The document summarizes key changes made by the Finance Act 2020 related to residential status for tax purposes in India. It discusses amendments to provisions determining an individual's residential status based on the number of days spent in India, as well as a new provision deeming high-earning Indian citizens to be resident if they are not liable to tax in any other country. It also covers changes to the definition of "not ordinarily resident" and introduces an equalization levy of 2% on e-commerce supply or services by non-resident e-commerce operators.

1. Webinar on
'Changes made by Finance Act, 2020
as notified with Finance Bill, 2020 ‘
DR Raj K. Agarwal CA Baldev Raj

2. Residential status

3. Residential status :An individual is said to be resident in India in any previous year, if he
(c) having within the four years preceding that year been in India for a period or
periods amounting in all to three hundred and sixty-five days or more, is in India for a
period or periods amounting in all to sixty days or more in that year.
up to A.Y 2020-20
Explanation. 1]—In the case of an
individual…..
(a) …………
(b)being a citizen of India, or a person of
Indian origin within the meaning of
Explanation to clause (e) of section 115C,
who, being outside India, comes on a visit
to India in any previous year, the provisions
of sub-clause (c) shall apply in relation to
that year as if for the words "sixty days",
occurring therein, the words "one hundred
and eighty-two days" had been substituted.
w.e.f A.Y 2021-22
(b)being a citizen of India, or a person of
Indian origin within the meaning of
Explanation to clause (e) of section 115C,
who, being outside India, comes on a visit to
India in any previous year, the provisions of
sub-clause (c) shall apply in relation to that
year as if for the words "sixty days",
occurring therein, the words "one hundred
and eighty-two days" had been substituted.
and in case of the citizen or person of Indian
origin having total income, other than the
income from foreign sources, exceeding
fifteen lakh rupees during the previous
year," for the words "sixty days" occurring
therein, the words "one hundred and twenty
days" had been substituted

4. Reasoning :
Instances have come to notice where period of 182 days specified in respect of an
Indian citizen or person of Indian origin visiting India during the year, is being
misused.
Individuals, who are actually carrying out substantial economic activities from
India, manage their period of stay in India, so as to remain a non-resident in
perpetuity and not be required to declare their global income in India.

5. Deemed resident – new sub-section 6(1A)
“(1A) Notwithstanding anything contained in clause (1), an individual, being a
citizen of India, having total income, other than the income from foreign sources,
exceeding fifteen lakh rupees during the previous year shall be deemed to be
resident in India in that previous year, 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 similar
nature;
Purpose :
The issue of stateless persons has been bothering the tax world for quite some
time. It is entirely possible for an individual to arrange his affairs in such a fashion
that he is not liable to tax in any country or jurisdiction during a year. This
arrangement is typically employed by high net worth individuals (HNWI) to avoid
paying taxes to any country/ jurisdiction on income they earn. Tax laws should not
encourage a situation where a person is not liable to tax in any country. The current
rules governing tax residence make it possible for HNWIs and other individuals,
who may be Indian citizen to not to be liable for tax anywhere in the world. Such a
circumstance is certainly not desirable; particularly in the light of current
development in the global tax environment where avenues for double non-taxation
are being systematically closed.

6. "not ordinarily resident"
(6) A person is said to be "not
ordinarily resident" in India in any
previous year if such person is—
(a) an individual who has been a non-
resident in India in nine out of the
ten previous years preceding that
year, or has during the seven
previous years preceding that year
been in India for a period of, or
periods amounting in all to, seven
hundred and twenty-nine days or
less; or
(b) a Hindu undivided family whose
manager has been………….
Additions : w.e.f A.Y 2021-22
(c) a citizen of India, or a person of
Indian origin, having total income,
other than the income from foreign
sources, exceeding fifteen lakh rupees
during the previous year, as referred to
in clause (b) of Explanation 1 to clause
(1), who has been in India for a period
or periods amounting in all to one
hundred and twenty days or more but
less than one hundred and eighty-two
days; or
(d) a citizen of India who is deemed to
be resident in India under clause (1A).

7. Reasoning : when originally Proposed following amendments
who has been non-resident in Seven nine out of the ten previous years preceding that
year
or
has during the seven previous years preceding that year been in India for an overall period
of 729 days or less
This category of persons has been carved out essentially to ensure that a non-
resident is not suddenly faced with the compliance requirement of a resident,
merely because he spends more than specified number of days in India during a
particular year.
The conditions specified in the present law in respect of this carve out have been
the subject matter of disputes, amendments and further disputes.
Further, due to reduction in number of days, as proposed, for visiting Indian citizen
or person of Indian origin, there would be need for relaxation in the conditions.

8. Class of
Individual
Total income
(excluding income
from foreign
sources)
Minimum no. of
days of stay in India
during the relevant
year to be
considered as
‘Resident in India’
Whether liable to pay
tax in any other
country?
Residential Status if
stay in India is less
than no. of days
mentioned in
condition (b)
(a) (b) (c) (d)
Indian citizen
visiting India
(Visit in India)
Not exceeding Rs.
15 lakhs
182 days Yes Non-resident
Not exceeding Rs.
15 lakhs
182 days No Non-resident
Exceeding Rs. 15
lakhs
120 days
(and 365 days in
last 4 years)
Yes Non-resident
Exceeding Rs. 15
lakhs
120 days
(and 365 days in
last 4 years)
No Not Ordinarily
Resident*

9. Class of
Individual
Total income
(excluding income
from foreign
sources)
Minimum no. of
days of stay in
India during the
relevant year to
be considered as
‘Resident in India’
Whether liable to
pay tax in any other
country?
Residential Status if
stay in India is less
than no. of days
mentioned in
condition (b)
(a) (b) (c) (d)
Indian citizen
(does not visit
India during
the year)
Not exceeding Rs.
15 lakhs
- Yes Non-resident
Not exceeding Rs.
15 lakhs
- No Non-resident
Exceeding Rs. 15
lakhs
- Yes Non-resident
Exceeding Rs. 15
lakhs
- No Not Ordinarily
Resident

10. Class of
Individual
Total income
(excluding income
from foreign
sources)
Minimum no. of days
of stay in India
during the relevant
year to be
considered as
‘Resident in India’
Whether liable to pay
tax in any other
country?
Residential Status if
stay in India is less
than no. of days
mentioned in
condition (b)
(a) (b) (c) (d)
Person of Indian
origin visiting
India
Not exceeding Rs. 15
lakhs
182 days
-
Non-resident
Exceeding Rs. 15
lakhs
182 days
(and 365 days in last
4 years)
-
Not Ordinarily
Resident*
Exceeding Rs. 15
lakhs
120 days
(and 365 days in last
4 years)
Yes
Non-resident
Exceeding Rs. 15
lakhs
120 days
(and 365 days in last
4 years)
No
Non-resident

11. Class of
Individual
Total income
(excluding income
from foreign
sources)
Minimum no. of
days of stay in
India during the
relevant year to be
considered as
‘Resident in India’
Whether liable to
pay tax in any other
country?
Residential Status if
stay in India is less
than no. of days
mentioned in
condition (b)
(a) (b) (c) (d)
Indian citizen
going outside
India as a crew
member or for
employment
Not exceeding Rs.
15 lakhs
182 days Yes Non-resident
Not exceeding Rs.
15 lakhs
182 days No Non-resident
Exceeding Rs. 15
lakhs
182 days Yes Non-resident
Exceeding Rs. 15
lakhs
182 days No Not Ordinarily
Resident*

13. (ca) "e-commerce operator" means a
non-resident who owns, operates or
manages digital or electronic facility or
platform for online sale of goods or
online provision of services or both
165A. (1) On and from the 1st day of April, 2020,
there shall be charged an equalisation levy at the
rate of two per cent. of the amount of
consideration received or receivable by an e-
commerce operator from e-commerce supply or
services made or provided or facilitated by it—
(i) to a person resident in India; or
(ii) to a non-resident :
sale of advertisement, which targets a customer,
who is resident in India or a customer who
accesses the advertisement though internet
protocol address located in India; and
sale of data, collected from a person who is
resident in India or from a person who uses
internet protocol address located in India
(iii) to a person who buys such goods or services or
both using internet protocol address located in
India.
(cb) "e-commerce supply or services"
means—
(i) online sale of goods owned by the e-
commerce operator;
(ii) online provision of services provided
by the e-commerce operator; or
(iii) online sale of goods or provision of
services or both, facilitated by the e-
commerce operator; or
(iv) any combination of activities listed
in clause (i), (ii) or clause (iii)

14. Not covered :
165A (2) The equalisation levy under sub-section (1) shall not be
charged—
(i) where the e-commerce operator making or providing or facilitating
e-commerce supply or services has a permanent establishment in India
and such e-commerce supply or services is effectively connected with
such permanent establishment;
(ii) where the equalisation levy is leviable under section 165; or
(iii) sales, turnover or gross receipts, as the case may be, of the e-
commerce operator from the e-commerce supply or services made or
provided or facilitated as referred to in sub-section (1) is less than two
crore rupees during the previous year.

15. e-commerce operator
RESIDENT : TDS
194-O. (1) Notwithstanding anything to the contrary
contained in any of the provisions of Part B of this
Chapter, where sale of goods or provision of services of
an e-commerce participant is facilitated by an e-
commerce operator through its digital or electronic
facility or platform (by whatever name called), such e-
commerce operator shall, at the time of credit of
amount of sale or services or both to the account of
an e-commerce participant or at the time of payment
thereof to such e-commerce participant by any mode,
whichever is earlier, deduct income-tax at the rate of
one per cent. of the gross amount of such sales or
services or both.
2) No deduction ……………credited or paid during the
previous year to ……….individual or Hindu undivided
family where the gross amount …….not exceed five
lakh rupees and ………….e-commerce participant has
furnished his Permanent Account Number or Aadhaar
number to the e-commerce operator
NON –resident :Equalization levy
165A.
(1) On and from the 1st day of April, 2020, there
shall be charged an equalisation levy at the rate of
two per cent. of the amount of consideration
received or receivable by an e-commerce operator
from e-commerce supply or services made or
provided or facilitated by it—
(2) The equalisation levy under sub-section (1) shall
not be charged—
(i) where the e-commerce operator………has a
permanent establishment in India and ……supply or
services is effectively connected with such
permanent establishment;
(ii) where the equalisation levy is leviable under
section 165; or
(iii) sales, turnover or gross receipts, as the case
may be, of the e-commerce operator from the e-
commerce supply or services made or provided or
facilitated as referred to in sub-section (1) is less
than two crore rupees during the previous year

16. Section 10(50) : Exempt income
Any income arising from any specified service provided on or after the
date on which the provisions of Chapter VIII of the Finance Act, 2016
comes into force or arising from any e-commerce supply or services
made or provided or facilitated on or after the 1st day of April, 2021
and chargeable to equalisation levy under that Chapter.
Explanation.—For the purposes of this clause, "specified service" shall
have the meaning assigned to it in clause (i) of section 164 of Chapter
VIII of the Finance Act, 2016.

17. Collection and recovery of equalisation levy on e- commerce
supply or services.

18. Others provision….
Consequences of late payment : Simple interest at the rate of 1% p.m. .
Penalty : equalisation levy payable
Not deducting the equalisation levy,
Deducting but not depositing the levy with in the due dates.
Statement of equalisation levy : Due date : 30th June of the F.Y immediately
following F.Y
Manner of furnishing, Belated or Revised Statement etc
Other provisions relating to processing of statement, appeal, prosecution, etc. are
same both in respect of equalisation levy payable under Section 165 or 165A.

19. TDS AND TCS

20. Scope of 194N expanded
up to 30.06.2020
194N : Every person, being
(i) a banking company to which the Banking
Regulation Act, 1949(10 of 1949) applies (including
any bank or banking insituation to in section 51 of
the Act;
(ii) a co-operative society engaged in carrying on
the business of banking ; or
(iii) a post office,
who is responsible for paying any sum, being the
amount or the aggregate of amounts, as the case
may be, in cash exceeding one crore rupees
during the previous year, to any person (herein
referred to as the recipient) from one or more
accounts maintained by the recipient with it shall,
at the time of payment of such sum, deduct an
amount equal to two per cent. of such sum, as
income-tax:
w.e.f 01.07.2020 : also Includes
Provided that in case of a recepient who has not filed the
returns of income for all of the three assessment years
relevant to the three previous years, for which the time
limit of file return of income under sub-section (1) of
section 139 has expired, immediately preceding the
previous year in which the payment of the sum is made to
him, the provision of this section shall apply with the
modification that—
(i) the sum shall be the amount or the aggregate of
amounts, as the case may be, in cash exceeding twenty
lakh rupees during the previous year; and
(ii) the deduction shall be—
(a) an amount equal to two per cent. of the sum where
the amount or aggregate of amounts, as the case may be,
being paid in cash exceeds twenty lakh rupees during the
previous year but does not exceed one crore rupees; or
(b) an amount equal to five per cent. of the sum where
the amount or aggregate of amounts, as the case may be,
being paid in cash exceeds one crore rupees during the
previous year

21. Case study :
Assessee not filed return of Income for three years and fall under proviso :
Cash withdrawal up to 30th June = 85 lakh
Cash withdrawal on 01.07.2020 = 20 lakh
How much TDS to be deducted on withdrawal on 01.07.2020 =
a) On Rs 15 Lakh @ 2% and on Rs 5 lakh @ 5% = TDS Rs 55 thousand ?
b) On Rs 100 Lakh @ 2% and on Rs 5 lakh @ 5% = TDS Rs 2.25 lakh ?

22. TDS ….some ….. Changes
Section 194J : ( TDS fees for profession on technical services )
Two per cent. of such sum in case of :
A) Fees for technical services (not being a professional services, or
B) Royalty where such royalty is in the nature of consideration for sale,
distribution or exhibition of cinematographic films and ten per cent. of
such sum in other cases
Section : 194K – ( TDS on dividend on units of mutual fund )
Provided that the provisions of this section shall not apply—
(i) where the amount of such income or, as the case may be, the aggregate of
the amounts of such income credited or paid or likely to be credited or paid
during the financial year by the person responsible for making the payment
to the account of, or to, the payee does not exceed five thousand rupees; or
(ii) if the income is of the nature of capital gains

23. TDS ….some ….. Changes
Rate of TDS on Dividend distributed to Non -resident of Foreign
Company
Part-II of First Schedule is amended
Provide 20% rate of TDS from dividend income distributed to a foreign
company, non-resident Indian or other non-resident person.

24. TCS : Remove certain ambiguities
‘206C (1G) Every person,––
a) being an authorised dealer, who receives an amount, or an aggregate
of amounts, of seven lakh rupees or more in a financial year for
remittance out of India from a buyer, being a person remitting such
amount out of India under the Liberalised Remittance Scheme of the
Reserve Bank of India;
(b) being a seller of an overseas tour programme package, who receives
any amount from a buyer, being the person who purchases such
package,
shall, at the time of debiting the amount payable by the buyer or at the
time of receipt of such amount from the said buyer, by any mode,
whichever is earlier, collect from the buyer, a sum equal to five per
cent. of such amount as income-tax:

25. changes made ……
Provided that the authorised dealer shall not collect the sum, if the amount or
aggregate of the amounts being remitted by a buyer is less than seven lakh rupees in
a financial year and is for a purpose other than purchase of overseas tour
programme package:
Provided further that the sum to be collected by an authorised dealer from the
buyer shall be equal to five per cent. of the amount or aggregate of the amounts in
excess of seven lakh rupees remitted by the buyer in a financial year, where the
amount being remitted is for a purpose other than purchase of overseas tour
programme package:
Provided also that the authorised dealer shall collect a sum equal to one half per
cent. of the amount or aggregate of the amounts in excess of seven lakh rupees
remitted by the buyer in a financial year, if the amount being remitted out is a loan
obtained from any financial institution as defined in section 80E, for the purpose of
pursuing any education:
Provided also that the authorised dealer shall not collect the sum on an amount in
respect of which the sum has been collected by the seller

26. Case study : what is rate of TCS ?
1. Mr A required to remit US$ 9,000 for medical treatment of his father in USA.( Covered
under LRS scheme ) . Rate of TCS be collected by AD ?
2. Mr Y required to remit US$ 20,000 for medical treatment of his father in USA (
Covered under LRS scheme ) . Rate of TCS to be collected by AD ?
3. Mr A required to remit US$ 5,000 to his son for his study in UK : a) when Mr A has
taken loan from Indian Bank equallant to US $ 3500 b) when loan taken equal ant to
USD 5000 c) when no loan taken ( Covered under LRS scheme ) . Rate of TCS to be
collected by AD ?
4. Mr Y required to remit US$ 15,000 to his son for his study in UK : a) when Mr Y has
taken loan from Indian Bank equallant to US $ 10000 b) when loan taken equal ant to
USD 15000 c) when no loan taken. Rate of TCS to be collected by AD ?
5. Mr A booked overseas tour programme package with M/S Zom Inc ,Singapore and to
remit US$ 5,000 . Rate of TCS to be collected by AD ?
6. Mr A booked overseas tour programme package with M/S ABC travels Indian travel
company and to them INR of Rs 375000 ( US$ 5,000*75). Rate of TCS to be collected
by M/S ABC travels Indian ?
7. M/s ABC Travels remitting US$ 5,000 for overseas tour programme package taken by
Mr A to M/S Zom Inc ,Singapore. Rate of TCS to be collected by AD ?

27. Other changes

28. SCOPE OF 80M DEDUCTION: EXPANDED
80M. (1) 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
or a foreign company or a business trust, there shall, in accordance with and
subject to the provisions of this section, be allowed in computing the total income
of such domestic company, a deduction of an amount equal to so much of the
amount of income by way of dividends received from such other domestic
company or foreign company or business trust as does not exceed the amount of
dividend distributed by it on or before the due date.
(2) Where any deduction, in respect of the amount of dividend distributed by the
domestic company, has been allowed under sub-section (1) in any previous year,
no deduction shall be allowed in respect of such amount in any other previous
year.
Explanation.––For the purposes of this section, the expression “due date” means
the date one month prior to the date for furnishing the return of income under
sub-section (1) of section 139.’.

29. Dividend on or after 01-04-2020 not taxable
- DDT already paid by company
Original Proposal
in section 10(34) and 10(35)
“Provided further that nothing
contained in this clause shall apply
to any income by way of dividend
received on or after the 1st day of
April, 2020
in Act
section 10(34) and 10(35
“Provided further that nothing
contained in this clause shall apply
to any income by way of dividend
received on or after the 1st day of
April, 2020 other than the
dividend on which tax under
section 115-O and section
115BBDA, wherever applicable,
has been paid

30. Amendments in section 10(23c) to remove conflicting provisions
Corpus donations received will be exempt from tax
Inserted Explanation to the Third Proviso to Section 10(23C) :
corpus donations shall not form part of the income of such institutions.
Corpus donation not to be considered as an application of Income
A similar provision is contained in the Twelfth Proviso to Section 10(23C) that
any contribution with a specific direction to the trust or institution registered
shall form part of the corpus of recipient trust, and it shall not be treated as
application of income for the donor.
Amendment, corpus donation given by a Section 12AA registered institution
to section 10(23C) approved institution will not be treated as an application
of income.

31. Professional also have opportunity for concessional Tax regime of
Section 115BAC
(5) Nothing contained in this section shall apply unless option is exercised in the prescribed
manner by the person,—
(i) having income from business or profession, on or before the due date specified under
sub-section (1) of section 139 for furnishing the returns of income for any previous year
relevant to the assessment year commencing on or after the 1st day of April, 2021, and
such option once exercised shall apply to subsequent assessment years;
(ii) having income other than the income referred to in clause (i), alongwith the return of
income to be furnished under sub-section (1) of section 139 for a previous year relevant to
the assessment year:
Provided that the option under clause (i), once exercised for any previous year can be
withdrawn only once for a previous year other than the year in which it was exercised and
thereafter, the person shall never be eligible to exercise option under this section, except
where such person ceases to have any income from business or profession in which case,
option under clause (ii) shall be available.

32. UNIT-HOLDERS OF BUSINESS TRUST SHALL BE EXEMPT FROM PAYING TAX ON
DIVIDEND IF SPV OPTS FOR SECTION 115BAA
Particulars SPV opts for
section 115BAA
SPV does not opt
for section
115BAA
Comments
Is SPV liable to pay DDT on
dividend distributed to
business trust?
No No DDT has been abolished by the Finance Bill,
2020. Thus, SPV shall not be required to pay
DDT on distribution of dividend to business
trust*.
Is business trust liable to pay
tax on dividend received or
receivable from SPV?
No No
Dividend received from SPV by the business
trust shall be exempt from tax under section
10(23FC).
Is unit-holder liable to pay tax
on dividend received from a
business trust?
No Yes
The Finance Bill, 2020 (as passed by the Lok
Sabha) provides an exemption under section
10(23FD) to unit-holders only if SPV opts for
section 115BAA. The dividend shall be
taxable in the hands of the unit holder if SPV
does not opt for section 115BAA.

33. (23FD) any distributed income, referred to in section 115UA,
received by a unit holder from the business trust, not being that
proportion of the income which is of the same nature as the income
referred in sub-clause (a) of clause (23FC) or sub-clause (b) of said
clause (in a case where the special purpose vehicle has exercised
the option under section 115BAA)" or clause (23FCA)];
10(23FC)any income of a business trust by way of—
(a)interest received or receivable from a special purpose vehicle; or
(b)dividend referred to in sub-section (7) of section 115-O.]
Explanation.—For the purposes of this clause, the expression "special purpose vehicle"
means an Indian company in which the business trust holds controlling interest and any
specific percentage of shareholding or interest, as may be required by the regulations
under which such trust is granted registration;]

34. Questions ?