Information for Tax Planning to the various types of assesses on the basis of Finance Bill 2020
Through this article, I tries to give information about the Finance Bill 2020 in a simplified manner to be used by every type of assessment in the Assessment year 2021-2022 (F.Y 2020-2021)
Following are the important points you have to Note before Planning Income –Tax for A.Y 2021-2022(F.y 2020-2021)
I. Residential Status.
There is a change in the Basic Condition and additional Condition with respect to Individual and the HUF. Please note the change.
Modification of residency provisions in respect of Individuals and HUF
Change in the Basic Condition
It is proposed that-
(i) the exception provided in clause (b) of Explanation 1 of sub-section (1) to section 6 for visiting India in that year be decreased to 120 days from existing 182 days.
Change in Additional Condition.
Now there is only one additional condition
(ii) an individual or an HUF shall be said to be “not ordinarily resident” in India in a previous year, if the individual or the manager of the HUF has been a non-resident in India in seven out of ten previous years preceding that year. This new condition to replace the existing conditions in clauses (a) and (b) of sub-section (6) of section 6.
(iii) an Indian citizen who is not liable to tax in any other country or territory shall be deemed to be resident in India.
II. Incidence of Tax.
Some people raised their concern that people who are working in oil rigs and merchant navy who stay in country for more than 125 days may be affected due to the changes in the Basic Condition. Then Finance Minister clarifies that only income earned in India will be taxed as far as NRIs are concerned.
III. Individual and HUF.
Please Plan your Tax either using Existing Income –Tax Slabs or opt the Option .
Calculate your tax as per existing slabs and option and select the beneficial one
New provisions are inserted for tax rates in respect of individual or HUF (section 115BAC of the Act) and resident co-operative societies (section 115 BAD of the Act) with an option to these taxpayers.
From the assessment year 2021-22 (FY 2020-21), individual and HUF tax payers have an option to opt for taxation under the newly inserted section 115BAC of the Act.
(EXISTING SLABS OF INCOME TAX).
The salient features of the rates specified in the said Part III are indicated in the following paragraphs-
A. Individual, HUF, association of persons, body of individuals, artificial juridical person. Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:—
| Upto Rs. 250,000 | Nil |
| Rs. 250,001 to Rs. 500,000 | 5 percent |
| Rs. 500,001 to Rs. 10,00,000 | 20 percent |
| Above Rs. 10,00,000 | 30 percent |
B. In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than the age of eighty years at any time during previous year
| Up to Rs. 300,000 | Nil |
| Rs. 300,001 to Rs. 500,000 | 5 percent |
| Rs. 500,001 to Rs. 10,00,000 | 20 percent |
| Above Rs. 10,00,000 | 30 percent |
OPTION (Incentives to Individual and HUF)
(Section 115BAC).
On satisfaction of certain conditions, an individual or HUF shall, from assessment year 2021-22 onwards, have the option to pay tax in respect of the total income at following rates:
| Total Income (Rs.) | Rate |
| Upto 2,50,000 | Nil |
| From 2,50,001 to 5,00,000 | 5 per cent. |
| From 5,00,001 to 7,50,000 | 10 per cent. |
| From 7,50,001 to 10,00,000 | 15 per cent. |
| From 10,00,001 to 12,50,000 | 20 per cent. |
| From 12,50,001 to 15,00,000 | 25 per cent. |
| Above 15,00,000 | 30 per cent. |
Conditions
(i) The option shall be exercised for every previous year where the individual or the HUF has no business income, and in other cases the option once exercised for a previous year shall be valid for that previous year and all subsequent years.
(ii) The option shall become invalid for a previous year or previous years, as the case may be, if the Individual or HUF fails to satisfy the conditions and other provisions of the Act shall apply;
(iii) If taxation is under the newly inserted section 115BAC of the Act shall not be entitled to the following exemptions/ deductions:
a. Leave travel concession as contained in clause (5) of section 10;
b. House rent allowance as contained in clause (13A) of section 10;
c. Some of the allowance as contained in clause (14) of section 10;
d. Allowances to MPs/MLAs as contained in clause (17) of section 10;
e. Allowance for income of minor as contained in clause (32) of section 10;
f. Exemption for SEZ unit contained in section 10AA;
g. Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
h. Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);
i. Additional deprecation under clause (iia) of sub-section (1) of section 32;
j. Deductions under section 32AD, 33AB, 33ABA;
k. Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
l. Deduction under section 35AD or section 35CCC;
m. Deduction from family pension under clause (iia) of section 57;
n. Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed
iv. Without set off of any loss,-
a) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in (a) above; or
b.) under the head house property with any other head of income;
v). by claiming the depreciation, if any, under section 32, except clause (iia) of sub-section (1) thereof, determined in such manner as may be prescribed; and
vi) without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.
Date of Option.
(vii) the concessional rate shall not apply unless option is exercised by the individual or HUF in the form and manner as may be prescribed,-
a. where such individual or HUF has no business income, along with the return of income to be furnished under sub-section (1) of section 139 of the Act; and
b. in any other case, on or before the due date specified under sub-section (1) of section 139 of the Act for furnishing the return of income for any previous year relevant to the assessment year commencing on or after 1st April, 2021 and such option once exercised shall apply to subsequent assessment years;
(viii.) the option can be withdrawn only once where it was exercised by the individual or HUF having business income for a previous year other than the year in which it was exercised and thereafter, the individual or HUF shall never be eligible to exercise option under this section, except where such individual or HUF ceases to have any business income in which case, option under para (vi)(a) above shall be available.
Change in the AMT
It is further proposed to amend section 115JC of the Act so as to provide that the provisions relating to AMT shall not apply to such individual or HUF having business income.
It is also proposed to amend section 115JD of the Act so as to provide that the provisions relating to carry forward and set off of AMT credit, if any, shall not apply to such individual or HUF having business income.
SURCHARGE
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph (including capital gains under section 111A, 112 and 112A) as well as income tax computed under section 115BAC, shall be increased by a surcharge at the rate of,—
A. If the Total Income exceeds Rs. 50 lakhs but does not exceeds Rs. 1 crore@10%
B. If the Total Income exceeds Rs. 1 crore but does not exceeds Rs. 2crore@15%
C. If the Total Income exceeds Rs. 2 crore but doesnot exceeds Rs. 5@ crore 25%
D. If the Total Income exceeds Rs. 5 crore@37%
Provided that in case where the total income includes any income chargeable under section 111A and section 112A of the Act, the rate of surcharge on the amount of Income-tax computed in respect of that part of income shall not exceed fifteen per cent.
Marginal Relief.
Marginal relief is provided in cases of surcharge. It is applicable to all type of assesses.
Health and Education Cess will be@4%
Other important points
I.Withdrawal of exemption on certain perquisites or allowances provided to Union Pubic Services Commission (UPSC) Chairman and members and Chief Election Commissioner and Election Commissioners
II.Extending time limit for sanctioning of loan for affordable housing for availing deduction under section 80EEA of the Act (OPTION I ONLY)
The existing provisions of section 80EEA of the Act provide for a deduction in respect of interest on loan taken from any financial institution for acquisition of an affordable residential house property. The deduction allowed is up to one lakh fifty thousand rupees and is subject to certain conditions. One of the conditions is that loan has been sanctioned by the financial institution during the period from 1st April, 2019 to 31st March, 2020.
The said deduction is aimed to incentivise first time buyers to invest in residential house property whose stamp duty does not exceed forty-five lakh rupees. In order to continue promoting purchase of affordable housing, the period of sanctioning of loan by the financial institution is proposed to be extended to 31st March, 2021.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.
III. Exempting non-resident from filing of Income-tax return in certain conditions.
Therefore, it is proposed to amend section 115A of the Act in order to provide that a non-resident, shall not be required to file return of income under sub-section (1) of section 139 of the Act if, –
(i) his or its total income consists of only dividend or interest income as referred to in clause (a) of sub-section (1) of said section, or royalty or FTS income of the nature specified in clause (b) of sub-section (1) of section 115A; and
(ii) the TDS on such income has been deducted under the provisions of Chapter XVII-B of the Act at the rates which are not lower than the prescribed rates under sub-section (1) of section 115A.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
IV. Rationalization of tax treatment of employer’s contribution to recognized provident funds, superannuation funds and national pension scheme.
Please read the following new provision .
Therefore, 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.
V. Widening the scope of TDS on E-commerce transactions through insertion of a new section.
In order to widen and deepen the tax net by bringing participants of e-commerce within tax net, 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.
“e-commerce operator” is defined to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce and is a person responsible for paying to e-commerce participant.
“e-commerce participant” is defined to mean a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce.
“electrnic commerce” is defined to mean the supply of goods or services or both, including digital products, over digital or electronic network.
“services” is defined to include fees for technical services and fees for professional services, as defined in section 194J.
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).
This amendment will take effect from 1st April, 2020.
Please Note the following example
| Existing
I.Salary ————————-20Lakhs Gross Salary——————20 lakhs Less: Standard deduction—–50,000 Less: Professional Tax —– 2,500 Net Salary——————-19,47,500 II.Income from House property Interest under Sec 24-200,000 Loss under House property—(200,000) III Income from Other sources—Nil IV. Gross Total Income=17,47,500. IVA. Deduction under Sec80C-150,000 V. Total Income=15,97,500 Income Tax Up to 250,000-Nil From 250,000 to 500,000-Rs.12,500. From 500,000 to 10,00,000-100,000 From 10 lakhs to 597500-179250 Total —-291750 Add :4% Cess—11670 Total Tax-303,420 |
Option
I. Salary —20 Lakhs II. Gross Total Income—20 Lakhs III. Total Income-20 Lakhs. IV.Income Tax will be as follows— Tax up to 250,000-Nil From 250,000 to 500,000-12,500. From 500,000-750,000-25,000 From 750,000-10 Lakhs-37500. From 10 Lakhs -12.5 Lakhs-50,000 From 12.5 Lakhs to 15 Lakhs-62,500 Balance—5 Lakhs@30%—150,000 Total Tax—-337,500 Add-4% Cess-13,500 Total Tax payable-351,000 |
IV. Co-operative Societies
Existing
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates will continue to be the same as those specified for FY 2019-20.
Surcharge
The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a co-operative society having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
From the assessment year 2021-22, resident co-operative societies have an option to opt for taxation under newly inserted section 115BAD of the Act.
Option
A. Incentives to resident co-operative societies.
(i) not withstanding anything contained in the Act but subject to the provisions of Chapter XII and satisfaction of certain conditions, a co-operative society resident in India shall have the option to pay tax at 22 per cent. for assessment year 2021-22 onwards in respect of its total income so however that if it fails to satisfy the conditions in any previous year, the option shall become invalid and other provisions of the Act shall apply;
(ii) the condition for concessional rate shall be that the total income of the co-operative society is computed,—
(a) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any provisions of Chapter VI-A;
(b) without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in (a) above; and
(c) by claiming the depreciation, if any, under section 32, except clause (iia) of sub-section (1) thereof, determined in such manner as may be prescribed;
(iii) the loss and depreciation referred to in (ii)(b) above shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year. However, where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on 1st April, 2021, corresponding adjustment shall be made to the written down value of such block of assets as on 1st April, 2020 in the prescribed manner, if the option is exercised for a previous year relevant to the assessment year beginning on 1st April, 2021;
(iv) the concessional rate shall not apply unless option is exercised by the co-operative society in the prescribed manner on or before the due date specified under sub-section (1) of section 139 of the Act for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after 1st April, 2021 and such option once exercised shall apply to subsequent assessment years;
(v) if the person has a Unit in the International Financial Services Centre (IFSC), as referred to in sub-section (1A) of section 80LA, the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in that section; and
(vi) the option so exercised cannot be withdrawn;
(vii) The surcharge applicable to such co-operative society shall be levied at 10 per cent..
It is further proposed to amend section 115JC of the Act so as to provide that the provisions relating to Alternate Minimum Tax (AMT) shall not apply to such co-operative society.
It is also proposed to amend section 115JD of the Act so as to provide that the provisions relating to carry forward and set off of AMT credit, if any, shall not apply to such co-operative society.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.
to meet the ordinary daily charges incurred by an employee on account of absence
TDS Provision.
Enlarging the scope for tax deduction on interest income under section 194A of the Act.
Section 194A of the Act governs interest other than interest on securities. Sub-section (1) thereof provides that any person not being individual or HUF who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall deduct income-tax at the rates in force.
(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; and
(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.
This amendment will take effect from 1st April, 2020.
V. Firms.
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for FY 2019-20. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a firm having a total income exceeding one crore rupees.
VI. Local authorities
The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for the FY 2019-20. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a local authority having a total income exceeding one crore rupees.
VII. Companies
The rates of income-tax in the case of companies have been specified in Paragraph E of Part III of the First Schedule to the Bill. In case of domestic company, the rate of income-tax shall be twenty five per cent. of the total income, if the total turnover or gross receipts of the previous year 2018-19 does not exceed four hundred crore rupees and in all other cases the rate of Income-tax shall be thirty per cent. of the total income. However, domestic companies also have an option to opt for taxation under section 115BAA or section 115BAB of the Act on fulfilment of conditions contained therein. The tax rate is 15 per cent. in section 115BAB and 22 per cent. in section 115BAA. Surcharge is 10 per cent. in both cases.
In the case of company other than domestic company, the rates of tax are the same as those specified for the FY 2019-20.
Surcharge at the rate of seven per cent. shall continue to be levied in case of a domestic company (except those opting for taxation under section 115BAA and section 115BAB of the Act), if the total income of the domestic company exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of twelve per cent shall continue to be levied, if the total income of the domestic company (except those opting for taxation under section 115BAA and section 115BAB of the Act) exceeds ten crore rupees.
In case of companies other than domestic companies, the existing surcharge of two per cent shall continue to be levied, if the total income exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of five per cent shall continue to be levied, if the total income of the company other than domestic company exceeds ten crore rupees.
Marginal relief is provided in surcharge in all cases.
In other cases [including sub-section (2A) of section 92CE, sections 115-O, 115QA, 115R, 115TA or 115TD], the surcharge shall be levied at the rate of twelve per cent..
For FY 2020-21, additional surcharge called the “Health and Education Cess on income-tax” shall be levied at the rate of four per cent on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such cess.
Modification of concessional tax schemes for domestic companies under section 115BAA and 115BAB
TLAA inserted section 115BAA and section 115BAB in the Act to provide domestic companies an option to be taxed at concessional tax rates provided they do not avail specified deductions and incentives. Some of the deductions prohibited are deductions under any provisions of Chapter VI-A under the heading “C. Deduction in respect of certain incomes” other than the provisions of section 80JJAA.
It is now proposed to amend the provisions of section 115BAA and section 115BAB to not allow deduction under any provisions of Chapter VI-A other than section 80JJAA or section 80M, in case of domestic companies opting for taxation under these sections.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years
Other important points
I. Exemption in respect of certain income of wholly owned subsidiary of Abu Dhabi Investment Authority and Sovereign Wealth Fund.
II.Exemption in respect of certain income of Indian Strategic Petroleum Reserves Limited.
III.Rationalization of provisions of start-ups.
(ii) the deduction under the said section shall be available to an eligible start-up, if the total turnover of its business does not exceed one hundred crore rupees in any of the previous years beginning from the year in which it is incorporated.
IV.Amendment of section 115BAB of the Act to include generation of electricity as manufacturing.
V.Allowing carry forward of losses or depreciation in certain amalgamations.
In order to address the issue faced by the amalgamated public sector banks and public sector General Insurance Companies, it is proposed to extend the benefit of this section to amalgamation of,-
(i) one or more corresponding new bank or banks with any other corresponding new bank under a scheme brought into force by the Central Government under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, or both, as the case may be, or
(ii) One or more Government company or companies with any other Government company under a scheme sanctioned and brought into force by the Central Government under section 16 of the General Insurance Business (Nationalisation) Act, 1972.
VI. Reducing the rate of TDS on fees for technical services (other than professional services).
To reduce litigation, 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.
This amendment will take effect from 1st April, 2020.
VII.Removing dividend distribution tax (DDT) and moving to classical system of taxing dividend in the hands of shareholders/unit holders.
In view of above, it is proposed to carry out amendments so that dividend or income from units are taxable in the hands of shareholders or unit holders at the applicable rate and the domestic company or specified company or mutual funds are not required to pay any DDT. It is also proposed to provide that the deduction for expense under section 57 of the Act shall be maximum 20 per cent of the dividend or income from units.
TDS on Dividend
(xiii) amend section 194 to include dividend for tax deduction. At the same time the rates of ten per cent. is proposed to be prescribed and threshold is proposed to be increased from Rs 2,500/- to Rs 5,000/- for dividend paid other than cash. Further, at present the mode of payment is given as “an account payee cheque or warrant”. It is proposed to change this to any mode.
(xiv) amend section 194LBA to provide for tax deduction by business trust on dividend income paid to unit holder, at the rate of ten per cent. for resident. For non-resident, it would be 5 per cent for interest and ten per cent. for dividend.
TDS on Mutual Fund.
(xv) insert a new section 194K to provide that any person responsible for paying to a resident any income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or units from the administrator of the specified undertaking or units from the specified company shall at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax there on at the rate of ten per cent. It may also be provided for threshold limit of Rs 5,000/- so that income below this amount does not suffer tax deduction.
VIII. Business Trust
Modification of the definition of “business trust”
The definition of “business trust” has been provided in clause (13A) of section 2 of the Act, to mean a trust registered as an Infrastructure Investment Trust (InvIT) or a Real Estate Investment Trust (REIT) under the relevant regulations made under the Securities and Exchange Board of India (SEBI) Act, 1992 and the units of which are required to be listed on a recognized stock exchange in accordance with the relevant regulations.
Representations have been received stating that private unlisted InvITs should be given the same status as public listed InvITs with regards to tax treatments provided under the Act. Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) (Regulations), 2019 vide notification No.SEBI/LAD-NRO/GN/2019/10 has, inter-alia, done away with the mandatory listing requirement for InvITs. In light of this, the definition of business trusts under the Act is required to be aligned with the amended SEBI Regulations.
Therefore, it is proposed to amend clause (13A) of section 2 of the Act to modify the definition of “business trust” so as to do away with the requirement of the units of business trust to be listed on a recognised stock exchange.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.
IX. Rationalising the process of registration of trusts, institutions, funds, university,
It is also felt that the approval or registration or notification for exemption should also be for a limited period, say for a period not exceeding five years at one time, which would act as check to ensure that the conditions of approval or registration or notification are adhered to for want of continuance of exemption. This would in fact also be a reason for having a non-adversarial regime and not conducting roving inquiry in the affairs of the exempt entities on day to day basis, in general, as in any case they would be revisiting the concerned authorities for new registration before expiry of the period of exemption. This new process needs to be provided for both existing and new exempt entities.
X. Filing of statement of donation by donee to cross-check claim of donation by donor
Hence, it is proposed to amend relevant provisions of the Act to provide that,-
(i) similar to exemptions under clauses (1) and (23C), exemption under clause (46) of section 10 shall be allowed to an entity even if it is registered under section 12AA subject to the condition that the registration shall become inoperative. If the entity wishes to make it operative in the future, it will have to file an application and then it would not be entitled for deduction under clause (46) from the date on which the registration becomes operative.
(ii) the registration under section 12AA would also become inoperative in case of an entity exempt under clause (23C) of section 10 as well, to have uniformity. The condition about making it operative again would also be similar to what is proposed for clause (46) of section 10.
(iii) an entity approved, registered or notified under clause (23C) of section 10, section 12AA or section 35 of the Act, as the case may be, shall be required to apply for approval or registration or intimate regarding it being approved, as the case may be, and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five previous years at one time calculated from 1st April, 2020.
(iv) an entity already approved under section 80G shall also be required to apply for approval and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five years at one time.
(v) application for approval under section 80G shall be made to Principal Commissioner or Commissioner.
(vi) an entity making fresh application for approval under clause (23C) of section 10, for registration under section 12AA, for approval under section 80G shall be provisionally approved or registered for three years on the basis of application without detailed enquiry even in the cases where activities of the entity are yet to begin and then it has to apply again for approval or registration which, if granted, shall be valid from the date of such provisional registration. The application of registration subsequent to provisional registration should be at least six months prior to expiry of provisional registration or within six months of start of activities, whichever is earlier.
(vii) the application pending for approval, registration, as the case may be, shall be treated as application in accordance with the new provisions, wherever they are being provided for.
(viii) deduction under section 80G/ 80GGA to a donor shall be allowed only if a statement is furnished by the donee who shall be required to furnish a statement in respect of donations received and in the event of failure to do so, fee and penalty shall be levied.
(ix) similar to section 80G of the Act, deduction of cash donation under section 80GGA shall be restricted to Rs 2,000/- only.
These amendments will take effect from 1st June, 2020.
XI. Rationalisation of provisions relating to tax audit in certain cases.
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.
Further, to enable pre-filling of returns in case of persons having income from business or profession, it is required that the tax audit report may be furnished by the said assessees at least one month prior to the due date of filing of return of income. This requires amendments in all the sections of the Act which mandates filing of audit report along with the return of income or by the due date of filing of return of income. Thus, provisions of section 10, section 10A, section 12A, section 32AB, section 33AB, section 33ABA, section 35D, section 35E, section 44AB, section 44DA, section 50B, section 80-IA, section 80-IB, section 80JJAA, section 92F, section 115JB, section 115JC and section 115VW of the Act are proposed to be amended accordingly.
Further, 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 an assessee referred to in clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act;
(B) removing the distinction between a working and a non-working partner of a firm with respect to the due date as mentioned in sub-clause (iii) of clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
The amendment relating to extending threshold for getting books of accounts audited will have consequential effect on TDS/TCS provisions contained in sections 194A, 194C, 194H, 194I, 194J and 206C as these provisions fasten liability of TDS/TCS on certain categories of person, if the gross receipt or turnover from the business or profession carried on by them exceed the monetary limit specified in clause (a) or clause (b) of section 44AB.
Therefore, it is proposed to amend these sections so that reference to the monetary limit specified in clause (a) or clause (b) of section 44AB of the Act is substituted with rupees one crore in case of the business or rupees fifty lakh in case of the profession, as the case may be.
These amendments will take effect from 1st April, 2020.
XII. Rationalisation of provision relating to Form 26AS
Section 203AA of the Act, inter-alia, requires the prescribed income-tax authority or the person authorised by such authority referred to in sub-section (3) of section 200, to prepare and deliver a statement in Form 26AS to every person from whose income, the tax has been deducted or in respect of whose income the tax has been paid specifying the amount of tax deducted or paid.
The Form 26AS as prescribed in the Rules, inter-alia, contains the information about tax collected or deducted at source. However, with the advancement in technology and enhancement in the capacity of system, multiple information in respect of a person such as sale/purchase of immovable property, share transactions etc. are being captured or proposed to be captured. In future, it is envisaged that in order to facilitate compliance, this information will be provided to the assessee by uploading the same in the registered account of the assessee on the designated portal of the Income-tax Department, so that the same can be used by the assessee for filing of the return of income and calculating his correct tax liability.
As the mandate of Form 26AS would be required to be extended beyond the information about tax deducted, it is proposed to introduce a new section 285BB in the Act regarding annual financial statement. This section proposes to mandate the prescribed income-tax authority or the person authorised by such authority to upload in the registered account of the assessee a statement in such form and manner and setting forth such information, which is in the possession of an income-tax authority, and within such time, as may be prescribed.
Consequently, section 203AA is proposed to be deleted.
These amendments will take effect from 1st June, 2020.
[Clauses 90]
XIII. Rationalisation of the provisions of section 49 and clause (42A) of section 2 of the Act in respect of segregated portfolios.
Section 49 of the Act provides for cost of acquisition for the capital asset which became the property of the assessee under certain situations. Further, clause (42A) of section 2 of the Act provides the definition of the term “short-term capital asset”. It also provides for determination of period of holding of the capital asset held by the assessee.
SEBI has, vide circular SEBI/HO/IMD/DF2/CIR/P/2018/160 dated December 28, 2018, permitted creation of segregated portfolio of debt and money market instruments by Mutual Fund schemes. As per the SEBI circular, all the existing unit holders in the affected scheme as on the day of the credit event shall be allotted equal number of units in the segregated portfolio as held in the main portfolio. On segregation, the unit holders come to hold same number of units in two schemes –the main scheme and segregated scheme.
In view of the above, it is proposed to amend sub-section (42A) of section 2 of the Act to provide that in the case of a capital asset, being a unit or units in a segregated portfolio, referred to in sub-section (2AG) of section 49, there shall be included the period for which the original unit or units in the main portfolio were held by the assessee.
Further, a new sub-section (2AG) is proposed to be inserted in section 49 of the Act to provide that the cost of acquisition of a unit or units in the segregated portfolio shall be the amount which bears to the cost of acquisition of a unit or units held by the assessee in the total portfolio, the same proportion as the net asset value of the asset transferred to the segregated portfolio bears to the net asset value of the total portfolio immediately before the segregation of portfolios.
It is also proposed to insert another sub-section (2AH) in the said section to provide that the cost of the acquisition of the original units held by the unit holder in the main portfolio shall be deemed to have been reduced by the amount as so arrived at under the proposed sub-section (2AG).
The Explanation below these two new sub-sections, as proposed to be inserted, provide that for the purposes of sub-sections (2AG) and (2AH), the expressions “main portfolio”, “segregated portfolio” and “total portfolio” shall have the meaning respectively assigned to them in the said circular dated 28th December, 2018 issued by SEBI.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
XIV. Amendment in the provisions of Act relating to verification of the return of income and appearance of authorized representative.
Now Insolvency Professional can appear as authorised representative .Please read the following Text.
While the IBC empowers the Insolvency Professional or the Administrator to exercise the powers of the Board of Directors or corporate debtor, it has been reported that lack of explicit reference in section 288 of the Act for an Insolvency Professional to act as an authorised representative of the corporate debtor has been raising certain practical difficulties.
Therefore, it is proposed to amend sub-section (2) of section 288 to enable any other person, as may be prescribed by the Board, to appear as an authorised representative.
XV..Widening the scope of Commodity Transaction Tax (CTT).
XVI.. IMPROVING EFFECTIVENESS OF TAX ADMINISTRATION
Modification of e-assessment scheme.
Section 143 of the Act provides the manner for processing and assessment of return of income (ITR) where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142 of the Act.
2. Sub-section (3A) of section 143 provides that the Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) of section 143 so as to impart greater efficiency, transparency and accountability by certain means specified therein. Accordingly, E-assessment Scheme, 2019 was notified under sub-section (3A) of Section 143 of the Act.
3. It is proposed to amend sub-section (3A) of section 143 of the Act to,-
(i) expand the scope so as to include the reference of section 144 of the Act relating to best judgement assessment in the said sub-section;
(ii) provide that Central Government may issue any direction under sub-section (3B) of the said section upto 31st March, 2022.
This amendment will take effect from 1st April, 2020.
[Clause 69]
XVII.Amendment in Dispute Resolution Panel (DRP).
Section 144C of the Act provides that in case of certain eligible assessees, viz., foreign companies and any person in whose case transfer pricing adjustments have been made under sub-section (3) of section 92CA of the Act, the Assessing Officer (AO) is required to forward a draft assessment order to the eligible assessee, if he proposes to make any variation in the income or loss returned which is prejudicial to the interest of such assessee. Such eligible assessee with respect to such variation may file his objection to the DRP, a collegium of three Principal Commissioners or Commissioners of Income-tax. DRP has nine months to pass directions which are binding on the AO.
It is proposed that the provisions of section 144C of the Act may be suitably amended to:-
(A) include cases, where the AO proposes to make any variation which is prejudicial to the interest of the assessee, within the ambit of section 144C;
(B) expand the scope of the said section by defining eligible assessee as a non-resident not being a company, or a foreign company.
This amendment will take effect from 1st April, 2020. Thus, if the AO proposes to make any variation after this date, in case of eligible assessee, which is prejudicial to the interest of the assessee, the above provision shall be applicable.
XVIII..Provision for e-appeal.
The filing of appeals before Commissioner (Appeals) has already been enabled in an electronic mode. However, the first appeal process under the Commissioner (Appeals), which is one of the major functions/ processes that is not yet in full electronic mode. A taxpayer can file appeal through his registered account on the e-filing portal. However, the process that follows after filing of appeal is neither electronic nor faceless. In order to ensure that the reforms initiated by the Department to eliminate human interface from the system reach the next level, it is imperative that an e-appeal scheme be launched on the lines of e-assessment scheme.
Accordingly, it is proposed to insert sub-section (6A) in section 250 of the Act to provide for the following: —
Empowering Central Government to notify an e-appeal scheme for disposal of appeal so as to impart greater efficiency, transparency and accountability.
Eliminating the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible.
Optimizing utilization of the resources through economies of scale and functional specialisation.
Introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).
It is also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, by notification in the Official Gazette, to direct that any of the provisions of this Act relating to jurisdiction and procedure of disposal of appeal shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. Such directions are to be issued on or before 31st March 2022. It is proposed that every notification issued shall be required to be laid before each House of Parliament.
This amendment will take effect from 1st April, 2020.
XIX..Clarity on stay by the Income Tax Appellate Tribunal (ITAT).
Assessee has to deposit certain money in certain circumstances ,please read the text.
It is proposed to provide that ITAT may grant stay under the first proviso subject to the condition that the assessee deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof.
It is also proposed to substitute second proviso to provide that no extension of stay shall be granted by ITAT, where such appeal is not so disposed of which the said period of stay as specified in the order of stay. However, on an application made by the assessee, a further stay can be granted, if the delay in not disposing of the appeal is not attributable to the assessee and the assessee has deposited not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof. The total stay granted by ITAT cannot exceed 365 days.
This amendment will take effect from 1st April, 2020.
XX. Provision for e-penalty.
Please read about the provision of e-penalty.
Therefore, it is proposed to insert a new sub-section (2A) in the said section so as to provide that the Central Government may notify an e-scheme for the purposes of imposing penalty so as to impart greater efficiency, transparency and accountability by,—
(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a mechanism for imposing of penalty with dynamic jurisdiction in which penalty shall be imposed by one or more income-tax authorities.
It is also proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub-section, for issuing notification in the Official Gazette, to direct that any of the provisions of this Act relating to jurisdiction and procedure of imposing penalty shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. Such directions are to be issued on or before 31st March, 2022. It is proposed that every notification issued shall be required to be laid before each House of Parliament.
XXI. Insertion of Taxpayer’s Charter in the Act.
It is proposed to insert a new section 119A in the Act to empower the Board to adopt and declare a Taxpayer’s Charter and issue such orders, instructions, directions or guidelines to other income-tax authorities as it may deem fit for the administration of Charter.
XXII.Please that there is a change in the Cost of Acquisition.
Please read the following text.
Rationalization of provisions of section 55 of the Act to compute cost of acquisition.
The existing provisions of section 55 of the Act provide that for computation of capital gains, an assessee shall be allowed deduction for cost of acquisition of the asset and also cost of improvement, if any. However, for computing capital gains in respect of an asset acquired before 1st April, 2001, the assessee has been allowed an option of either to take the fair market value of the asset as on 1st April, 2001 or the actual cost of the asset as cost of acquisition.
It is proposed to rationalise the provision and to insert a proviso below sub-clause (ii) of clause (b) of Explanation under clause (ac) of sub-section (2) of the said section to provide that in case of a capital asset, being land or building or both, the fair market value of such an asset on 1st April, 2001 shall not exceed the stamp duty value of such asset as on 1st April, 2001 where such stamp duty value is available. It is also proposed to insert an Explanation so as to provide that for the purposes of sub-clause (i) and (ii), “stamp duty value” shall mean the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.
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