The Finance Bill, 2020 has been introduced in the Lok Sabha on 1st February, 2020 and has proposed various amendments under Direct and Indirect taxes.
- Key changes proposed to be brought in vide Finance Bill, 2020 under the Income Tax Act, 1961:
Applicable to all Assesses
- Come the new financial year, all entities liable to deduct tax at source will be required to enquire from each of its employees, who are liable to tax, as to the option the employees have opted for payment of taxes each year. This is in view of the proposed new regime to be inserted vide Section 115BAC. The brief details are –
A new Section 115BAC – “Tax on income of individuals and Hindu Undivided Family (HUF)” has been proposed to be inserted with effect from 1st April, 2020, to provide an option to Individuals or HUF’s to pay tax at lower rate than the prevailing tax rates as prescribed in the table below subject to the fulfilment of the specified conditions:
| Income (INR in Lakh) | Proposed Optional Rate of Tax (%) | Current Rate of Tax (%) |
| 5.00 – 7.50 | 10 | 20 |
| 7.50 – 10.00 | 15 | 20 |
| 10.00 – 12.50 | 20 | 30 |
| 12.50 – 15.00 | 25 | 30 |
| Above 15.00 | 30 | 30 |
Conditions:
- The option may be exercised for every previous year by an Individual or HUF having no business income. However, for person exercising this option and having business income, the option once exercised for a previous year shall be valid for that previous year and all subsequent years. In such cases, the option can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the Individual of HUF will not be eligible to exercise the option of the concessional rate again, except in case where such individual of HUF ceases to have business income.
- The option is to be exercised along with the Return of Income to be furnished u/s 139(1) of the Act.
- It is proposed that provisions of Section 115JC- “Alternate Minimum Tax (AMT)” and Section 115JD- “Carry forward and set off of AMT credit” will not apply to such Individuals and HUF having business income.
- The individual or HUF availing the above option shall not be entitled to the following exemptions/ deductions :
- Leave travel concession as per clause (5) of section 10;
- House rent allowance as per clause (13A) of section 10;
iii. Some of the allowance as contained in clause (14) of section 10;
- Allowances to MPs/MLAs as per clause (17) of section 10;
- Allowance for income of minor as per clause (32) of section 10;
- Exemption for SEZ unit as per section 10AA;
vii. Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
viii. Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23.
- Additional depreciation under clause (iia) of sub-section (1) of section 32;
- Deductions under section 32AD, 33AB, 33ABA;
- 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;
xii. Deduction under section 35AD or section 35CCC;
xiii. Deduction from family pension under clause (iia) of section 57;
xiv. Any deduction under Chapter VIA, except 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;
- 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 above; or under the head house property with any other head of income.
- It has been proposed to remove dividend distribution tax (DDT) applicable to Corporates under Section 115-O with effect from 1st April, 2020. A new Section 80 M – “Deduction in respect of certain intercorporate dividends” has been proposed to be inserted with effect from 1st April, 2020, which lays down that in cases where the gross total income of a domestic company in any previous year includes any income by way of dividends from any other domestic company, then such domestic company shall be allowed in computing the total income a deduction of an amount equal to so much of the amount of income by way of dividends received from such other domestic company as does not exceed the amount of dividend distributed by the first mentioned domestic company on or before the due date. In lieu of this, it has been also proposed to amend Section 115BAA – “Tax on income of certain domestic companies” and Section 115BAB- “Tax on income of new manufacturing domestic companies” of the Act, so as to allow benefit of deduction under Section 80M to companies opting for these concessional rates u/s 115BAA (22%) and 115BAB (15%).
- It has been proposed to amend Section 44AB- “Audit of accounts of certain persons carrying on business or profession” with effect from 1st April, 2020, so as to increase the turnover threshold for audit for taxpayers carrying on business from Rs. 1 crore to Rs. 5 crore 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, it has been proposed to amend Section 44AB- “Audit of accounts of certain persons carrying on business or profession” with effect from 1st April, 2020, so as to amend the due date for getting accounts audited and furnish a tax audit report to a month prior to the due date of filing of return of income as specified in Section 139(1). Earlier the tax audit reports where to filed along with the return of income which has now been amended. Further, it has been proposed to amend explanation (2) of clause (a) of Section 139(1) – “ Return of Income” so as to extend the due date for filing return to 31st October.
Therefore, the due date for submission of audit report for assessees other than those covered by transfer pricing will be 30th September whereas the return filing date for such assessee other than covered by Transfer Pricing will be 31st October. Furthermore, in transfer pricing audit cases the due date for uploading of audit report is 31st October and whereas filing of return is 30th November.
- It has been proposed that with effect from 1st April, 2020 the rate of TDS under Section 194J in case of fees for technical services (other than professional services) shall be reduced to 2% from existing 10%.The TDS rate in other cases under section 194J (relating to professional services) would remain same at 10%.
- It has been proposed that with effect from 1st April, 2020, a new sub section (6A) shall be inserted in Section 250 to empower Central government to notify an e-appeal scheme for disposal of appeal so as to impart greater efficiency, transparency and accountability.
- It has been proposed that with effect from 1st April, 2020, ITAT may grant stay under the first proviso subject to the condition that the assessee deposits not less than 20% 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 proposed that with effect from 1st April, 2020, a new Section 119A shall be inserted to empower CBDT 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.
- It has been proposed to insert a new Section 271 AAD with effect from 1st April. 2020 to provide for levy of penalty on a person, if it is found during any proceeding under the Act that in the books of accounts maintained by him there is a (i) false entry or (ii) any entry relevant for computation of total income of such person has been omitted to evade tax liability. The penalty payable by such person shall be equal to the aggregate amount of false entries or omitted entry. It is also propose to provide that any other person, who causes in any manner a person to make or cause to make a false entry or omits or causes to omit any entry, shall also pay by way of penalty a sum which is equal to the aggregate amounts of such false entries or omitted entry.
Applicable for e-commerce operators and e-commerce participants
- With effect from 1st April, 2020, a new Section 194-O shall be inserted so as to provide for deduction of tax at 1% on the gross amount of sales or service or both to be deducted 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 will required to deduct tax at the time of credit 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.
Applicable for Start up’s
- Effective from 1st day of April, 2020 an eligible startup under Section 80-IAC who are responsible for paying any income to the assessee being perquisite in nature as specified, in any previous year relevant to the assessment year 2021-22 or subsequent year, deduct or pay, as the case may be, tax on such income within 14 days of earliest of the following, on the basis of rates in force in the FY in which the sweat equity shares or specified security is allotted or transferred –
- after the expiry of forty eight months from the end of the relevant assessment year; or
- from the date of the sale of such specified security or sweat equity share by the assessee; or
- from the date of which the assessee ceases to be the employee of the person;
- It has been proposed to amend section 80 IAC which provides for deduction of an amount equal to 100% of the profits and gains derived from an eligible business by an eligible start-up. Further, the deduction under section 80-IAC shall now be available for a period of 3 consecutive assessment years out of 10 years beginning from the year in which it is incorporated as against 3 out of 7 years. Also, more assesses are proposed to be covered as eligible start-ups, since start-ups having total turnover of its business upto INR 100 crore will now be eligible as against only INR 25 crores at present.
Applicable to NBFC’s
Section 194LC is proposed to be amended with effect from 1st day of April, 2020 to provide that the period of concessional rate of withholding tax (made by a specified company or business trust on interest paid to non-residents) at a rate of 5% shall be extended to 1st July, 2023 from 1st July, 2020. Further, concessional rate of TDS at 4% shall be applicable on the interest payable to a non-resident, in respect of monies borrowed in foreign currency from a source outside India, by way of issue of any long term bond or RDB on or after 1st April, 2020 but before 1st July, 2023 and which is listed only on a recognized stock exchange located in any IFSC.
- Key changes proposed to be brought in vide Finance Bill, 2020 under the Indirect Taxes are –
Central Goods and Service Tax Act, 2017
- It has been proposed to amend Section 10(2) relating to Composition Scheme so as exclude from the ambit of the said scheme certain category of taxable persons, engaged in making any–
- supply of services which are not leviable to tax under the CGST Act;
- inter-State outward supplies of services;
- outward supply of services through an electronic commerce operator who is required to collect tax at source under Section 52.
- It has been proposed to amend Section 29(1) relating to cancellation of registration, so that the registered persons who have opted for registration on voluntary basis may cancel the registration at any time by filing an application for cancellation to the proper officer.
- It is proposed to amend the proviso to subsection 2 of Section 31 relating to manner of issue of Tax invoice, so as to empower the Government with recommendation of GST council to notify the categories of services or supplies in respect of which tax invoice or any other document shall be issued and to make rules regarding the time and manner of its issuance.
- It is proposed to amend Section 51 relating to tax deduction at source, to remove the existing requirement of issuance of TDS Certificate in Form GSTR-7A by the deductor to the deductee and omit the corresponding provisions of late fees for delay in issuance of TDS certificate.
- It has been proposed to amend Section 140 relating to transitional arrangements retrospectively w.e.f.1st July, 2017, so as to prescribe the time limit and the manner of availing ITC against certain unavailed credit under the existing law.
Customs Act, 1962
- It has been proposed to amend clause (f) of Section 11(2) of the Customs Act to empower Central Government to prohibit import or export of gold or silver or any other goods which may cause injury to the economy of the country. This clause has been amended to include “any other goods” (in addition to gold and silver) in its ambit.
- It has been proposed to insert New Section 51B so as to provide for creation of an Electronic Duty Credit Ledger (EDCL) in the customs systems. This would enable duty credit in lieu of duty remission to be given in respect of exports or other such benefits in electronic forms for its usage, transfer etc.
- It has been proposed to impose Health Cess on imports of medical devices falling under heading 9018 to 9022 of customs tariff at the rate of 5%.
- Key changes in basic customs duty (BCD) effective from 2nd February, 2020 are:
| Sector Specific | Earlier Rate of Duty | Current rate of Duty |
| Footwear | 25 | 35 |
| Parts of footwear | 15 | 20 |
| Household Items like tableware; kitchware; water filters etc. | 10 | 20 |
| Household appliances like table fans; ceiling fans etc | 10 | 20 |
| Furniture Goods | 20 | 25 |
| Automobile and automobile parts like Catalytic converter | 10 | 15 |
| Paper industry | 10 | 5 |
For further details please refer the attached document
Source: Ministry of Finance
