Recent Income Tax Changes by Taxation Laws (Amendment) Ordinance, 2019

DIRECT TAX HIGHLIGHTS

Benefits have been announced by Finance Minister in order to boost the economy. A gist on them has been provided below for your ease of reference:

For Existing Domestic Companies

• Reduce the Corporate tax rate for Domestic Companies from 30% to 22% (excluding surcharge & cess) subject to the condition that they will not avail any exemption/incentive. Exemptions / benefits that cannot be availed are listed below:

• • Additional Depreciation on Plant & Machinery
  • Additional Allowance on Scientific Research
  • Section 32AD (investment in P&M in notified backward areas), 32AB (Investment Deposit Account), 35CCC (Expenditure on Agriculture Extension project), 35CCD (Expenditure on Skill Development project)
  • Chapter VI-A Deductions other than Section 80JJAA
• Without set off of any loss carried forward from any earlier Assessment Year if such loss is attributable to any of the above deductions

• Option needs to be exercised before filing of return. Once exercised, it cannot be revoked.

• MAT will not be applicable to such Companies.

For New Manufacturing Companies: 

• Rate of Tax will be 15% (excluding surcharge & cess) subject to the below conditions:

• Company has been set up & registered on or after 1^st October, 2019 and commenced manufacturing operations on or before 31^st March, 2023.
• The Company is not formed by splitting up, reconstruction of a business already in existence.
• The Company does not use any plant & machinery previously used for any purpose.

Plant & machinery used outside India and satisfying a few further conditions like never been used in India, imported from outside India & no depreciation was claimed earlier under the provision of the Act is still eligible and can be used for claiming the benefit of lower tax. Further, if the used plant & machinery does not exceed 20% of the total Plant & machinery, the condition will have deemed to been complied with and benefit of 15% tax can be taken.

• The Company does not use a building previously used as a hotel or a convention center.
• The exemptions / benefits as listed above for existing Companies should also not be taken by such new Companies.
• Option needs to be exercised before filing of return. Once exercised, it cannot be revoked.
• MAT will not be applicable for such Companies
  

Minimum Alternate Tax 

• MAT rate has been reduced from 18.5% to 15% excluding surcharge & cess.

Buy Back Tax 

• Section 115QA – Tax on buy back of shares will not be applicable for Companies who have announced the buy back on or before 5^th July, 2019.
• Exemption has been given under Section 194N (TDS @ 2% on cash withdrawal in excess of Rs. 1 crore) to commission or agents or traders operating under Agriculture Produce Market Committee and registered under any Law relating to Agriculture Product Market of the concerned state subject to the following conditions: (Notification No. 70/2019 dated 20^th September, 2019)
• Commission agent or trader is registered with APMC,
• furnish his PAN and details of the previous year withdrawals,
• notify the banking Company or Co-operative society the account from which they will withdraw cash,
• the cash to be withdrawn is for making payments to the farmers for purchase of agricultural produce.
• Higher Rate of Depreciation on motor Cars, motor buses, motor lorries & motor taxis (Notification No. 69/2019 dated 20^th September, 2019).

• The Cost Inflation Index for 2019-20 has been set at 289 (Notification No. 63/2019 dated 12^th September, 2019)

• CBDT raises monetary threshold limit for Income Tax Department for filing appeals:

In cases where the disputed issue arises in more than one assessment year for an assessee, appeal will be filed only for those years where the tax effect (tax + surcharge + cess) exceed the above monetary limits.

In cases of composite orders involving multiple assesses, the tax effect will be calculated for each assessee and Appeal will be filed only when the tax effect exceeds the monetary limit.

Also Read relevant Press Releases and Notifications

Taxation Laws (Amendment) Ordinance, 2019