Budget2020

BUDGET
2020
GLIMPSE
JOSHI APTE & CO., CHARTERED ACCOUNTANTS

Optional New Slab rates and its conditions
 New Section has been proposed , where Individual and HUF can have option to compute and discharge the tax at
the following slab rates :
 Important point to note is that the surcharge and cess will be applicable as they are applicable for AY 20-21, so no
change in surcharge and cess
 However to avail this option, Individual and HUF will have to forgo the deductions provided in Sub sec(2), those are
Sr.No. Total Income Rate of tax
1. Up to Rs.2,50,000 Nil
2. 2,50,001- 5,00,000 5 %
3. 5,00,001-7,50,000 10%
4. 7,50,001-10,00,000 15%
5. 10,00,001- 12,50,000 20%
6. 12,50,001- 15,00,000 25%
7. Above Rs.15,00,000 30%

…….. Continued
a. House Rent Allowance – exemption u/s 10(13A) b . Specified / prescribedAllowances u/s 10(14)
b. Standard deduction, Profession tax – Sec. 16 c . Interest paid on house property - Sec. 24
c. Depreciation d. Deductions under ChapterVI-A like 80C, 80D, 80G etc
except (80CCD i.e. Deduction is relation NPS can only be claimed)
Above mostly common deductions are provided, there are yet few deductions mentioned in the sections but
rarely used therefore not covered here.
 He cant claim the set off of carried forward losses of earlier years including for Income from House property
 No exemption and deduction should be claimed for allowances and perquisite
 This option has to be exercised while filing the return and it can be withdrawn only once for a previous year
other than the year in which it was exercised . Ultimately its matter of weighing Option I vs New Option and
then to decide or select the slab rates.
 However, in case of Individual or HUF carrying on the business, if this option is exercised at the time of filing
tax return, it can’t be withdrawn like above.

Residential Status –Amendment
Number of days Stay in India
 In Section 6 (1) Clause (a) : An Individual is said to be resident –If he is in India in than year for period or periods
amounting in all to one hundred and twenty days or more.
 Before this amendment it is one hundred and eighty-two days or more, so now to become Non Resident Individual
will have to stay 62 days more outside India.
 This Amendment will increase the number of Residents under Income Tax Act.
 Appropriately in Explanation 1 clause (b) also the word one hundred and Twenty days will be substituted
Deemed Resident –Addition to Section 6 (1)
 Individual citizen of India, shall be deemed to be resident if he is not liable to tax in any other country or territory
on the basis of his domicile ,residence or any other similar criteria.
 This provision has created deeming fiction of residential status on the basis of citizenship and his taxability in other
countries
 Every Citizen of India residing outside India will have to consider this clause and its applicability in his case

Residential Status –Amendment
Resident but not Ordinarily resident- Amendment
 In case of Individual if he is non resident in Seven out of the ten preceding to the previous year
 In case of HUF , if Karta is non resident in Seven out of the ten preceding to the previous year
 Now from this section “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” has been removed.

Dividend Income received from Company and Mutual Funds
Sec. 10(34) – Dividends from companies and Sec. 10(35) – Dividends from Mutual Funds –
 Proposal to insert the clause stating that “nothing contained in the above mentioned sections shall apply to any
income received specified in these sections on or after 1st April 2020”
 In short , now the dividends received from the Companies and Mutual funds is taxable in the hands of all the
assesses.
 Special tax rate of 10% specified in Sec. 115BBDA for dividends from companies will not applicable after 1st April
2020, therefore it will be taxable as per the rates applicable to each assesses.
 However, Sec. 115O has been abolished after 1st April 2020, therefore now companies declaring dividend will not
require to pay dividend distribution tax
 Similarly Sec. 115R has been abolished after 1st April 2020, therefore , fund house declaring the dividend will not
require to pay dividend distribution tax
 SoYou May Expect the Increase in Dividend Distribution from Companies and Mutual Funds, however there will be
outflow of tax based on the applicable tax rate to each assessee.

Dividend Income received by and from domestic Company
Section 80M has been inserted to avoid double taxation
 If domestic company received the dividend from other domestic dividend then actually it is taxable in its hands ,
how ever, it can claim deduction :
 If it further declares the dividend to its shareholder before due date [ Due date : One month prior to the date of
furnishing the return of income under Sec. 139(1).
 Deduction will be restricted to the amount of dividend received and dividend declared whichever is lower.
 This provision will avoid the double taxation.
 Being the deduction is available for the dividend declared even after the end of previousYear , specific clause has
been added that the amount for which deduction is claimed cant be considered for any other previous year . I.e.
Double deduction is not allowed
 This deduction is available only for dividends declared by domestic companies, so it is not applicable for Dividends
received from MUTUAL FUNDS.

Dividend Income and deduction of expenses
Dividend Income for assesses is taxable under the head “Other Income”
 We can imagine the litigation of Sec.14A and Rule 8D in relation to dividend income being exempt earlier
 You may think that it came to end, however possibility of new litigation because of following proposed
amendment :
 Provided that no deduction shall be allowed from the dividend income or income in respect of units from
…………… other than deduction on account of interest expense , and it shall not exceed 20% of dividend income.
 Now, in earlier years company may submitted that these are our expenses against dividend income to avoid Rule
8D.
 So whether during the assessments these expense will be once again dis allowed u/s 57 even though dividend is
taxable.

Full value consideration for land and building – Sec. 43A and
50C
In case of Sec. 43A and Sec.50C the full value consideration will be calculated considering the proposed
amendment :
 If the stamp duty value of land or building does not exceed 110% of actual consideration received or receivable
then actual consideration will be deemed to be the full value of the consideration.
 It is proposed amendment for Sec. 43Ca (Profits and Gains of business) , 50C (Capital Gain)
 With this proposal the tolerance limit between consideration and fair market increased.
 Amendment to Section 55 has also been proposed for the fair value of land or building or both
 In case of land or building or both , if its date of acquisition is before 1st April 2001, then right now there is option to
replace the fair market value as on 1st April 2001 as cost being indexation base year.
 However, now, the fair market value of land or building or both shall not exceed the stamp duty value, wherever
available.

Other Amendments : Proposals and its brief gist
 Section 115A has been amended to cover all dividends being Section 115O abolished, therefore now dividends
declared and received by non resident will be under the preview of Sec.115A.
 Similarly the Section 115AC [Non-Resident -GDR] , 115ACA [Resident employee] and 115AD [FII] have been
amended to cover the dividend declared by companies. And accordingly the word “other than dividend referred to in
Section 115-O” substituted by “dividend”
 Section 115BAA and Section 115BAB has been amended to exclude Section 80M , so that companies availing tax rate
under this section can claim deduction u/s 80M.
 In case of Section 115BAB (New company established after 01st October 2019) the explanation has been inserted to
clarify that the “Business of manufacture or production of any article or thing” shall include the business of
generation of electricity

 Section 44AB: In case of business, turnover limit for audit has been increased from Rs one crore to five crore ,
however limit is applicable only if Aggregate of all amount received including received for sales or gross receipts during
previous year in cash does not exceed 5% of the said amount and aggregate of all amount paid including amount
incurred for purchases in cash during previous year does not exceed 5% of the said amount .Therefore , if either cash
sale or cash expenses during the year are in excess of 5% of total sale or expenses then audit is applicable.
 Sec.44AB: Specified date is provided in explanation as due date of filing return u/s 139(1), however now it is re defined
as one month prior to the due date of filing return.
 Sec. 139(1) has been amended and the due date for filing returns of the assesses, who’s accounts are required to be
audited under this Act is 31st October. Therefore , now theTax audit report has to be filed on or before 30th September
and return of the assesses can be filed on or before 31st October .
 Sec 140: In case of company where managing director is not appointed or not available due to unavoidable reason
then any director of the company is authorized to sign, now company can designate any other person for signing the
return.
 Sec.92F: Specified Date Specified date is provided in explanation as due date of filing return u/s 139(1) (30th November),
however now it is re defined as one month prior to the due date of filing return.

 Section 194: It is amended to cover with-holding of tax on dividend declared by companies which is now taxable in
the ands of shareholder, so company will have to deduct tax at 10% on dividend amount paid in excess of five
thousand rupees.
 Sec.194A, 194C, 194J , 194I, 14H :These sections will be applicable in case of Individual or HUF where gross receipts and
turnover is in excess of Rs. 1 crore for business and Rs. 50 Lakhs for profession. i.e Applicability these with holding
sections is segregated from applicability of tax audit.
 Section 194J : Rate for tax with holding in case of fees for technical services (not being professional services) will be
two percent and in other all cases 10%
 Sec 194K: Tax at 10% will be withhold on dividends paid on units of mutual fund . It will be applicable only in cases
where dividend paid is in excess of five thousand rupees.

 Section 194LC:Tax with holding rate has been reduced from 5% to 4% under his section . And Applicability of this section
extended till any loan agreement entered on or before 2023.
 Sec.195 has been amended to cover withholding of tax on dividends declared by companies being taxable in the hands of
shareholder.
 Sec.194-O: New section has been inserted where e-commerce operate (platform provider) will have to deduct the tax at 1%
of gross sale of goods or services at the time of crediting the sales to the account of e-commerce participants (vendor/
supplier). It will not be applicable in case where service provider is Individual or HUF and total sales does not exceeds five lakhs
rupees and he has furnished PAN or Aadhaar
 Tax Collection at Source: Sec.206C: Now Authorized dealer will have to doTCS if any buyer is remitting an amount above
Rs.7.00 lacs outside Indian under Liberalized Remittance Scheme.TCS will be done at 5 %
 Seller of an overseas tour program package will have to doTCS in case of all buyers booking the tour. In both these cases TCS
should be at 5%
 And in case of Sale of any goods above worth Rs.50 Lakhs to any buyer will attractTCS at 0.1% of sale consideration only if
PAN is not provided then it will be at 5%. .The term seller has been defined means a person whose total sales, gross receipts or
turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the
financial year in which the sale of goods is carried out, not being a person as the Central Government may, by notification in
the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein

 Sec. 72AA has been revamped to cover the amalgamation of banking business or Insurance business as a part of
Scheme framed by Central government, then in that cases carry forward of unabsorbed losses and depreciation will be
allowed . Its step towards consolidation of banking business
 Deduction of Interest on affordable house property u/s 80EEA was earlier restricted to loans sanctioned till March
2020, now it through this proposal it increased to March 2021. It means deduction under this section made available to
new buyers in next financial year.
 80GGA – Deduction in respect of donations for Scientific research and rural development – Limit for deduction under
this section is reduced to Rs.2,500 if its paid other than cash. And it will be allowed only if it is reflected and available for
verification in accordance with the risk management strategy formulated by the Board
 In case of Start up Companies-Three years deduction can be claimed out of ten assessment years earlier it as seven
years . And eligibility criteria of Start up is increased from Rs. 25 crore to 100 crore, so now the company with
turnover more than Rs.25 crore but less than Rs.100 crore can claim the deduction.

 Sec. 90 has been amended to provide that the double taxation agreement entered into by the central government
should be without creating opportunities for non-taxation, reduced taxation through tax evasion or avoidance through
treaty –shopping. Similarly section 90A has also been amended.
 Section 92CB :The income derived from business connection in India or through property in India or through asset or
source of Income in India or through transfer of capital asset [Refer Sec.9 (1) Clause (i) ] in India SHALL be Subject to
Safe harbor rules.
 Section 92CC amended to align with Section 92CB , so now the Board with the approval of Central government may
enter into advance pricing agreement for income covered in Sec.9 (1) Clause (i). Accordingly the sub section(1) (2) and
(3) along with sub section (9A) has been re worded and accordingly substituted.
 In relation to Section 94B – Limitation on interest deduction (Similar to thin capitalization) : Proposal is to clarify
that this section will not be applicable in respect of interest paid on debt issued by lender which is permanent
establishment in India of non-resident, being person engaged in banking business . [ e.g. branch of foreign bank ]

Major other amendments in brief
 Every trust and institution will have to make applicationfor registrationfor exemption and to provide deduction for donation u/s 80G .
In addition , trust will have to set mechanism for verification as per the risk management strategy framed by the board.
 Explanation 3A has been added to Sec. 9(1)clause (i) to clarify the nature of business will be covered under Significanteconomic
presence.
 Amendment in definition ofWork under section 194C
• The definition of work, includes the activity of manufacturing or supplying a product, according to the requirement or
specification of a customer, by using material purchased from such customer commonly known as “contract Manufacturing”.
However, cases where the material is purchased from any person other than the customer are currently excluded from the
purview of these provisions.
 Vivad seVishwas Scheme (Dispute resolution scheme)
• It is proposed to bring a scheme for settling existing direct tax litigation. Under the scheme, it is proposed that taxpayers
would be required to pay the amount of the disputed taxes only. Further, there will be complete waiver of interest and
penalty where payment of disputed taxes is made by 31 March 2020.
• In case where the dispute relates to penalty, or interest or fee not connected with the disputed tax, taxpayers would be
required to pay only 25% of the same by 31 March 2020 for settling the dispute.
• In case payment is made after 31 March 2020, taxpayer will be required to pay 110% of the disputed tax (the excess 10% shall
be limited to the amount of related penalty and interest, if any) and 30% in case of penalty, interest and fee. The scheme will
remain open till 30 June 2020.
• There is no amendment in this respect in the Finance Bill. Detailed guidelines and provisions would be announced later.

THANK YOU!
This document is intended for private circulation & knowledge sharing purpose only. All efforts
have been made to ensure the accuracy of information in this document, however we will not be
responsible for any errors that may have crept in inadvertently and do not accept any liability
whatsoever, for any direct or consequential loss howsoever arising from any use of this
document.

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