Highlights of the Union Budget 2020
Changes applicable to Individual Taxpayers from F.Y. 2020-21
1) Rates of income-tax in respect of income liable to tax for the assessment year 2021-2022
A) The old slabs and rates of income tax are continued for Individual & HUF taxpayers.
B) However, one option is provided to Individual & HUF taxpayers under Section 115BAC.
C) On satisfaction of certain conditions, they can opt to pay tax as per following slabs –
| Total Income (Rs.) | Rate of Tax |
| Up to 2,50,000 | NIL |
| From 2,50,001 to 5,00,000 | 5% |
| From 5,00,001 to 7,50,000 | 15% |
| From 10,00,001 to 12,50,000 | 20% |
| From 12,50,001 to 15,00,000 | 25% |
| Above 15,00,000 | 30% |
D) Individual or HUF not having income from business or profession, can choose one of the above option (i.e. old rates or new rates) every year.
E) Individual or HUF having income from business or profession, have to choose the option of paying tax at new rates only once. If he chooses to pay tax at new rates for a year, then the option can be withdrawn only once for the future years. Once the option is withdrawn, then he will never be able to opt for such option again.
The conditions for opting new tax rates are as follows –
- No deduction is to be claimed under Chapter VI-A (Section 80C, 80D, 80G, 80E, etc. i.e. Life Insurance Premium, Tution Fees, Housing Loan Principle Repayment, Mediclaim, Medical Expenditure, Interest on Educational Loan, Donation, etc.)
- No standard deduction of Rs. 50,000 is to be claimed against Salary income.
- No deduction is to be claimed of Entertainment Allowance and Profession Tax against Salary income.
- No deduction of interest paid on housing loan against self occupied house property f.No deduction of additional depreciation
G) There is no change in the rate of Surcharge and Health & Education Cess.
H) Example of taxation under old scheme and new scheme is as follows –
| Particulars | Amount Rs. under old scheme | Amount Rs. under new scheme |
| Income from Salary | 12,50,000 | 12,50,000 |
| Less : Standard Deduction | 50,000 | Not Available |
| Net Income from Salary | 12,00,000 | 12,50,000 |
| Income from Other Sources | 50,000 | 50,000 |
| Gross Total Income | 12,50,000 | 13,00,000 |
| Less : Deduction under Chapter VI-A (i.e. Section 80C, 80D, 80G, 80TTA, etc.) | 1,50,000 | Not Available |
| Total Income | 11,00,000 | 13,00,000 |
| Tax on Total Income | 1,48,200 | 1,43,000 |
| Savings in Tax | 5,200 | |
2) Removing of Dividend Distribution Tax and taxation of dividend in the hands of shareholders / unit holders
Current Provisions
A) Currently, dividend distribution tax is to be paid by domestic company / mutual fund on the amount declared, distributed or paid by way of dividend. Rate of Dividend Distribution Tax is 15%.
B) When the company pays dividend distribution tax, the dividend is exempt in the hands of shareholders / unit holders to the extent of Rs. 10 Lakhs.
C) In the hands of shareholders / unit holders, dividend in excess of Rs. 10 Lakhs is taxable @ 10%.
Proposed Provisions
D) t is proposed to remove the requirement of paying dividend distribution tax by companies
E) It is also proposed to tax dividend in the hands of shareholders / unit holders at the rates as applicable to them.
F) Deduction for expenses under Section 57 shall be allowed maximum 20% of the dividend.
Changes applicable to Business / Profession from F.Y. 2020-21
1) Rates of income-tax in respect of income liable to tax for the financial year 2019-2020 & financial year 2020-21
A) No change in the existing rate of tax in case of Partnership Firms and LLPs
B) In the case of domestic company, an option is provided under Section 115BAA to opt for tax rate of 22% on satisfaction of certain conditions. The conditions are as follows –
- No deduction is to be claimed under Section 10AA, 32AD, 33AB, 33ABA, 35(2AA), 35(2AB), 35AD, 35CCC, 35CCD (i.e. weighted deductions for scientific expenditure, deduction in respect of more than 100 bedded hospitals, exemption to units in SEZ, etc.)
- No deduction to be claimed in respect of Part C – Deductions in respect of certain incomes of Chapter VI-A (Section 80-IA, 80-IAB, 80-IB, 80-IC, etc.)(i.e. deduction in respect of profits of industrial undertakings, housing projects, undertakings in SEZ, hotels & convention centers, etc.)
- No deduction is to be claimed of Entertainment Allowance and Profession Tax against Salary income.
- No additional depreciation to be claimed. d.Set off of brought forward loss in respect of above sections is not allowed.
C) The option is to be exercised on or before due date of filing return of income.
D) Option once exercised cannot be withdrawn for same or any other assessment year.
F) No change in the existing rate of surcharge & health & education cess.
2) Concessional tax rate for new manufacturing domestic companies under Section 115BAB
A)New Section 115BAB is introduced in which option is given to new manufacturing domestic companies to opt for tax rate of 15% on satisfaction of certain conditions. The conditions are as follows –
- The company should be engaged in the business of manufacturing of any article or thing and research in relation to, or distribution of, such article or thing.
- The company has been set up and registered on or after 1st October 2019 and has commenced manufacturing on or before 31st March 2023.
- The business is not formed by splitting up or reconstruction of a business already in existence.
- The company does not use any machinery or plant previously used for any purpose in India.
- The company does not use any building previously used as hotel or convention centre on which deduction under Section 80-ID is allowed.
- No deduction is to be claimed under Section 10AA, 32AD, 33AB, 33ABA, 35(2AA), 35(2AB), 35AD, 35CCC, 35CCD (i.e. weighted deductions for scientific expenditure, deduction in respect of more than 100 bedded hospitals, exemption to units in SEZ, etc.)
- No deduction to be claimed in respect of Part C – Deductions in respect of certain incomes of Chapter VI-A (Section 80-IA, 80-IAB, 80-IB, 80-IC, etc.)(i.e. deduction in respect of profits of industrial undertakings, housing projects, undertakings in SEZ, hotels & convention centers, etc.)
- No additional depreciation to be claimed.
- Set off of brought forward loss in respect of above sections is not allowed.
B) The option is to be exercised on or before due date of filing return of income.
C) Option once exercised cannot be withdrawn for same or any other assessment year.
3) Change in turnover limit for Tax Audit in certain cases
Current Provisions
A) Currently, tax audit under Section 44AB is applicable to the assessees whose turnover / gross receipts exceed Rs. 1 Crore in the previous year. Proposed Provisions
B) It is proposed to increase such turnover limit of Rs. 1 Crore to Rs. 5 Crores in the cases where –
- Aggregate receipts in cash during the previous year does not exceed 5% of total receipts including receipts for sales or services or turnover, and
- Aggregate payments in cash during the previous year does not exceed 5% of total payments including payments for expenses
4) Change in due date of filing return of income for certain assessees
Current Provisions
A) Currently, due date of filing return of income in the case of company, a person other than company to whom tax audit is applicable, working partner of a firm to which tax audit is applicable, is 30thSeptember of the assessment year. Proposed Provisions
B) It is proposed to change the date to 31st October of the assessment year for filing income tax returns however, due date for filing tax audit reports shall remain 30th September of the assessment year.
C) It is also proposed to remove the distinction between working and non working partner of a firm to which tax audit is applicable. Therefore due date of filing return of income in case of all partners of a firm to which tax audit is applicable, will be 31st October of the assessment year.
D) These amendments will take effect from 1st April 2020 and apply in relation to the assessment year 2020-21 (i.e. financial year 2019-20) and subsequent assessment years.
Changes applicable to All Taxpayers from F.Y. 2020-21
1) Amendment in the provisions for computing cost of acquisition of certain capital assets
Current Provisions
A) Currently, for computing capital gain in respect of a capital asset acquired before 1st April 2001, the option is available to the assessee either to take fair market value of the asset as on 1st April 2001 or to take the actual cost of acquisition of such asset. Proposed Provisions
B) It is proposed 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.
2) Amendment in Provisions in respect of TDS under Section 194J for Professional / Technical Fees Current Provisions
A) Currently, Section 194J provides rate of TDS @ 10% in respect of Fees for Professional Services and Fees for Technical Services. Proposed Provisions
B) Considering the conflicts regarding rate of TDS in respect of Fees for Technical Services, it is proposed to reduce the rate of TDS in case of Fees for Technical Services (other than professional services) to 2% from existing 10%.
3) New Section 194-O regarding TDS on certain sales or services (to be made by companies like Amazon, Flipkart, etc. of the traders selling goods or services through them)
Current Provisions
A) It is proposed to insert new Section 194-O regarding deduction of tax by an e-commerce operator on sale of goods or services facilitated by it through its digital platform.
B) Under this provision, tax is to be deducted by an e-commerce operator (i.e. amazon, paytm, flipkart, myntra, etc.) on sales or services facilitated through their digital platform.
C) Rate of TDS shall be @ 1% D)Tax shall be deducted if value of sales or services facilitated through their platform is more than Rs. 5 Lakhs in a financial year
4) New Section 194M (TDS to be deducted by the persons to whom tax audit is not applicable) Current Provisions
Current Provisions
A) Currently, TDS provisions regarding payment against contract for work (Section 194C), Commission (Section 194H), Professional / Technical Fees (Section 194J) are applicable to Individuals and HUFs to whom tax audit is applicable.
B) However, Individuals and HUFs who are outside the scope of tax audit are not required to deduct tax under the above mentioned sections. Provisions of New Section 194M
C) Individuals and HUFs to whom tax audit is not applicable will be required to deduct tax on the payment against contract for work, commission, professional / technical fees if aggregate of such amount credited or paid during the year exceeds Rs. 50 Lakhs.
D) Tax will require to be deducted @ 5%.
E) The provisions of this section will take effect from 1st September, 2019.
5) New Section 194N (TDS on Cash Withdrawal)
Current Provisions
A) New provision is introduced for deduction of tax on cash withdrawals made from banks, pat sanstha and post office.
B) Tax is to be deducted by banks, pat sanstha and post office if cash withdrawals of any person from one or more accounts maintained with these persons exceeds Rs. 1 Crore during the year.
C) Tax is to be deducted on the amount of cash withdrawal in excess of Rs. 1 Crore @ 2%. E.g. if total cash withdrawals of a person during the year is Rs. 1.50 Crore, then tax will be deducted on Rs. 50 Lakhs @ 2%.
D) However, tax will not require to be deducted if cash withdrawal is made by the Government, bank or pat sanstha. E.g. if XYZ Pat Sanstha is maintaining account with ABC Co-operative Bank Ltd and withdraws cash in excess of Rs. 1 Crore during the year,then tax will not be required to be deducted by ABC Co-operative Bank Ltd.
E) The provisions of this section will take effect from 1st September, 2019.
6) Amendment in TCS Provisions under Section 206C
Current Provisions
A) It is proposed to amend Section 206C to include certain sellers of goods under TCS provisions.
B) A seller of goods whose turnover during preceding financial year exceeded Rs. 10 Crores will be required to collect tax from the buyer if sales during the current financial year to such buyer exceedRs. 50 Lakhs.
C) Tax will required to be collected @ 0.1%. If the buyer doesn’t have PAN / Aadhaar, then the rate of TCS will be @ 1%.
D) Tax will not required to be collected if the sale is made to the Central Government, State Government, Embassy, High Commission or any other specified persons.
E) Tax will not required to be collected if TCS is applicable under other provisions. (e.g. liquor traderwill not be required to collect tax under this provision since he is required to collect tax under other provision of the Act.)
F) Tax will not required to be collected if the buyer is liable to deduct TDS under any provisions of theAct and he has deducted such amount.
G) This provision will take effect from 1st April, 2020.
7) Penalty for fake invoice
Current Provisions
A) It is proposed to insert a new provision for levy of penalty if it is found that, in the books of accounts –
- There is a false entry, or
- Omission of any entry relevant for computation of income with intention to evade tax
B) The false entry is proposed to include the following –
- Forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or
- Invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods or services or both; or
- Invoice in respect of supply or receipt of goods or services or both to or from a person who do not exist
8) Modification of e-assessment scheme Current Provisions
Current Provisions
A) Currently, assessments under Section 143(3) (i.e. regular scrutiny assessments) are conducted faceless through e-assessment module (i.e. all the required information is uploaded on the platform provided by the Government, no physical submission of information / documents) Proposed Provisions
B) It is proposed to expand the scope of e-assessments to include assessments under Section 144 (i.e. best judgment assessment or ex-parte assessments)
C) Therefore, assessments under Section 144 will be conducted faceless through e-assessment module.
9) Provision for e-appeal Current Provisions
Current Provisions
A) Currently, a taxpayer can file appeal to Commissioner (Appeals) through electronic mode. However, the submission of information / documents during the course of appeal is neither electronic nor faceless. Proposed Provisions
B) It is proposed to empower the Government to notify an e-appeal scheme to conduct the appeals faceless.
C) Therefore appeals before the Commissioner (Appeals) will be conducted faceless (i.e. all the required information is to be uploaded on the platform provided by the Government, no physical submission of information / documents)
10) Provision for e-penalty Current Provisions
Current Provisions
A) Currently, a taxpayer has to visit the assessing officer for submission against show cause notice issued for levying penalty. Proposed Provisions
B) It is proposed to empower the Government to notify an e-scheme to conduct the penalty proceedings faceless.
C) Therefore all the penalty proceedings will be conducted faceless (i.e. all the required information isto be uploaded on the platform provided by the Government, no physical submission of information / documents)
11) Rationalising the process of registration of trusts and other institutions
Current Provisions
A) It is proposed to provide that, a trust and other institutions already registered under Section 12AA /Section 80G will have to get fresh approval by making application to Principal Commissioner or Commissioner.
B) Such approval shall be valid for a period not exceeding 5 years at one time.
C) The amendments will take effect from 1st June 2020.
12) Filing of statement of donation by the trust / institution
Current Provisions
A) It is proposed that, a trust or other institution registered under Section 80G will have to submit a statement of donations received by it during the year.
B) Fee / penalty shall be levied for failure to furnish such statement.
C) Deduction under Section 80G/ 80GGA to a donor shall be allowed only if it is reflected in the statement filed by the donee.
D) The amendments will take effect from 1st June 2020.
13) Rationalisation of provisions relating to Form 26ASCurrent Provisions
Current Provisions
A) Currently, the Government provides to all assessees Form 26AS which contains details of tax deducted and / or payments of taxes during the year by such assessee.
B) Form 26AS also contains information relating to purchase / sale of immovable property. Proposed Provisions
C) It is proposed to abolish Form 26AS.
D) It is proposed to insert new Section 285BB regarding annual financial statement.
E) Through such annual financial statement, information regarding transactions of the assessee in the possession of an income tax authority will be uploaded in the registered account of the assessee on e-filing portal.
F) The amendments will take effect from 1st June 2020.
14) Direct Tax Vivad Se Vishwas Bill, 2020
Current Provisions
A) The Government has announced above bill for resolution of various Income Tax Appeals pending before Commissioner (Appeals), Tribunal, High Court and Supreme Court.
B) Appellant shall be given an option of withdrawing the appeal pending at any of the above stages on payment of tax and partial amount of interest and penalty.
C) Details of payment and waiver are as follows –
| Sr. No. | Nature of arrears | If payment is made before 31st March 2020 | If payment is made after 31st March 2020 |
| 1 | Aggregate amount of Disputed Tax, Interest and Penalty | Payment Amount of only disputed tax is to be paid Waiver Amount of interest and penalty will be waived td> | Payment - Amount of 110% of disputed tax is to be paid - If amount of interest & penalty is less than 10% of disputed tax, then amount of tax and actual amount of interest and penalty is to be paid Waiver Interest and penalty in excess of 10% of tax will be waived |
| 2 | Aggregate amount of Disputed Interest or Disputed Penalty or Disputed Fee | Payment Amount of 25% of disputed interest or disputed penalty or disputed fee is to be paid Waiver Amount of 75% of disputed interest or disputed penalty or disputed fee will be waived |
Payment - Amount of 30% of disputed interest or disputed penalty or disputed fee is to be paid Waiver Amount of 70% of disputed interest or disputed penalty or disputed fee will be waived |