Income Tax Amendments

The Finance Bill, 2020 has received the assent of the President. Finance Act, 2020 amended various provisions of the Income-tax Act, 1961 which are
related to salaries, capital gain tax, deductions etc. Below are some of the important amendments

Amendments Finance Act, 2020

1. New Tax Scheme Section 115BAC– New Income Tax Scheme with Lower Tax Slabs without deductions and exemptions. Individual & HUF shall have option to pay at previous year rates with deductions and exemptions or as per this section without deductions and exemptions. (Applicable from AY 2021-22)
2. Employer contribution to NPS/PF/Superannuation to be taxable in hands of the employee if it exceeds 7.5 lacs per annum. (Applicable from AY 2021-22)
3. Residential Status – Change in Section 6 – Number of days of Stay in India for Citizens or person of Indian Origin reduced to 120 from 182 days , having total Income of More than INR 15 lacs in a Financial Year (Applicable from AY 2021-22)
4. Scope of Safe Harbour Rules and Advance Pricing Agreement to be extended to attribution of Income of Permanent Establishment. (Applicable from AY 2020-21)
5. Relaxation of Return Filling for Non Residents – Section 115A Non Residents having Total Income comprising of Royalty or Fee for Technical Service on the nature specified in section 115A (1) (b) of the Income Tax Act, 1961 and TDS on such Income has been deducted under provisions of Chapter XVII – B, shall not be required to file its Return of Income under section 139(1). (Applicable from AY 2020-21)
6. Thin Capitalization – Section 94B Provision for Interest Limitation would not apply to interest paid in respect of debt issued by a lender which is a Permanent Establishment of a Non Resident, being a person engaged in the business of banking, in India. (Applicable from AY 2021-22)
7. Abolishment of Dividend Distribution Tax. Dividend to be taxed in the hands of the Recipient as part of their Total Income. Tax to be withheld under section 194K of the Income Tax Act for Resident Payee, where the amount of Dividend exceeds INR 5,000/-. In case of Non Resident Payee tax to be withheld under section 195 of the Act at the rate of 20%. (Applicable on Dividend declared and distributed on or after 1-4-2020)

8. Capital Gains
   a. Safe harbour provision of 5% as prescribed in the present provisions of section 43CA, 50C and 56 of the Act increased to 10% (Applicable from AY 2021-22)
   b. Section 55 is proposed to be amended to provide that in case of land or building or both, the FMV as on 01-04-2001 would not exceed stamp duty value as on 01-04-2001 (Applicable from AY 2021-22)
9. Tax Audit Limit Increased to INR 5 crore in case of person, whose aggregate cash receipt & cash payments do no exceeds 5% of the aggregate of all receipts and payments, respectively. (Applicable from AY 2020-21)
10. Resident Co‐operatives societies shall have option to pay tax @22% subject to conditions. (Applicable from AY 2021-22)
11. Provisions relating to Alternate Minimum Tax (AMT) shall not apply to co‐operative society. (Applicable from AY 2021-22)
12. Deduction under section 80IAC shall be available to three consecutive assessment years out of ten years beginning from year of Incorporation (Earlier Seven Year) limited to 100 crores. (Applicable from AY 2021-22)
13. Deferment in Taxability of Perquisites of ESOP’s in Eligible Start Up’s. (Applicable from AY 2020-21)
14. Due date of filing of return u/s 139(1) is proposed to be changed to 31st October of the assessment year as against 30th September. Tax Audit to be filled one month prior to date of Return Filling. (Applicable from AY 2020-21)
15. Tax Deduction at source
    a. TDS on technical services (other than Professional Services) to be charged @2% as compared to 10%. (Will take effect on 1-4-2020)
    b. Interest paid by a co‐operative society to its member or any other co‐operative society whose total sales exceed INR 50 Cr. during previous FY and amount of interest exceed INR 50,000/ is liable to deduct TDS. (Will take effect on 1-4-2020)
    c. TDS to be deducted @1 % by E‐commerce operator on any sum paid or credited to E‐commerce subject to conditions (Will take effect on 1-4-2020)
    d. TDS of 4% on the interest payable to a non‐resident, issue of long‐term bond or RDB, on or after 1-4-2020 but before 1-7-2023.
    e. Insertion of section 194K for TDS of 10% on any income paid in respect of mutual funds specified u/s 10(23D). (Will take effect on 1-4-2020)
    f. TCS on the on foreign remittance through Liberalized Remittance Scheme (LRS) @ 5% (Will take effect on 1-10-2020)
    g. TCS on selling of overseas tour package @ 5%. (Will take effect on 1-10-2020) h. TCS on Sale of Goods @ 0.1%. (Will take effect on 1-10-2020)
    

Disclaimer: The above Highlights has been prepared for clients and firm’s personnel view. It is general information and does not express view or opinion of Singhi Chugh & Kumar (“SCK”). It is meant for general guidance and no responsibility for loss arising to any person on the basis of the above information would be accepted by SCK. It is recommended that the professional advice be sought based on the specific facts and circumstances