2020)||10||7.5|
|Section 194 K:
Payment of Dividend by Mutual Funds
|5, 000 (w.e.f. 1/4/2020)||10||7.5|
|Section 194A: – Interest||5, 000||10||7.5|
|Section 194C: Payment to contractor||Rs 30,000 per contract or Rs 1, 00, 000 for aggregate amount during the year|
|a) HUF/ Individuals||1||0.75|
|Section 194H: Commission or brokerage||15,000||5||3.75|
|Section 194I: Rent||2,40,000|
|a) Plant & Machinery||2||1.5|
|b) Land or building or furniture or fitting||10||7.5|
|Section 194-IA: Payment on purchased of certain immovable property||50,00,000||1||0.75|
|Section 194-IC: Payment of monetary consideration under Joint Development Agreements||–||10||7.5|
|Section 194J: Payment for fees for Technical services, Professional services or royalty etc.||Rs 30, 000|
|a) In case of fees for technical services (not being a professional royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic film) (effective from 1st April 2020)||2||1.5|
|b) In case of fees for any other professional services||10||7.5|
a) Filed the returns of income for all of the three assessment years relevant to the three previous years and cash withdrawals exceeding 1 cr
|b) Not Filed the returns of income for all of the three assessment years relevant to the three previous years: (This provision is applicable w.e.f. 01 July, 2020)
– Cash withdrawals from 20 Lakhs to 1 Cr
(w.e.f. 01 July, 2020)
(w.e.f. 01 July, 2020)
|– Cash withdrawals exceeding 1 cr||5||5|
|Section 194 – O
Payment by e-commerce operator to e-commerce participants ( applicable w.e.f. 01/10/2020)
|Individual/HUF not liable to audit but liable for TDS in following cases|
|Section 194M: Payment of commission, brokerage, contractual fee, professional fee||50 Lakhs||5||3.75|
|Section 194-IB: Payment of rent by individual or HUF||Rent for the month exceeds Rs 50, 000||5||3.75|
Note 1: In case payee does not furnish PAN, TDS rate would be 20%
Note 2 : The relaxation in TDS/TCS rates with effect from 14/05/2020 will not have any impact on the ultimate tax liability and therefore, any deficit in tax liability, due to reduced rates should be paid by Advance Tax Instalments.
Standard Deduction for Salary is now 50000/- for AY 2020-21
For the FY 2019-20 and onwards, the benefit of considering the houses as self-occupied has been extended to 2 houses. Now, a home-owner can claim his 2 properties as self-occupied and remaining house as let out for Income tax purposes.
a) Maximum Deduction under Interest for House property for self-occupied
b) House property 1 – Max. Interest allowed 150000/-
c) House property 2 – Max. Interest allowed 150000/-
d) But Maximum can be 200000/-
Seeking to expand the tax payer base further, Budget 2019 has proposed to make income tax return filing mandatory for certain persons even if their income is below the taxable limit. If the assessee-
a) Has deposited amount more than 1 cr in aggregate in one or more of current account maintained with banks or co-operative society
b) Has incurred foreign expenditure of more than Rs.200000/- for himself or any other person
c) Has incurred electricity expenditure of more than 1 lakh
Till 31/03/2020, only those assessees were required to deduct TDS whose accounts were subject to Tax Audit u/s 44AB. With effect from 01/04/2020 (FY 2020-21), the linkage of TDS with the audit has been discontinued and following assessees are required to deduct TDS:
|TDS APPLICABILITY ON INDIVIDUAL AND HUF|
|i)||In case of the business||If the sales/turnover exceed Rs. 1 Crore in the preceding financial year (i.e. 2019-20)|
|ii)||In case of Profession||if the gross receipts exceed Rs. 50 Lacs in the preceding financial year(i.e. 2019-20)|
Following 3 new categories of transactions have been introduced with effect from 01/10/2020 for TCS:
|S. No.||Nature of Transaction||Person Liable for TCS||Rate of TCS|
|1.||Remittance out of India under Liberalised Remittance Shceme (LRS) of RBI||Tax to be collected by bank/ foreign exchange dealer||a) Upto remittance of Rs. 7 Lacs in a year by the concerned bank/foreign exchange dealer : NIL
b) Over Rs. 7 L.acs:
i) 5% (in case of Non- PAN/Aadhar @ 19%)
ii) 0.5% in case of remittance out of education loan(in case of Non-PAN/Aadhar 5%)
|2.||Overseas Tour Programme Package ( including expenses for travel, boarding, lodging or travelling or similar expenses)||Any Tour programme seller||5% ( in case of non-PAN / Aadhar @ 10%)|
|3.||Sale of Goods||Seller of the Goods whose turnover during the preceding FY exceeded Rs. 10 Crore and receives Rs. 50 Lacs or more from a Domestic buyer of the goods||0.1% ( in case of non-PAN / Aadhar @ 1 %) of the amount received (including GST)|
In View of the Covid, Govt. has extended the due dates for various actions. Due dates are as under:
|a)||Furnishing the Audit Report u/s 44AB or Audit Report under any other provisions of the Act||31st October, 2020|
|b)||Filing ITR in case of all assesses||30th November, 2020|
|c)||Last date for completion of Scrutiny Assessment for AY 2018-19 by department||31st December, 2020|
|d)||Investment/payment for availing the benefits u/s 80C to 80GGC or investment for the purpose of Capital Gains||30th June, 2020|
|e)||TDS Payment related to March, 2020||Can be paid upto 30th June with Interest of delayed period @ 9% per annum (0.75% monthly)|
|f)||Filing of Form 24/26 (TDS Returns) for Qtr ending on 31st March, 2020||30th June, 2020|
|g)||Advance Tax instalment falling due on 15/06/2020 (For AY 2021-22)||Can be paid upto 30/06/2020. Rate of Interest for delay for this period would be 0.75% per month for this window of 15 days|
|h)||Last date to link Aadhar will be||31st December, 2020|
DATE OF FILING ITR FOR AY 2019-20(FY 2018-19)
|a)||Filing original ITR or revising the ITR already filed||30th June, 2020|
There is change in the depreciation rates applicable for Motor Vehicles as under:
|Period of Purchase of Vehicle||Use of the Vehicle||Depreciation Rate|
|01/04/2019 to 22/08/2019||Hire or Running as Taxi||30%|
|01/04/2019 to 22/08/2019||Use for Business||15%|
|23/08/2019 to 31/03/2020||Hire or Running as Taxi||45%|
|23/08/2019 to 31/03/2020||Use for Business||30%|
Presently 26AS form gives the information regarding TDS Deducted / Taxes paid related to assessee. With effect from 01/06/2020, the scope of this form is being widened to include all informations related to assessee such as sale/purchase of shares, immovable property, donations made etc.
|S. NO.||Nature of information to be included in 26AS|
|1.||Information relating to tax deducted or collected at source (TDS or TCS)|
|2.||Information relating to specified financial transaction (SFT) i.e. related to purchased of property, use of credit card, purchase of shares, cash deposit /withdrawals exceeding specified limits etc.|
|3.||Information relating to payment of taxes|
|4.||Information relating to demand and refund|
|5.||Information relating to pending proceedings|
|6.||Information relating to completed proceedings|
|7.||Any other information in relation to sub-rule (2) of rule 114-I|
a) Indian Citizens/Person of Indian Origin(PIO) shall be treated as resident but not ordinarily resident if he was in India for more than 120 days and his income received/accrued in India is more than Rs. 15 Lacs. However those earning less than Rs. 15 Lacs would continue to be governed by the old provisions.
b) Indian Citizen living out of India and not assessed for Income Tax in other country (e.g. living in Dubai) would now be deemed as `Resident’ in India if his total Income exceeds Rs. 15 Lacs from Indian sources/ Indian Connection. Visit to India is not required for such Citizen.
With effect from 01/04/2020, dividends received from companies / mutual funds would be included in the `Income from Other Sources’. TDS would be deducted @ 10% u/s 194 / 194K by the Companies/Mutual Fund if the amount of dividend exceeds Rs. 5000/-. Further no any expense can be deducted from such income except `Interest on the borrowing made for such investment’ to the extent of 20% of such dividend.
All existing Trust/Educational Institution have to apply again for the fresh registration before 31st December, 2020. Such trust should keep the Trust Deed and other statutory documents of registration ready for applying the fresh registration. New registration would be valid for 5 years and renewal would involve the scrutiny by the Registering Authority for the application of the funds for objectives of the trust.
Trust registered u/s 80G and accepting donations would now have to file a statement of donations received after 01/10/2020 and issue a certificate to the donor in a prescribed form. Only after filing of such statement, the donee would be able get the deduction of the donations made u/s 80G. Failure to file the statement before the due date would invite the Late Fees of Rs. 200 Per day of delay besides the penalty by the Assessing Officer from Rs. 10000/- to Rs. 100000/-
Every person donating to PM CARES Fund shall be eligible to claim a 100% deduction of the amount donated from his total income. Further, the restriction of Section 80G(4) which limits the deduction to 10% of adjusted gross income shall also not be applicable for donation made to PM CARES Fund
Donations made to PM Cares Fund between 01-04-2020 and 30-06-2020 can be claimed as deduction either in the financial year 2019-20 or 2020-21, at the option of the taxpayer. . But, if the taxpayer opts to claim a deduction in the Financial Year 2020-21, then he shall not be eligible to opt for concessional tax regime of section 115BAC and 115BAD, as the case may be.
Employer’s contribution to the National Pension Scheme (NPS) is exempt perquisite in the hands of the employee. Such contribution can be made upto 10% of Salary Income of the employee ( Central Govt. employees 14%) and similarly employers contribution to Recognised Provident Fund (RPF) could be made upto 12% of salary income. Thus, there was no upper monetary limit on the amount of contributions. Now the Finance Act, 2020 has introduced the limit of Rs. 7.50 Lacs on the employers’ contribution to NPS, RPF or any other superannuation funds.
If the actual consideration of purchased/sold property is lesser than DLC Value prescribed by Govt., then such difference is added to the income of Buyer and Seller of property. Now, the new position can be summarized as under:
|Nature of Transaction||If the Stamp value does not exceed 10% of actual transaction price||If the Stamp value exceeds 10% of actual transaction price|
|Purchase of immovable Property||If the stamp value does not exceed 10% or Rs. 50000/-, the difference would be ignored||Difference between actual purchase price and stamp value would treated as Income from other sources|
|Sale of Immovable Property||If the stamp value does not exceed 10%, the difference would be ignored||Stamp Value would be substituted as Sale Consideration for computation of capital gains/business income|
Section 80EEA provides for deduction of Interest upto Rs. 1.5 Lacs on the borrowings made from the Bank/Housing Finance Company, for the purchase of residential house having stamp value not exceeding Rs. 45 Lacs. Such deduction has been extended for the loans sanctioned upto 31st March, 2021.
In the case of Land and Buildings acquired before 01/04/2001, the assessee is given option to substitute Fair Market Value (FMV) prevailing as on 01/04/2001 instead of actual cost. With effect from FY 2020-21, this option has been restricted that such FMV would not exceed the Stamp Value(DLC Value) prevailing as on 01/04/2001, if such value is available.
Under Section 54 (sale of residential house property – purchase of residential house property), the Amendment in this section is of Long Term Capital Gains(LTCG) is upto 2 Crore, then assessee can acquire TWO residential house properties within the prescribed time limit. The benefit of purchase of 2 house property is available only once in life
Limit of Turnover for the Audit is presently Rs. 1 Crore in the case of business and Rs. 50 Lacs in the case of professions. Finance Act, 2020 has amended the Tax Audit Limit in case of the business as under:
The limit would be raised to Rs. 5 Crore in the case of business if the assessee satisfies following conditions:
a) Cash receipts during the year should not exceed 5% of total receipts during the year
b) Cash payments should not exceed 5% of total payments during the year
The limit of audit can be summarized as under:
|Audit required if Gross Receipts from Profession during the relevant previous year exceeds Rs.50 lakhs or
If income of assessee exceeds the maximum exemption limit and he has opted for the Presumptive Tax scheme in any of the last 5 previous years, but does not opt for the same in current year.
|TURNOVER LIMITS||AUDIT MANDATORY||AUDIT MANDATORY||AUDIT NOT MANDATORY|
|If Turnover is below Rs. 1Crore||Audit required if the profit declared is below 8% / 6%||Audit required if the profit declared is below 8% / 6% in the Assessment year or opted for such scheme in preceding 5 years||Audit not required if the profit declared is more than 8% on cash sales and 6% on non-cash sales . Cash Receipts / Payments limit of 5% is not applicable.|
|If Turnover is Above Rs. 1Crore but below Rs. 2 Crore||Cash Receipts / Payments limit of 5% is applicable and may be liable for audit even if profit declared is more than 8% or 6% if 5% limits not maintained||-do-||Audit not required if the profit declared is more than 8% on cash sales and 6% on non-cash sales
|Turnover is between Rs. 2 Crore to 5 Crore||Cash Receipts / Payments limit of 5% is applicable and would be liable for audit if limits are breached||Not Applicable||Profit declared may be below or above 8% / 6%. Audit is not linked with profit percentage. If the 5% cash receipts/payment creiteria is satisfied.|
Till FY 2018-19, the due dates for audit and ITR used to be same i.e. 31st October. Now from the assessment year 2020-21, such dates have been changed. Audit date would always be prior to date of filing ITR. For example: Audit report for the FY 2019-20 has to be filed by 31st October, 2020 and ITR filing date is 30th November, 2020.
Section 271AAD provides for the levy of penalty upon a person equal to the aggregate amount of false or omitted entry if it is found by the assessing officer in the course of any proceeding under the Income Tax Act, 1961 that there is a false entry, or omission of any entry which is relevant for computation of total income of such person, to evade tax liability, in the books of account maintained by such person. Further, sub-section (2) of section 271AAD provides that any other person who causes the person referred earlier, to make such false entry or omits or causes to omit any entry which is relevant for computation of total income of such person, to evade tax liability shall also be liable to penalty similarly.
Such proceeding under the Income Tax Act, 1961 may be, for instance, assessment proceeding, investigation proceeding e.g. under section 131, 131(1A), 132, 133(6), 133A; TDS proceeding, penalty proceeding and appellate proceeding. But, if the authority who has found such default during any of these proceeding before him is not the assessing officer, such authority would be required to refer the matter to the concerned assessing officer who would thereafter proceed to initiate & impose penalty under section 271AAD.
1. Above changes are of indicative nature. Readers are advised to confirm the provisions again with their Tax Advisers before initiating action.
2. In view of the Covid, Government is coming out with frequent changes in various laws including Income Tax Law.