Important Highlights & Tax Proposals of Finance Budget 2020-21

Taxation

Important Highlights & Tax Proposals of Finance Budget 2020-21

The Finance Minister, Nirmala Sitharaman presented his second Union budget 2020 in Parliament today i.e. 01-02-2020. Following are important proposals made therein:-

Direct Taxes Proposals

  • Income tax slab rate for individual & HUF are proposed to be changed for FY 2020-21 but this new slab is optional for taxpayer, taxpayer may choose to pay tax at old slab rate. If tax payer want to opt for this new slab rate then he has to forego various deduction and exemption like deduction u/s 80C, standard deduction, NPS deduction u/s 80CCD(1b). he may continue to avail exemption of allowance given under section 10(14) like conveyance allowance etc. New slab rate is given below:-
  • Income Level OLD Slab New Slab
    Upto 2.5 Lakh NIL NIL
    2.5 Lakh to 5 lakh 5% 5%
    5 Lakh to 7.5 Lakh 20% 10%
    7.5 Lakh to 10 Lakh 20% 15%
    10 Lakh to 12.5 Lakh 30% 20%
    12.5 Lakh to 15 Lakh 30% 25%
    above Rs. 15 Lakh 30% 30%

 

  • As per provision of sec 115BAC , Assessee has the option to choose any from above slab rate and the option shall be exercised for every previous year where assessee has no business income, In other cases option once exercised shall be valid for current & subsequent previous years.
  • If option given under 115BAC is exercised then following deduction & exemption shall not be available to the taxpayers:-

Leave travel concession as contained in clause (5) of section 10;

House rent allowance as contained in clause (13A) of section 10;

Some of the allowance as contained in clause (14) of section 10;

Allowances to MPs/MLAs as contained in clause (17) of section 10;

Allowance for income of minor as contained in clause (32) of section 10;

Exemption for SEZ unit contained in section 10AA;

Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;

Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);

Additional deprecation 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;

Deduction under section 35AD or section 35CCC;

Deduction from family pension under clause (iia) of section 57;

Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, 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.

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 to in (a) above; or under the head house property with any other head of income; is not allowed.

As many allowances have  been  provided  through  notification  of  rules,  it  is  proposed  to  carry  out  amendment  of  the Income-tax Rules, 1962 (the Rules) subsequently, so as to allow only following allowances notified under section 10(14) of the Act to the Individual or HUF exercising option under the proposed section:

Transport Allowance granted to a divyang employee to meet expenditure for the purpose of commuting between place of residence and place of duty

Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;

Any Allowance granted to meet the cost of travel on tour or on transfer;

Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

  • Dividend distribution tax is proposed to be removed and dividend will become taxable in the hands of receiver.
  • Rationalisation of provisions relating to tax audit in certain cases.

    Under section 44AB of the Act, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds one crore rupees in any previous year. In case of a person carrying on profession he is required to get his accounts audited, if his gross receipt in profession exceeds, fifty lakh rupees in any previous year.

    In order to reduce compliance burden on small and medium enterprises, it is proposed to increase the threshold limit for a person carrying on business from one crore rupees to five crore rupees in cases where,-

    • aggregate of all receipts in cash during the previous year does not exceed five per cent of such receipt; and
    • aggregate of all payments in cash during the previous year does not exceed five per cent.

* Dividend Distribution Tax on companies removed and dividend to be taxed in hands of the recipient.

* 15% concessional rate of corporate tax extended to Power Sector

* Foreign Investment encouraged by extending lower withholding tax rate to interest on various securities in respect of foreign investment

* Start ups provided with more income tax benefits

* Cooperative societies provided an option to be taxed at 22 % with no exemption

* New Charitable Institution registration process to be completely electronic

* Faceless Appeals to be enabled in lines of faceless assessments

* Vivaad se Vishvash
• no Dispute but Trust Scheme
• Direct Tax Dispute Resolution
• payment of all taxes will lead to waiver of penalty and interest
• applicable for all pending appeals at all levels

* PAN to be allotted instantly on basis on Adhar

click the below link to download budget:-

Budget Speech 2020 (FY 2020-21)

Finance bill 2020 (FY 2020-21)

Direct tax proposal in finance bill 2020 (FY 2020-21)

 

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