Inclusive Budget for Sabka Saath Sabka Vikas Sabka Vishwash€¦ · x Tax burden on employees due to tax on ESOPs to be deferred by five years or till they leave the company or when

UNION BUDGET 2020-21 Nirav Kotecha & Co. Chartered Accountants

FOREWORD

Inclusive Budget for Sabka Saath Sabka Vikas Sabka Vishwash

The Union Budget presented in the Parliament of India on 1st February, 2020 at 11 AM by the Finance

Minister Smt. Nirmala Sitharaman spells the continuing agenda of the successive NDA Government. The

Finance Minister has struck a fine equilibrium between controlling inflation and fiscal imbalances on

the one hand and promoting growth on the other.

The Budget 2020 is woven around three themes i.e. Aspirational India, economic development and

building a caring society for all. In the longest budget speech, FM Sitharaman introduced a series of tax

reforms for individual taxpayers.

The Finance Minister aims to promote sustainable growth through development in the infrastructure,

agriculture, education, and social sector. His emphasis on governance, IT driven automated functions

and efficiency measures should make India an attractive destination for investment.



Particulars

2019-2020 Revised

Estimates

2020-2021

Budget Estimates

2021-2022 Projections

2022-2023 Projections

Fiscal Deficit 3.8 3.5 3.3 3.1

Revenue Deficit 2.4 2.7 2.3 1.9

Primary Deficit 0.7 0.4 0.2 0.0

Gross Tax Revenue 10.6 10.8 10.7 10.7

Non-tax Revenue 1.7 1.7 1.5 1.5

*Figures in bracket shows % of GDP

** It is anticipated that there will be a variation in fiscal deficit of 0.5 per cent of GDP in 2019-20 and 2020-21 to

provide adequate space for countercyclical fiscal measures taken for boosting investments.

Source: Medium Term Fiscal Policy Cum Fiscal Policy Strategy Statement released by Government of India

Fiscal Indicators – Rolling Targets


Union Finance Minister Nirmala Sitharaman on Saturday presented Union Budget for 2020-21, which

proposes to give Indian economy an impetus to emerge as more vibrant and stronger. Finance Minister

made amply clear that India is poised to become 5 Trillion Dollar Economy in the next five years.

The finance minister laid out the Government’s Tri-dimensional Prominent Themes of Budget 2020-

2021. Areas to focus varies from making India 5 Trillion Economy to ensuring digitisation of Government

processes and private transactions.


Resident Definition

The proposed changes in residency rules will significantly impact the taxability of inbound and outbound

population.

An individual is said to Resident of India if he is in India in that previous year for a period or

periods amounting to 120 days or more (Changed from 182 days to 120 days) (Section 6)

New sub-section 1A under Section 6 inserted which provides that Indian Citizen shall be

Deemed to be Resident in India, if he is not liable to tax in any other country or territory by

reason of his domicile or residence or any other criteria of the similar nature.

Conditions For person being “Not Ordinarily Resident” changed to

o An individual who has been non-resident in India in 7 out of 10 previous years

preceding that year

o A HUF whose manager has been a non-resident in India in 7 out of 10 previous years

preceding that year

Charitable Trust

Registration of the Charitable Trust shall be online.

Existing charitable trusts are required to make application to the Principal Commissioner or

Commissioner within 3 months from the date on which this proviso becomes applicable

Approval/exemption shall be granted for maximum period of 5 years.

In case of fresh application, provisional approval will be provided for the period of 3 years

without detailed inquiry.

Post the provisional approval, it has to apply again for approval or registration.

Filling of Statement of donations received by Donee to cross check the claim of deduction by

donor.

Section 43CA, 50C & 56

Deviation of 5% was allowed with respect to the transfer value and stamp value of the of

asset/capital asset. This deviation is increased 10%.

Corporate Tax

Dividend Distribution Tax abolished and dividend will be taxable in the hands of the recipient

Concessional Corporate Tax rate benefit extended to new power generation companies along

with new manufacturing companies.

Start up having turnover up to INR 25 Crores were allowed deduction of 100% of its the profits

for three consecutive assessment years out of seven years if the total turnover does not exceed

INR 25 Crore, however now the turnover limit have increased to INR 100 Crores and period of

eligibility have increased to 10 years instead of 7 years

Direct Tax Proposals


Tax Audit

In order to reduce the compliance burden on small and medium enterprises, threshold limit for

person carrying on business for tax audit increased from 1 Crore to 5 Crore where aggregate

receipts/payments in cash does not exceed 5% of total receipts and payments.

Due date for filing of Income tax return changed to 31st October from 30th September (Section

139) for

o Company,

o A person (other than a company) whose accounts are required to be audited under

this Act or under any other law for the time being in force and

o Working partner of a firm whose accounts are required to be audited under this Act or

under any other law for the time being in force.

It is pertinent to note that the date of furnishing tax audit shall continue to be 30th September.

Simplification & Transparency

Instant online allotment of PAN on the basis of Aadhaar.

Insertion of Taxpayer’s Charter in the Act - 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.

This is introduced to prevent undue harassment to the taxpayers of the country

Taxation of Co-Operative Society

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 which provides for reduced rate of

tax @ 22% subject to non-availment of certain deductions and exemptions.

TDS on Interest under Section 194A to be deducted to Co-Operative Society if

o sales, gross receipts or turnover exceeds 50 Crore during the financial year immediately

preceding the financial year in which interest is paid or deducted and

o amount of interest is more than 50 Thousand in case of Senior Citizen (Age of 60 years

or more) and 40 Thousand in case of others

Set-off Carry Forward of Losses

New provisions have been inserted to provide for carry forward of business losses and

unabsorbed depreciation to amalgamated bank and Amalgamated government company

under the scheme issued by the Government

Deductions

Deduction in respect of certain donations for scientific research or rural development under

Section 80GGA in Cash restricted to INR 2000.

For claiming deduction under section 80-IB, assesse is required to furnish report of audit in the

prescribed form duly signed and verified by accountant, that the deduction is correctly claimed.

New Section 80M is inserted to provide deduction for income by way of dividend by the

domestic company from any other domestic company. Deduction shall not exceed the amount

of dividend distributed by First mentioned domestic company on or before the due date.

International Taxation


Date of furnishing the transfer pricing audit report preponed to 31st October from currently

30th November. Date of filing of ITR for such assesse shall continue to be 30th November.

Under Section 92CB, Scope of Power of Board to make safe harbour rules expanded to include

income referred to in Section 9(1)(i) along with existing scope for Arm’s Length Price

In line with above amendment, Section 92CC also amended to provide for Advance Pricing

Agreement for international transaction which also include transactions to be entered into by

that person. APA scope also widened to include the income referred to in Section 9(1)(i).

Personal Income Tax

The existing tax slabs have been rejigged to make way for a new personal tax regime for

individuals opting to forego prescribed tax deductions and exemptions such HRA, tax-saving

investments under section 80C, the standard deduction for salaried taxpayers, etc.

Section 115BAC introduced to provide an option to individuals or HUFs to pay tax at reduced

slab rates subject to foregoing of certain exemptions / deductions and satisfaction of certain

conditions.

Total Income (INR) Existing Rate

New Regime

Upto 250,000 NIL NIL

250,001 to 5,00,000 5% 5%

500,000 to 750,000 20% 10%

Rs.750,001 to Rs.1000,000 20% 15%

Rs.1000,001 to 1250,000 Lacs 30% 20%

Rs.1250,001 to Rs.1500,000 30% 25%

Above Rs. 15 lacs 30% 30%

Conditions

Provisions of Alternative Minimum Tax to Individual and HUF will not be applicable if Section

115BAC is adopted. The option shall be exercised for every financial year where the individual

or the HUF has no business income and in other cases, the option once exercised shall be valid

for that financial year and all subsequent years.

No deduction/exemption shall be allowed in the new regime rates for HRA, LTC, Children

Tuition Fees, Daily Allowance, SEZ exemption, Section 16 standard deduction of INR 40,000,

Interest on home loan (Section 24(b)), Depreciation (Section 32), Deduction under Section

32AD, 33AB, 33ABA, 35(2AA), 35AD, 35CCC, 57(iia), Chapter VI-A deductions, medical

insurance, deduction for pension under section 80CCD(2), 80JJAA.

No set off of loss or unabsorbed depreciation from earlier years shall be allowed.

Tax burden on employees due to tax on ESOPs to be deferred by five years or till they leave the

company or when they sell, whichever is earliest

In a significant move, amounts contributed by the employer towards NPS, PF and

superannuation fund will be taxable beyond 7.5 lakhs p.a. (Section 17(2)).

Further, to boost start-ups, taxability of ESOPs has been deferred to earlier of 5 years from

exercise or sale or resignation by the employee.

Additional home loan interest deduction of Rs 1.5 lakhs has been extended by one year for first

time home buyers.


Pending Assessments & Appeals

Total 4.83 Lakh assessment cases are pending with various authorities with respect to the

Income Tax. New Scheme is introduced “Vivaad se Vishwash” i.e. “No Dispute But Trust” similar

to Sabka Vishwas Legal Dispute Scheme of Indirect Tax in Direct tax also, which provides for

settlement of income tax demand without any interest or penalty if the payment is made on or

before 31 March 2020.

In case of appeal made to ITAT, for availing the stay on demand raised, stay application shall be

subject to the condition that assesse deposits not less than 20% of the amount of tax, interest,

fees, penalties, or any other sums payable is paid or provides security of the equal amount.

Further, aggregate period of stay shall not exceed 365 days.

Currently Faceless assessment is in place where assessment can be completed without visiting

the Income tax department. Income Tax will also enable this facility for the Appeal at

Commissioner (Appeals) level to eliminate that interface between Commissioner (Appeals) and

taxpayer having dynamic jurisdiction.

TDS & TCS

Section 194 is amended to provide for deduction of TDS on Dividend declared by domestic

companies @ 10%. Threshold limit for the financial year shall be INR 10,000.

Under Section 194J, Rate of TDS shall be 2% for Fees for technical services and 10% for other

cases

Provisions of the TDS sections 194A, 194C, 194H, 194I, 194J, for deduction of TDS is reworded

to provide for “One Crore in case of Business & 50 Lakh in case of profession” instead of “is

liable to audit of accounts under clause (a) or (b) of section 44AB

New Section 194K has been inserted to provide TDS deduction @10% on payment of income

to Resident in respect of specified units (Units of Mutual Fund, Units from Administrator of

Specified Undertaking & Units of Specified Company). Threshold limit for income is INR 5000

during the financial year

Under Section 194C, definition of Work has been widened to include relative and associate of

the assesse for providing the good under the Job Works Contract. Now, in case goods provided

by relative or associate (As per Section 40A(2)(b)of the assesse, TDS will be deducted at the

time of credit or payment.

Under Section 194LBA, rate of TDS on distribution of income from REITs changed from existing

5% for Interest & Dividend both TO 5% for interest & 10% for dividend

Under Section 194LC, TDS on Interest payment to Non-Resident for interest on bonds listed in

stock exchanges in IFSC, rate of deduction shall be 4%. Termination date for concessional rate

of 5% is extended from 1-7-2020 to 1-7-2023.

New Section 194O inserted to provide for TDS deduction on sale of goods or provision of

services of an e-commerce participant is facilitated by e-commerce operator, such e-commerce

operator shall, at the time of credit or payment, deduct the TDS @ 1%.

o No TDS to be deducted if E-Commerce participant is individual or HUF and gross

amount of goods & services does not exceed INR 5 Lakh and PAN is provided by the

participant.

o Provision of this section will not apply if payment is made for the advertisement on the

e-commerce platform and payment is not in connection with the sale of goods or

providing services

In case PAN is not provided, rate of deduction shall be 5%


TCS (Section 206C) –

Every person –

o being authorized dealer who receives an amount or aggregate of an amount of INR 7

lakh or more in financial year for remittance out India from Buyer, being a person

remitting such amount out of India under LRS (Liberalised Remittance Scheme) of RBI

AND

o every person being a seller (whose sales, gross receipts or turnover exceeds INR 10

Crore in the preceding financial year) of an overseas tour program package, who

receives any amount from buyer;

by any mode required to collect TCS @ 5% on the amount receivable at the time of credit

or payment. In case of no PAN/Aadhaar, TCS collection rate shall be 10%.

Also TCS of 0.1% will be levied in case of sale of goods in excess of 50 Lakh in a financial year subject to

certain conditions. In case of no PAN/Aadhaar, TCS collection rate shall be @ 1%.

This provision shall not be applicable if buyer is liable to deduct the tax and has deducted such tax.

Fees & Penalties

New Section 234G is introduced to provide payment of fees of INR 200 per day in case of failure

to furnish statement under Section 80G within prescribed time.

Section 271K inserted which provides that Assessing Officer may direct payment of INR 10,0000

to INR 1 Lakh as penalty on institute under section 35(1) (research association, university,

college or other institution, etc.) for non-delivery of statement or certificate under section 80G

Section 271AAD has been amended to provide for penalty for false entry or omission of entry

which is relevant in computation of income to evade tax liability, for which amount of penalty

shall be sum equal to the aggregate amount of such false or omitted entry.


GST

New GST Return system to roll out from 1 April 2020

Total of 60 lakh new taxpayers and 105 crore e way bills generated under GST

Average household now saves 4 percent of monthly spend due to reduced GST rates

Aadhaar based verification of taxpayers is being introduced to eliminate dummy registrations

Deep data analytics and AI tools are being used for crackdown on GST input tax credit, refund, and other

frauds and to identify all those who are trying to game the system

CGST Amendments

The definition of “Union territory” is being amended to update the definition of “Union territory” to

include U.T. of Ladakh and newly merged U.T. of Dadra and Nagar Haveli and Daman and Diu.

Section 122 is being amended by inserting a new sub-section to make the beneficiary of the transactions

of passing on or availing fraudulent Input Tax Credit liable for penalty similar to the penalty leviable on

the person who commits such specified offences.

Due date for claiming ITC on Debit Note as per Section 16(4) is no more linked to date of its original

invoice, rather date of such debit note is to be referred for claiming ITC.

Section 29(1)(c) is being amended to provide for cancellation of registration which has been obtained

voluntarily under section 25(3).

Proviso to Section 30(1) is being substituted to provide for additional 30 days for filing application for

revocation of cancellation of registration, in deserving cases by Additional Commissioner or Joint

Commissioner and another 30 days by Commissioner.

Section 31 is being amended to provide enabling provision to prescribe the manner of issuance of Tax

invoices in case of services or supplies.

Section 109 is being amended to bring the provision for Appellate Tribunal under the CGST Act in the

Union Territory of Jammu and Kashmir and Ladakh.

IGST Amendment

Section 25 is being amended to make provision for enabling the issuance of removal of difficulties orders

for another 2 years, i.e. till 5 years from the date of commencement of the said Act.

Customs

Introduction of Health Cess on import of Medical devices at the rate of 5%. Payment of such Health

Cess cannot be made through Export Promotion Scrips.

Insertion of new provision for creation of an Electronic Duty Credit Ledger in the custom’s system

Anti-dumping duty rules changed to strengthen the anti-circumvention measures to widen the scope.



PM KUSUM to cover 20 lakh farmers for stand-alone solar pumps and further lakh for grid connected pumps

Viability gap funding for creation of efficient warehouses on PPP mode.

Women SHGs run Village storage scheme to be launched

Kisan Rail” and “Krishi Udaan” to be launched by Indian Railways and Ministry of Civil Aviation respectively for

a seamless national cold supply chain for perishables

Doubling of milk processing capacity by 2025.

Agricultural credit target of INR 15 lakh crore for 2020-21

Deposit Insurance Coverage to increase from INR 1

lakh to INR 5 Lakh per depositor

Eligibility limit for NBFCs for debt recovery under

SARFAESI Act proposed to be reduced to asset size

of INR 100 crore or loan size of INR 50 Lakh.

Proposal to sell balance holding of government in

IDBI Bank, LIC. Etc.

Separation of NPS Trust for government employees

from PFRDAI.

Specified categories of government securities would

be opened for non-resident investors.

FPI Limit for corporate bonds to be increased to 15

per cent.

New debt ETF proposed mainly for government

securities

Agriculture


Extension of invoice financing to MSMEs through TReDs.

A scheme to provide subordinate debt for entrepreneurs of MSMEs.

Scheme anchored by EXIM Bank and SIDBI to handhold MSMEs in exports markets.

NIRVIK Scheme for higher export credit disbursement launched.

Setting up of an Investment Clearance Cell to provide end to end facilitation.

Scheme to encourage manufacturing of mobile phones, electronic equipment and semi-conductor

packaging.

National Technical Textiles Mission for a period of 4 years.

An international bullion exchange to be set up at GIFT City.

National Logistics Policy to be launched

soon.

Accelerated development of Highways.

Four station redevelopment projects

150 passenger trains through PPP mode.

More Tejas type trains for tourist

destinations.

Corporatizing at least one major port.

100 more airports to be developed under

UDAAN.

Knowledge Translation Clusters for emerging

technology sectors

Scaling up of Technology Clusters harbouring test

beds and small scale manufacturing facilities.

National Mission on Quantum Technologies and

applications with an outlay of Rs.8000 crore

proposed

Industry, Commerce and Investment


Degree level online education programmes for students of deprived sections of the society

Ind-SAT to be conducted in Asia and Africa under ‘Study in India’ programme.

About 150 higher educational institutions will start apprenticeship embedded courses.

Internship opportunities to fresh engineers by urban local bodies.

Special bridge courses to improve skill sets of those seeking employment abroad.

“TB Harega Desh Jeetega” campaign launched to end TB by 2025.

Viability gap funding proposed for setting up hospitals in the PPP

mode.

Expansion of Jan Aushadhi Kendra Scheme to all districts by 2024.

ODF Plus to sustain ODF behaviour.

Focus on liquid and grey water management along with waste

management.

Proposal to establish Indian Institute of Heritage and conservation.

5 archaeological sites to be developed as iconic sites.

A museum on Numismatics and Trade to be established.

Tribal museum to be set up in Ranchi, Jharkhand.

Maritime museum to be set up in Lothal, Gujarat

Encouragement to states implementing plans for cleaner air in large cities

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Inclusive Budget for Sabka Saath Sabka Vikas Sabka Vishwash€¦ · x Tax burden on employees due to tax on ESOPs to be deferred by five years or till they leave the company or when