BUDGET 2020 HIGHLIGHTS – INCOME TAX



1. TAX AUDIT THRESHOLD | Increased from one crore to five crores | Provided that the aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent. of the said amount and aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent. of the said payment


2. Tax audit report due date 30th September | Respective assesses income tax filling due date 31st October | Proposals to auto-populate data from tax audit report to return filling for ease of taxpayer.

For this reason, there has been amendments in many sections where there was a requirement to file audit report along with return of income to avail benefit of the respective section. They have to amended to exclude requirement of filling tax return along with furnishing audit report . (E.g. refer amendments in sec 32AB, 33AB, 33ABA, 35E, 35D, 43DA, 80-IA, 80JJA, 92F, 115JB, 115JC, 115VW)


3. Amendment - definition of business trust |to omit the requirement of listing of the business trust from recognised stock exchange in accordance with the regulations made by SEBI.


4. SEC 194J | TDS on Fees for technical services (not being a professional service) reduced from 10% to 2%


5. SEC 6 – RESIDENTIAL STATUS


Clause (1): An individual is said to be resident in India in any previous year, if he

a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or

b) 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.


Ø In the case of an individual being a citizen of India, or a person of Indian origin who, being outside India, comes on a visit to India in any previous year, the provisions of point b) (above) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "“one hundred and twenty days" had been substituted.


Ø Notwithstanding anything contained in clause (1) (above), an individual, being a citizen of India, shall be deemed to be resident in India in any 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.


Ø Amendment: not ordinarily resident

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 seven out of the ten previous years preceding that year; or

(b) a Hindu undivided family whose manager has been a non-resident in India in seven out of the ten previous years preceding that year.


6. That the amount of any contribution made by the employer in respect of the assessee, to the account of an assessee in a recognised provident fund; in the scheme referred to in subsection (1) of section 80CCD; and in an approved superannuation fund shall be treated as perquisite, to the extent it exceeds one lakh and fifty thousand rupees seven lakh and fifty thousand rupees in a previous year. That annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme referred above may also be treated as perquisite.


7. There has been significant changes wrt charitable trust (Sec 11, 12, 12A etc) refer next edition for more details.


8. Section 43 | Definitions of certain terms relevant to income from profits and gains of business or profession. | Actual cost, paid, plant , scientific research, speculative research, written down value | Substitute the words “recognised stock exchange” for the words “recognised association” wherever they occur.


9. Section 43CA (similar amendment in section 50C and in Section 56)| Amendment | relating to special provision for full value of consideration for transfer of assets other than capital assets in certain cases. | That where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent. one hundred and ten per cent. of the consideration received or accruing as a result of the transfer the consideration so received or accruing as a result of transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.


10. Section 49 | Amendment | Cost with reference to certain modes of acquisition. | That the cost of acquisition of a unit or units in the segregated portfolio shall be the amount which bears to the cost of acquisition of a unit or units held by the assessee in the total portfolio in the same proportion as the net asset value of the asset transferred to the segregated portfolio bears to the net asset value of the total portfolio immediately before the segregation of portfolios; and further to provide that the cost of the acquisition of the original units held by the unit holder in the main portfolio shall be reduced by the amount as so arrived for the units of segregated portfolio.


11. Section 55 | Amendment | The cost of long-term capital asset acquired before the 1st day of April, 2001 is taken to be the cost of acquisition to the assesse or the fair market value of the asset on that date, at the option of the assessee. | It is proposed to insert a proviso so as to provide that in case of a capital asset referred to in sub-clauses (i) and (ii), being land or building or both, the fair market value of such asset on the 1st day of April, 2001 for the purposes of the said sub-clauses shall not exceed the stamp duty value, wherever available, of such asset as on the 1st day of April, 2001.


12. Section 57 | Amendment | Said section allows deduction of any reasonable sum for the purpose of realising such dividend except the dividend referred to in section 115-O. It is proposed to omit the reference of dividend referred to in section 115-O.

It is further proposed to insert a proviso to the said section so as to provide that no deduction shall be allowed from the dividend income, or income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or income in respect of units from a specified company defined in the Explanation to clause (35) of section 10, other than deduction on account of interest expense and in any previous year such deduction shall not exceed twenty per cent. of the dividend income, or income in respect of such

units, included in the total income for that year without deduction under that section.


13. Substitute section 72AA | That notwithstanding anything contained in sub-clauses (i) to (iii) of clause (1B) of section 2 or section 72A, where there is an amalgamation of (i) one or more banking company or companies with a banking institution (ii) one or more corresponding new bank or banks with any other corresponding new bank (iii)one or more Government company or companies with any other Government company

The accumulated loss and unabsorbed depreciation of such banking company or companies or amalgamating corresponding new bank or banks or amalgamating Government company or companies shall be deemed to be the loss, or, as the case may be, allowance for depreciation of such banking institution or amalgamated corresponding new bank or amalgamated Government company for the previous year in which the scheme of amalgamation was brought into force and other provisions of the Income-tax Act relating to set-off and carry forward of loss and allowance for depreciation shall be apply accordingly.


14. Section 80EEA | Amendment | The deduction in respect of interest paid on loan sanctioned by a financial institution for acquisition of a residential house property, shall be available if the loan has been sanctioned during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2020 31st day of March, 2021, subject to other conditions specified in the said section.


15. Section 80GGA | Amendment | Deduction in respect of certain donations for scientific research or rural development | Assessee’s claim for a deduction shall be allowed on the basis of information relating to such sum furnished by the payee to the prescribed income-tax authority or the person authorised by such authority, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.


16. 80-IAC | Amendment | The deduction under the said section shall be available to an eligible start-up for a period of three consecutive assessment years out of Seven years ten years beginning from the year in which the eligible start-up is incorporated and the total turnover of its business does not exceed twenty-five crore one hundred crore rupees in the previous year relevant to the assessment year for which deduction under this section is claimed.


17. Section 80-IBA | Amendment | the deduction in respect of profits and gains derived from the business of developing and building affordable housing projects for hundred per cent. of the profits and gains derived from the business of developing and building such projects approved by the competent authority after the 1st day of June, 2016 but on or before the 31st day of March, 2020 31st day of March, 2021.


18. New section 80M | Deduction in respect of certain inter-corporate | 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, 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 as does not exceed the amount of dividend distributed by the first mentioned domestic company on or before the due date.

Sub-section (2) of the said section provides that 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.

It is further proposed to clarify the expression “due date” to mean the date one month prior to the date for furnishing the return of income under sub-section (1) of section 139.


19. Section 90 | Amendment | Central Government shall enter into said agreement for the avoidance of double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in the said agreement for the indirect benefit to residents of any other country or territory).


20. Section 92CB | Amendment | clause (i) of sub-section (1) of section 9 shall also be subject to safe harbour rules.


21. Section 94B | Relating to limitation on interest deduction in certain cases | It is proposed to insert a new sub-section (1A) after the said sub-section so as to provide that nothing contained in that sub-section shall apply to interest paid in respect of a 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.


22. Section 115AC (similar in section 115ACA, 115AD, 115C) | Amendment | Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer. | It is proposed to omit the reference of dividends referred to in section 115-O so that all dividend income is taxed in the hands of non-resident.


23. Section 115BBDA | Similar amendment in Section 115-O | Similar in also Section 115R (tax on distributed income to unit holders – mutual funds) | Tax on certain dividends received from domestic companies | The said section provides for taxation of dividend exceeding ten lakh rupees in the hands of specified assessee resident in India at the rate of ten per cent. It is proposed to amend the said section so as to restrict the applicability of the provisions of that section to dividend declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020.

Dividend distribution Tax (DDT) has been discontinued and instead of that from 1/4/2020 tax on dividend has to be now paid by recipient at their applicable rates.

No deduction u/s 195 shall be made wrt dividends u/s 115O


24. Section 115JC (similar in Section 115JD) (Alternate minimum tax) | Amendment | It is proposed to consequentially insert a new subsection (5) in the said section so as to provide that the provisions contained therein shall not apply to a person who has exercised the option referred to in section 115BAC or section 115BAD.


25. Insert a new section 119A so as 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 such Charter.


26. Section 140A | Amendment | relating to self-assessment. | It is proposed to insert a new clause (vi) in the said subsection so as to provide that where any tax is payable on the basis of any return required to be furnished under section 115WD or section 115WH or section 139 or section 142 or section 148 or section 153A or, as the case may be, section 158BC, an assessee shall also take into account any tax or interest payable under the provisions of sub-section (2) of section 191.


27. Section 144C | Reference to dispute resolution panel. | It is proposed to amend the said sub-section so as to enable the eligible assessee to file his objection to dispute resolution panel where the Assessing Officer proposes to make any variation which is prejudicial to the interest of such assessee. | It is also proposed to include a non-resident, not being a company, or a foreign company under the definition of ‘eligible assessee’.


28. Section 194 | TDS on dividends paid by Indian company to a shareholder, who is resident in India | Rate of deduction rates in force 10% | threshold limit Rs 2500 Rs 5000.


29. Section 194C | Modify the definition of “work” to include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in clause (b) of sub-section (2) of section 40A. It is also proposed to insert “or associate of such customer” in the long line.


30. Section 194K | TDS on dividends paid by Mutual fund to a person resident of India | Rate of deduction 10% | threshold limit Rs 5000.


31.Section 194LBA | certain income from units of a business trust. | It is further proposed to amend sub-section (2) of the said section to provide that the tax is to be deducted at the rate of five per cent. in case of income the nature referred to in sub-clause (a) of clause (23FC) of section 10 and at the rate of ten per cent. in case of income of the nature referred to in sub-clause (b) of the said clause.


32. New Section 194-O | Any payment made by e-commerce operator to the participant, the operator will have to deduct 1% TDS (in No PAN case 20%) only if the annual amount paid or credited exceeds 5 lakh.

It shall also be eligible for certificate for deduction at lower rate.


33. Section 196 | Income in respect of units of NR | It is proposed to amend the said sub-section to substitute the expression “Unit Trust of India” referred to in the said sub-section with “specified company referred to in the Explanation to clause (35) of section 10; and to enable credit of income or payment thereof by any mode.

Proviso to this sub-section provides that no deduction shall be made under this section from any such income credited or paid on or after the 1st day of April, 2003. It is further proposed to omit the proviso to the said subsection.


34. Section 250 | Amendment | E-Appeals | It is proposed to insert new sub-sections (6B), (6C) and (6D) in the said section so as to, inter alia, provide for a scheme, by notification in the Official Gazette, for the disposal of appeal under section 250 so as to impart greater efficiency, transparency and accountability.


35. New section 271AAD | Penalty shall be levied on a person who is required to maintain books of account, if it is found that the books contain a false entry or that any entry has been omitted which is relevant for the computation of his total income. Such person shall be liable to pay by way of penalty a sum equal to the aggregate amount of such false and omitted entries. Penalty shall also be levied on any other person who causes the person required to maintain books of account to make or causes to make any false entry or omit or cause to omit any entry in books of account.

The false entries shall include use or intention to use forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence; or invoice in respect of supply or receipt of goods or services or both issued by the person or any other person without actual supply or receipt of such goods; or invoice in respect of supply or receipt of goods or services or both to or from a person who does not exist.


36. It is proposed to insert sub-sections (2A), (2B) and (2C) in the said section so as to, inter alia, provide for a scheme, by notification in the Official Gazette, for imposing penalty under Chapter XXI of the Act to impart greater efficiency, transparency and accountability. | amend section 274 of the Income-tax Act relating to procedure.


37. New section 285BB | Annual information statement so as to provide that the prescribed income-tax authority or the person authorised by such authority shall upload in the registered account of the assessee an annual information statement in such form and manner, within such time and along with such information, which is in the possession of an income-tax authority as may be prescribed.


38. New section 115BAC | Providing option to individual and HUF taxpayer to pay tax at a lower rate



Under the new regime the total income of the individual or Hindu undivided family shall be computed:


(i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or section 16 or clause (b) of section 24 (in respect of the property referred to in sub-section (2) of section 23) or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii), of sub-section (1) or sub-section (2AA), of section 35 or section 35AD or section 35CCC or clause (iia) of section 57 or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or section 80JJAA;


(ii) without set off of any loss, — (a) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); (b) under the head “Income from house property” with any other head of income;


(iii) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed; and


(iv) without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.


Nothing contained in this section shall apply unless option is exercised in the prescribed manner by the person, —


(i) having business income, 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 no business income, along with 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 business income in which case, option under clause (ii) shall be available.

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