BUDGET INSIGHTS 2020

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BUDGET INSIGHTS 2020

 

INDIVIDUAL

  • A new optional tax regime has been proposed where income is taxable at reduced rates without the benefit of any deduction and exemption
  • It is proposed that DDT shall be abolished, and shareholders shall be liable to pay tax on dividend income.
  • Threshold limit for a tax audit is proposed to be increased from Rs. 1 crore to Rs. 5 crore provided cash receipt or payment does not exceed 5% of total receipt or payment.
  • The due date for filing of return by the persons who are liable for tax audit has been proposed to extend from September 30 to October 31 of Assessment Year.
  • If the land or building is purchased before 01-04-2001, the fair market value of such property can’t exceed the stamp duty value of the property as on 01-04-2001
  • To curb the practice of obtaining fake GST invoices, a new penalty of an amount equal to the aggregate amount of fake GST invoices has been proposed
  • E-appeal & e-penalty schemes to be launched on the lines of the e-assessment scheme.

 

TAX SLAB

  • Income tax applicable to Individual and HUF under new optional tax regime – Section 115BAC.

 

A new tax regime for Individual and HUF has been proposed by the Finance Bill, 2020 to tax the income of such assessees at lower tax rates if they agree to forego prescribed deductions and exemptions under the Income Tax Act. Special provision for calculating the income of assessees opting for this section is prescribed under the said section.

      1. Individual (resident or non-resident), who is of the age of less than 60 years on the last day of the relevant previous year:
Net income range Any Individual/HUF
Up to Rs. 2,50,000 Nil
From Rs 2,50,001 to Rs 5,00,000 5%
From Rs 5,00,001 to Rs 7,50,000 10%
From Rs 7,50,001 to Rs 10,00,000 15%
From Rs 10,00,001 to Rs 12,50,000 20%
From Rs 12,50,001 to Rs 15,00,000 25%
Above Rs. 15,00,000 30%
  1. Resident senior citizen, i.e., every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year:
Net income range Income-Tax rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 – Rs. 5,00,000 5%
Rs. 5,00,000- Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
  1. Resident super senior citizen, i.e., every individual, being a resident in India, who is of the age of 80 years or more at any time during the previous year:
Net income range Income-Tax rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000- Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Surcharge: – 

where total income exceeds Rs. 50,00,000 10% of income tax
where total income exceeds Rs. 1,00,00,000 15% of income tax
where total income exceeds Rs. 2,00,00,000 25% of income tax
where total income exceeds Rs. 5,00,00,000 37% of income tax

Health and Education cess: – 4% of income tax and surcharge.

 

  • Income Tax Slab Rate for AY 2021-22 for Individuals opting for old tax regime where prescribed deductions and exemptions can be availed:

 

      1.  Individual (resident or non-resident), who is of the age of less than 60 years on the last day of the relevant previous year:
Net income range Income-Tax rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000- Rs. 5,00,000 5%
Rs. 5,00,000- Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

 

      1. Resident senior citizen, i.e., every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year:
Net income range Income-Tax rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 – Rs. 5,00,000 5%
Rs. 5,00,000- Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
      1. Resident super senior citizen, i.e., every individual, being a resident in India, who is of the age of 80 years or more at any time during the previous year:
Net income range Income-Tax rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000- Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Surcharge: – 

where total income exceeds Rs. 50,00,000 10% of income tax
where total income exceeds Rs. 1,00,00,000 15% of income tax
where total income exceeds Rs. 2,00,00,000 25% of income tax
where total income exceeds Rs. 5,00,00,000 37% of income tax

Health and Education cess: – 4% of income tax and surcharge.

Note: – A resident individual is entitled to rebate under section 87A if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 12,500, whichever is less.

A comparative study of tax saving:

The following table gives a snapshot of tax liability under the present regime and the proposed optional regime. 

S.No. Total Income Present  Proposed  Saving
1 Rs.2,50,000 Nil Nil   
2 Rs.5,50,000 23,400 18,200 5,200
3 Rs.7,50,000 65,000 39,000 26,000
4 Rs.10,00,000 1,17,000 78,000 39,000
5 Rs.12,50,000 1,95,000 1,30,000 65,000
6 Rs.15,00,000 2,73,000 1,95,000 78,000
7 Rs.20,00,000 4,29,000 3,51,000 78,000

Note: The above illustrative computation is without taking any deductions available under the old regime.

CORPORATES

  • Concessional Corporate tax rate of 15% is proposed to be allowed to new domestic companies engaged in the generation of electricity
  • The period of approval of the project by the competent authority under section 80-IBA is proposed to be extended to 31-03-2021.
  • Domestic company or mutual funds shall not be required to pay any dividend distribution tax
  • Companies opting for the concessional rates shall not be allowed a deduction under any provisions of Chapter VI-A other than section 80JJAA or section 80M.
  • Assessees can seek advance pricing agreement (APA) or SHR in respect of the determination of attribution of profits to PE. 
  • E-commerce operator shall deduct tax at the rate of 1% from sale done by the participant thought their platforms.
  • The scope of TCS extended to overseas remittance, sale of overseas tour package and sale of goods.

 

TAX SLAB

  1. Tax rates for domestic companies:
Particulars Tax rates
Company opting for section 115BA 25%
Company having turnover or gross receipt of up to Rs. 400 crore in the previous year 2017-18 30%
Company opting for section 115BAA 22%
Company opting for section 115BAB 15%
Any other company* 30%
MAT 15%
  1. Tax rates for foreign companies is 40%.
  2. Surcharge: –
Company Net income is between Rs. 1Cr. – 10 Cr. Net income exceeds Rs. 10Cr.
Domestic company 7% 12%
Foreign company 2% 5%
  1. Health and Education cess: 4% of income tax plus surcharge.

STARTUPS

  • Section 80-IAC has been proposed to be amended to provide that deduction to an eligible start-up shall be available for a period of 3 consecutive assessment years out of 10 years
  • Further, the turnover limit for claiming such exemption has been raised to Rs. 100 crore which was earlier Rs. 25 crore.
  • TDS or tax payable in respect of income pertaining to Employee Stock Option Plan (ESOP) of startups has been proposed to be deferred

 

 

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