Here are a few predictions that did rounds before the presentation of the Union Budget 2020. We examine how these predictions have turned into actual facts.
| Expectations | Reality | ||||||||||||||||||||||
TAX SLABS
| TAX SLABS
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| Enhancement of section 80C of the Income Tax Act limit The overall exemption limit under section 80C should at least be enhanced to Rs. 3 lakh, from the current Rs. 1.5 lakh. Similarly, while increasing the limits under 80C, concurrently the limit of investment under PPF may also be increased. | No such enhancement or alteration to Section 80C of the Income Tax Act | ||||||||||||||||||||||
| Tweaks in long-term capital gains tax on equity To encourage small taxpayers to invest in the stock market, the government may consider increasing the limit of Rs 1 lakh for taxing the long-term capital gains from the transfer of such equity shares and units of equity-oriented funds. Further, the government may also consider specifying a holding period (say 5 years) and if such shares or units are transferred after the specified holding period, the long-term capital gains may be considered as exempt.
| No tweaks or changes in Long-term capital gains tax on equity | ||||||||||||||||||||||
| Removal of dividend distribution tax (DDT) The other big change expected in the Budget 2020 is the removal of dividend distribution tax. At present, any dividend distributed by companies attracts an effective tax rate of 20.56 percent. Further, shareholders receiving dividends above Rs 10 lakh a year are required to pay an additional 10 percent tax.
| Dividend distribution tax (DDT) to be taxed in the hands of the recipients alone.
Companies no longer need to pay dividend distribution tax. | ||||||||||||||||||||||
| Income tax legacy disputes amnesty scheme A new amnesty scheme for the resolution of legacy disputes in Income Tax is in the works and with which the cash-starved government expects will mop up at least Rs 2 lakh crore. The new scheme could be unveiled in Union Budget 2020 on Saturday as the government looks for ways and means to shore up dwindling revenue numbers. This amnesty scheme could mirror the Sabka Vishwas scheme which was targeted at customs and excise dispute resolution amnesty scheme,
| ‘Vivad Se Vishwas’ scheme, with a deadline of 30th June 2020, to reduce litigations indirect taxes: · Waiver of interest and penalty – only disputed taxes to be paid for payments till 31st March 2020. · Additional amount to be paid if availed after 31st March 2020. · Benefits to taxpayers in whose cases appeals are pending at any level. |
Speaking on Budget 2020 with Taxscan, Abhishek A Rastogi, Partner, Khaitan & Co. said that, “The announcements around tax are simple but interesting. It appears very clear that the government has learned the benefits of the Amnesty scheme introduced for the indirect tax regime and has now proposed it even for the direct tax regime. It is expected that the scheme will resolve a lot of pending litigation, resulting in benefits to the taxpayers and the government exchequer. The interesting and innovative announcements related to the inclusion of the tax charter and cash rewards need to be closely monitored. The finance minister did not shy away from making announcements to show that the focus will remain on better tax compliance and hence appropriately commented with respect to returns, refunds, electronic invoices, Aadhaar-based verification, credit mismatch, and deep data analytics. The other important issues announced were the rate rationalization and removal of the problem of inverted duty structure. The government is keen to pragmatically address these issues apart from addressing the problem of foreign trade agreements. It is a fact that various imports under foreign trade agreements are made based on the rules of Origin. The government is clear that various checks would be put to examine these rules including those provisions where the tax leakages may happen in Customs and GST”.
He also said that “While the budget speech clearly aims to reduce the tax terrorism, the amendments proposed for GST arrest provisions may end up in increasing the hardship for taxpayers who may be subject to financial fraud investigations”.
“The deviation of 0.5% on account of unanticipated fiscal implications looks reasonable and the finance minister looks committed to attaining fiscal consolidation by gradually reducing the fiscal deficit. The task will be easy in case there is an improvement in tax buoyancy and the FM has announced various measures such as improvement in compliances, amnesty scheme for direct taxes and harsh provisions for tax frauds”, also added.
Speaking to Taxscan, Mr. Rahul Garg, Partner, PwC said that, “On the tax front, multiple changes have been introduced. The government has announced measures for abolishing the dividend distribution tax, relaxation from the filing of tax returns by foreign companies, extending the sunset clauses for some beneficial withholding tax rates and introducing a simplified personal taxation regime without any tax deductions. In addition, steps have been taken to check tax evasion through fake GST invoices, the introduction of TCS provisions on LRS remittances and foreign tour packages to widen the taxpayer base.”
Mr. Gaurav Pingle, Practicing Company Secretary said that “With respect to the removal of DDT and dividend being taxable in the hands of investors, closely-held private companies will now consider the different tax-efficient ways in rewarding the shareholders. The companies/promoters may consider buy-back of shares also”.
“On the Budget announcement with respect to the decriminalizing the Companies Act, 2013, the Government already released the Report of the Companies Law Committee in November 2019. In addition to decriminalizing the Companies Act, 2013, there are several other provisions which will be amended e.g. clarity of definition of ‘listed company’, setting up of NCLAT benches, remuneration to non-executive directors of public companies, in case of losses or inadequate profits, reducing the timelines for the rights issue, etc. However, there would be another round of amendments required for streamlining the provisions of the Companies Act, 2013”, he also added.
Adv Sherry Samuel Oommen, Head – Tax and Corporate Laws, “The reactions to the Union Budget 2020 have been primarily mixed with no clear sign of unalloyed happiness. On the personal tax front, while one did expect a change in tax slabs coupled with an enhancement in limits for investments under section 80C, the Government has proposed an option of reduced tax rate subject to non-claiming of any incentive/deduction. One would argue that the change was brought about with the objective of increasing spending instead of investment, whilst keeping the option of investment still alive. To me, the change appears to rather “thoughtless” without any clear intent on the part of the Government, especially since “Aspiration India” and “Economic Development” were among the prominent themes in the Budget.
He also added that, The move to eliminate Dividend Distribution Tax would definitely help Corporate India, whilst shifting the burden of tax back to the recipient. This move of eliminating DDT would definitely augur foreign investment into the country, as relief from taxation could also be availed under the respective tax treaties. On the amnesty front, one did expect a scheme on the lines of “Sabka Vishwas Scheme”, providing for a relief even on the principal amount as well, which was indeed a grand success. In my view, the “Vivad Se Vishwas” Scheme may not have many takers like the “Sabka Vishwas Scheme”, as the former scheme does not offer any reduction in the principal amount. I would augur well if the Government could recalibrate the Scheme in line with the “Sabka Vishwas Scheme”.
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Indirect Taxes and Customs ( CBIC ) has notified the different due dates for GSTR-3B for the Taxpayers having turnover up to Rs. 5cr for January to March 2020.
The Notification issued by the CBIC said that “the return in FORM GSTR-3B of the said rules for the months of January 2020, February 2020 and March 2020 for taxpayers having an aggregate turnover of up to rupees Five Crore in the previous financial year, whose principal place of business is in the States of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana or Andhra Pradesh or the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman, and Nicobar Islands and Lakshadweep shall be furnished electronically through the common portal, on or before the 22nd February 2020, 22nd March 2020, and 22nd April 2020, respectively”.
The Notification also said that “the return in FORM GSTR-3B of the said rules for the months of January 2020, February 2020 and March 2020 for taxpayers having an aggregate turnover of up to rupees Five Crore in the previous financial year, whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha or the Union territories of Jammu and Kashmir, Ladakh, Chandigarh, and Delhi shall be furnished electronically through the common portal, on or before the 24th February 2020, 24th March 2020 and 24th April 2020, respectively”.
GSTR-3B is a monthly return. All regular taxpayers need to file this return till June 2018. Taxpayers can file their return on GST Portal.
Earlier in a statement issued, the Ministry further had said that it has also taken note of difficulties and concerns expressed by the taxpayers regarding the filing of GSTR-3B and other returns. The matter has been discussed by the GSTN with Infosys, the Managed Service Provider, which has come out with the above solution to de-stress the process as a temporary but immediate measure. For further improving the performance of the GSTN filing portal on a permanent basis, several technological measures are being worked out with Infosys and will be in place by April 2020.
Subscribe Taxscan Premium to view the JudgmentThe Maharashtra Appellate Authority for Advance Ruling (AAAR) has ruled that the amount collected as membership subscription and admission fees by Rotary Club from its members does not attract Goods and Services Tax (GST) as a supply of service.
This decision was made in an appeal filed by the Rotary Club of Mumbai Queens Necklace against the decision of the Maharashtra Authority for Advance Ruling (AAR) which classified the functioning of the Rotary Club as that of any other club registered under the GST regime.
The appellant was able to convince the appellate authority that their functions include, promotion of peace, fighting diseases, providing clean water, sanitation and hygiene, protection of mothers and children, support of education and not the provision of services and goods such as recreation, sports which other clubs provide in normal parlance. The amount collected from members as subscription and admission fees are strictly utilized for the administration purposes, meeting expenses, banquet expenses, catering expenses and printing and stationery expenses of the club.
The Appellate Authority benched by Rajiv Jalota and Sungita Sharma held that since it is not being established as the Appellant is doing any business in terms of section 2(17) of the CGST Act, 2017, it can be deduced that activities carried out by the appellant would not come under the scope of supply as envisaged under section 7(1) of the CGST Act, 2017.
Subscribe Taxscan Premium to view the JudgmentThe Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the case of Commissioner of Central Excise v Vijai Marine Services held that ‘casino vessels’ could not be classified as ‘pleasure boats’.
The issue before the Tribunal was with respect to the classification of ‘MV Royale Floatal’ i.e. a vessel manufactured by M/s Vijai Marine Services in which the Revenue aggrieved seeks re-classification of the goods under heading no. 8903 9990, instead of heading no. 8901 9000 accepted by the adjudicating authority.
The SCN was issued for recovery of undischarged duty liability on the ground that the vessel was intended for deployment as an ‘offshore casino’ to be operated on the Mandovi river in Goa and that under the pretext of clearing the same as a ‘conveyance’, the true intent of use and actual design of the impugned goods had been concealed to avail the consequences of the claimed classification.
The common ground of the present appeal was that the vessel was transformed from out of a ‘dumb barge’ and ‘other equipment’ imported by M/s Highstreet Cruises and Entertainment Pvt Ltd, Goa in June 2009, a subsidiary of M/s Delta Corp Ltd, which as also the holding company of M/s Delta Pleasure Cruise Company Pvt. Ltd. M/s Vijai Marine Services was contracted for the conversion into a self-propelled luxury floating hotel which, held in the impugned order to be ‘manufacture’. The clearance, at a declared value of ₹ 11.89 crores, had been effected at ‘nil’ rate of duty applicable to heading no. 8905 with an exemption under notification no. 12/2013-CE dated 1st March 2013.
The Coram constituting of members C.J. Mathew and Dr. S.K. Pati as technical and judicial members respectively held in favor of the assessee and declined to interfere with the order of the adjudicating authority. It held that ‘casino vessels’ could not be classified as ‘pleasure boats’.
The decision of re Ashok Khetrapal had been relied upon. It was held that a vessel for pleasure or sport should be meant for personal consumption/use of the person/owner of a vessel. It is evident from the facts on record that the vessel POG imported by the importer is not used for the personal use of the owner for pleasure or sport but is used for commercial purposes as a ‘Casino vessel’. Hence the vessel was held to be a passenger ship or Special Trade Passenger Ship when no contrary opinion of another competent authority is brought on record saying that POG is a vessel for pleasure or sport.
Subscribe Taxscan Premium to view the JudgmentThe Central Government last Thursday published new directions to include Limited Liability Partnerships (LLPs) in the condonation of delay scheme available under the Companies Act 2013.
Section 460 under the Companies Act 2013, states that,
“a) where any application required to be made to the Central Government under any provision of this Act in respect of any matter is not made within the time specified therein, that Government may, for reasons to be recorded in writing, condone the delay; and
(b) where any document required to be filed with the Registrar under any provision of this Act is not filed within the time specified therein, the Central Government may, for reasons to be recorded in writing, condone the delay. ”
Condonation of Delay Scheme came into existence in 2018 so as to provide one final opportunity to the directors of the defaulting companies who due to the reason of the non-filing of financial statements and annual returns were held liable and disqualified. With this new directive, directors of LLPs will now get the benefit of condoning the delay.
A few months ago, MCA, with an intent to crackdown on shell companies, had disqualified more than two lakh directors of shell companies within a span of 15 days, for not filing their financial statements or annual returns for two straight years, violating provisions of the Companies Act, 2013.
Such companies / LLPs which have been struck off /whose names have been removed from the register of companies under section 248(5) of the Act can take advantage of the Scheme.
On adopting the above scheme, the concerned Registrar will withdraw all the pending the prosecution(s) for all documents filed under the scheme. “However, this scheme is without prejudice to action under section 167(2) of the Act or civil and criminal liabilities, if any, of such disqualified directors during the period they remained disqualified.”
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Nirmala Sitharam, the Finance Minister of India presented the Union Budget for the Financial year 2020-21 wherein the budget proposed the extension from 5% to 10% under Section 50C and 45CA.
Section 45CA and 50C under Income Tax covers the provisions pertaining to the income which is the result of capital gains, any real estate transaction and profit from any business. Further, Section 45CA and 50C also cover that if in case the consideration value does not exceed the circle rate by 5% then the difference can be accounted as income in the hands of both the buyer as well as sellers.
The objective of the Union Government behind the extension from 5% to 10% under Section 45CA and 50C is to ease the real estate transactions.
Further, in the cases with pertains to the Employees those who possess the Employees Stock Option Plans (ESOP) and start-ups as per the Union Budget 2020 may differ in paying the taxes up to 5 years which will be from the time of exercise to the time of leaving the start-up or until they sell the shares possessed by them, amongst both these events whichever takes place earlier will be considered.
The budget also elaborated in the cases wherein the turn-over of the start-ups is up to Rs. 25 Crores then, in that case, the start-ups are permitted to deduct 100% of its profit for 3 years of seven years which are the continuous assessment years, now this limit of Rs. 25 Crores is increased to Rs. 100 Crores and the time period have now been increased from 7 years to 10 years.
Subscribe Taxscan Premium to view the JudgmentThe Institute of Chartered Accountants of India (ICAI) has announced the Special Examination for members of Foreign Accounting bodies with whom the ICAI had entered into Mutual Recognition Agreement (MRA) / Memorandum of Understanding (MoU).
The Special examinations will be held on 8 th, 9th, 10th, 11th & 12th June 2020 at New Delhi Examination center.
Examination Fees
The Examination Fees paid by a Candidate shall not be refunded/adjusted under any circumstances. The candidate who are applying for the second time and onward are required to remit the Examination Fees again.
Last date for receipt of application
Application received after 23 rd February 2020 will not be entertained under any circumstances. Therefore, candidates sending their application by post must send the same at least 3-4 days in advance of the last date and avoid sending it on the last date for receipt of application forms.
How the application form should reach the Institute?
The application form is sent by Speed Post / Registered Post only in the special envelope attached to the Examination Form to the Additional Secretary (Exams.), The Institute of Chartered Accountants of India, “ICAI Bhawan”, Indraprastha Marg, New Delhi – 110 002. · Candidates are advised to retain the receipt issued by Post Office till the receipt of Admit Card. · Candidates are advised not to send the application through the private courier. · Candidates should not submit/send the application form to the regional/branch offices of the Institute.
For Further details click here.
The Finance Minister Nirmala Sitharaman while presenting the union budget for 2020 on Saturday has proposed for a 10% TDS on capital gains from mutual funds along with TDS on dividends for resident individuals who exceed Rs.5000 in income from such funds
It has been proposed for insertion of a new section 194K which states :
“ 194K. Any person responsible for paying to a resident any income in respect of:
(a) units of a Mutual Fund specified under clause (23D) of section 10; or
(b) units from the Administrator of the specified undertaking; or
(c) units from the specified company,
shall, at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax thereon at the rate of ten percent
Provided that the provisions of this section shall not apply 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. ”
At present, TDS is deducted for NRI investors in mutual funds but not from resident individuals. The latter have to calculate and pay tax on a self-assessment basis was the earlier scenario.
This proposal has received mixed responses from the market. Many believe that inflows will come down and it will create an unnecessary headache in the filing of ITR and may cause loss of few govt benefits too in the process. While other few believe that the deduction of TDS is a welcome step on par with TDS on Fixed Deposits as it will prevent big-ticket investors from mutual funds resulting in only retail investors in the mutual fund industry.
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The Finance Minister, while announcing the budget 2020 has proposed to amend the Companies Act, 2013 to substitute criminal liability by civil liability.
The Finance minister stated that “tax harassment” would not be tolerated and also reassured taxpayers that the government will take measures to free from harassment of any kind.
Finance Minister Nirmala Sitharaman said in the Budget 2020 that “My first attempt and also an earnest attempt which continues today is to decriminalize everything to do with Companies law or related laws. The very point Prime Minister, Narendra Modi”.
She also stated that the government does not want a law that could treat every business house with suspicion and the number of sections leading to criminal liability and penalties in Company Law.
There has been a debate about building into statutes, criminal liability for acts that are civil in nature. Hence, for Companies Act, certain amendments are proposed to be made that will correct this.
Subscribe Taxscan Premium to view the JudgmentThe Finance Minister Nirmala Sitharaman has proposed the following changes across various spheres of International Taxation and Transfer Pricing:
Contribution of the eligible fund manager during first three years up to twenty-five crore rupees shall not be accounted for the purpose of calculation of the aggregate participation or investment in the fund, directly or indirectly, by Indian resident and if the fund has been established or incorporated in the previous year, the condition of monthly average of the corpus of the fund to be at one hundred crore rupees shall be fulfilled within twelve months from the last day of the month of its establishment or incorporation.
It is proposed to amend section 9A of the Act will take effect from 1st April 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
The Government in a view to attract fresh investment, create jobs and stimulate the economy, has proposed to extend the period of said concessional rate of TDS of five percent to 1st July 2023 from 1st July 2020 provide that the rate of TDS shall be four percent on the interest payable to a non-resident, in respect of monies borrowed in foreign currency from a source outside India, by way of issue of any long term bond or RDB on or after 1st April 2020 but before 1st July 2023 and which is listed only on a recognized stock exchange located in any IFSC.
The Government has proposed to amend section 194LD to extend the period of rate of TDS of 5% under the said section to 1st July 2023 from the existing 1st July 2020 provide that the concessional rate of TDS of five per cent under the said section shall also apply on the interest payable, on or after 1st April 2020 but before 1st July 2023, to an FII or QFI in respect of the investment made in municipal debt security.
The Government has proposed to amend section 94B of the Act so as to provide that provisions of interest limitation would not apply to interest paid in respect of a debt issued by a lender which is a PE of a non-resident, being a person engaged in the business of banking, in India.
This amendment will take effect from 1st April 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.
The Government has proposed to amend section 115A of the Act in order to provide that a non-resident, shall not be required to file return of income under sub-section (1) of section 139 of the Act if, – his or its total income consists of only dividend or interest income as referred to in clause (a) of sub-section (1) of said section, or royalty or FTS income of the nature specified in clause (b) of sub-section (1) of section 115A, and the TDS on such income has been deducted under the provisions of Chapter XVII-B of the Act at the rates which are not lower than the prescribed rates under sub-section (1) of section 115A.
In view of the above, it is proposed to amend section 92CB and section 92CC of the Act to cover the determination of attribution to PE within the scope of SHR and APA.
With respect to section 92CB, the amendment will take effect from 1st April 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. With respect to section 92CC, the amendment will take effect from 1st April 2020 and therefore will apply to an APA entered into on or after 1st April, 2020.
The Government has proposed to suitably amended provisions of section 144C of the to include cases, where the AO proposes to make any variation which is prejudicial to the interest of the Assessee, within the ambit of section 144C; expand the scope of the said section by defining eligible Assessee as a non-resident not being a company, or a foreign company.
This amendment will take effect from 1st April 2020. Thus, if the AO proposes to make any variation after this date, in case of eligible Assessee, which is prejudicial to the interest of the Assessee, the above provision shall be applicable.
The Government has proposed to provide that ITAT may grant stay under the first proviso subject to the condition that the Assessee deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof.
It is also proposed to substitute the second proviso to provide that no extension of stay shall be granted by ITAT, where such appeal is not so disposed of which the said period of stay as specified in the order of stay. However, on an application made by the Assessee, a further stay can be granted, if the delay is not disposing of the appeal is not attributable to the Assessee and the Assessee has deposited not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof. The total stay granted by ITAT cannot exceed 365 days.
This amendment will take effect from 1st April 2020.
The Government has proposed to amend clause (b) of sub-section (1) of section 90 of the Act so as to provide them with an opportunity to enter into an agreement with the Government of any country outside India or specified territory outside India for, inter alia, the avoidance of double taxation of income under the Act and under the corresponding law in force in that country or specified territory, as the case may be, 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 this agreement for the indirect benefit of residents of any other country or territory).
It is also proposed to make a similar amendment in clause (b) of sub-section (1) of section 90A of the Act.
These amendments will take effect from 1st April 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.
The Government has proposed to defer the applicability of SEP to starting from the assessment year 2022-23. Certain drafting changes have also been made while deferring the proposal.
The current SEP provisions shall be omitted from the assessment year 2021-22 and the new provisions will take effect from 1st April 2022 and will, accordingly, apply in relation to the assessment year 2022-23 and subsequent assessment years.
Further, as per the discussion going on in the international forum, countries generally agree that income from the advertisement that targets Indian customers or income from the sale of data collected from India or income from the sale of goods and services using such data collected from India needs to be accounted for in Indian revenue. Hence, it is proposed to amend the source rule to clarify this position.
It is proposed that the exception from said Explanation 5 provided to an asset or a capital asset, held by a non-resident by way of investment in erstwhile Category I and II FPIs under the SEBI (FPI) Regulations, 2014 may be grandfathered. Further, similar exceptions may be provided in respect of investment in Category-I FPI under the SEBI (FPI) Regulations, 2019.
Amendment of the definition of royalty so as not to exclude consideration for the sale, distribution or exhibition of cinematographic films from its meaning is also in the proposal.
It is further proposed to amend section 295 of the Act so as to empower the Board for making rules to provide for the manner in which and the procedure by which the income shall be arrived at in the case of operations carried out in India by a non-resident and transaction or activities of a non-resident.
To enable pre-filling of returns in case of persons having income from business or profession, it is required that the tax audit report may be furnished by the said assesses at least one month prior to the due date of filing of return of income. This requires amendments in all the sections of the Act which mandates the filing of audit report along with the return of income or by the due date of filing of return of income. Thus, provisions of section 10, section 10A, section 12A, section 32AB, section 33AB, section 33ABA, section 35D, section 35E, section 44AB, section 44DA, section 50B, section 80-IA, section 80-IB, section 80JJAA, section 92F, section 115JB, section 115JC and section 115VW of the Act are proposed to be amended accordingly.
The Government has proposed to amend sub-section (2) of section 288 to enable any other person, as may be prescribed by the Board, to appear as an authorized representative.
These amendments will take effect from 1st April 2020.
The Government has proposed to carry out amendments so that dividends or income from units are taxable in the hands of shareholders or unitholders at the applicable rate and the domestic company or specified company or mutual funds are not required to pay any DDT. It is also proposed to provide that the deduction for expense under section 57 of the Act shall be a maximum of 20 percent of the dividend or income from units. Therefore, it is proposed to-
i. amend section 115-O to provide that dividend declared, distributed or paid after 1st April 2003, but on or before 31st March 2020 shall be covered under the provision of this section.
ii. amend clause (34) of section 10 to provide that the provision of this clause shall not apply to any income, by way of dividend, received on or after 1st April 2020.
iii. amend section 115R to provide that the income distributed on or before 31st March 2020 shall only be covered under the provision of this section.
iv. amend clause (35) of section 10 to provide that the provision of this clause shall not apply to any income, in respect of units, received on or after 1st April 2020.
v. amend clause (23FC) of section 10 so that all dividends received or receivable by the business trust from a special purpose vehicle is exempt income under this clause.
vi. amend clause (23FD) of section 10 to exclude dividend income received by a unitholder from the business trust from the exemption so that the dividend income is taxable in the hand of unitholder of the business trust.
vii. amend subsection (3) of section 115UA to delete reference to sub-clause (a) so that distributed income of the nature as referred to in clause (23FC) or clause (23FCA) of section 10 shall be deemed to be income of the unitholder and shall be charged to tax as income of the previous year. Thus, dividend income distributed by a special purpose vehicle to business trust would be taxed in the hands of the unitholder.
viii. remove reference of section 115-O dividend income in various sections like section 57, section 115A, section 115AC, section 115ACA, section 115AD, and section 115C.
ix. remove the opening line of clause (23D) of section 10, as mutual fund no longer required to pay additional tax.
x. insert new section 80M as it existed before it removed by the Finance Act, 2003 to remove the cascading effect, with a change that set-off will be allowed only for dividend distributed by the company one month prior to the due date of filing of a return, in place of the due date of filing return earlier.
xi. amend section 115BBDA which taxes dividend income in excess of ten lakh rupee in the hands of the shareholder at ten per cent., to the only dividend declared, distributed or paid by a domestic company on or before the 31st day of March 2020.
xii. amend section 57 to provide that no deduction shall be allowed from dividend income, or income in respect of units of the mutual fund or specified company, other than a deduction on account of interest expense and in any previous year such deduction shall not exceed twenty percent. of the dividend income or income from units included in the total income for that year without the deduction under section 57.
xiii. amend section 194 to include dividend for a tax deduction. At the same time the rates of ten percent. is proposed to be prescribed and the threshold is proposed to be increased from Rs 2,500/- to Rs 5,000/- for the dividend paid other than cash. Further, at present, the mode of payment is given as “an account payee cheque or warrant”. It is proposed to change this to any mode.
xiv. amend section 194LBA to provide for a tax deduction by the business trust on dividend income paid to unitholder, at the rate of ten percent. for the resident. For a non-resident, it would be 5 percent for interest and ten percent. for the dividend.
xv. insert a new section 194K to provide that any person responsible for paying to a resident any income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or units from the administrator of the specified undertaking or units from the specified company shall at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax thereon at the rate of ten percent. It may also be provided for the threshold limit of Rs 5,000/- so that income below this amount does not suffer tax deduction. It is also proposed to defined “Administrator”, “specified company”, as already defined in clause (35) of section 10. It is also proposed to define “specified undertaking” as in clause (i) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002. It is also proposed to provide that where any income is credited to any account like suspense account, in the books of account of the person liable to pay such income, the liability for tax deduction under this section would arise at that time.
xvi. amend section 195 to delete exemption provided to the dividend referred to in section 115-O.
xvii. amend section 196A to revive its applicability on TDS on income in respect of units of a Mutual Fund. It is also proposed to substitute “of the Unit Trust of India” with “from the specified company defined in Explanation to clause (35) of section 10” and “in cash or by the issue of a cheque or draft or by any other mode” with “by any mode”.
xviii. amend section 196C to remove exclusion provided to a dividend under section 115-O. It is also proposed to substitute “in cash or by the issue of a cheque or draft or by any other mode” with “by any mode”.
xix. amend section 196D to remove exclusion provided to a dividend under section 115-O. It is also proposed to substitute “in cash or by the issue of a cheque or draft or by any other mode” with “by any mode”.
Amendments at clause (i) to (xii) above will take effect from 1st April 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years. Amendments at clause (xiii) to (xix) will take effect from 1st April 2020.
In regard to residency provisions, the government has proposed that
This amendment will take effect from 1st April 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.
Subscribe Taxscan Premium to view the JudgmentIn an aim to address the ailing Non-Banking Financial Corporations (NBFCs), Finance Minister Nirmala Sitharaman in her budget 2020 speech on Saturday has proposed a reduction in the NBFC’s limit for eligibility for debt recovery.
Under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002, the current eligibility limit is Rs.500 crore of asset size or loan size of Rs.1 crore. This limit has now been proposed to be reduced to Rs.100 crore of asset size of Rs.50 lakh loan size.
This reduction in limit would mean that now Non-Banking Financial Corporations debt recovery can enforce the security interest for lower ticket size loans. This is also expected to improve their ability to recover smaller loans and improve the financial health of NBFCs debt recovery with poor performing assets of lower value.
Subscribe Taxscan Premium to view the JudgmentThe Government of India on Thursday appointed M Ajit Kumar IRS (C&CE 84) as chairman of the Central Board of Indirect Taxes and Customs (CBIC). The appointment came just two days before the Union Budget 2020 presentation.
“The Appointments Committee of the Cabinet has approved the appointment,” said an official release. The order was issued by the Union Ministry of Personnel, Public Grievances and Pensions and it said, “The Appointments Committee of the Cabinet (ACC) has approved the appointment of M. Ajit Kumar, IRS (C&CE 84), as Chairman, Central Board of Indirect Taxes and Customs (CBIC).”
The new Chairman’s immediate responsibilities will include accelerating the Goods and Services Tax (GST) revenues and to deal with the changes introduced in customs duties in the Union Budget for 2020 on Saturday.
Subscribe Taxscan Premium to view the JudgmentThe Finance Minister Nirmala Sitharaman through her budget 2020 has proposed for a collection of 1% TDS from sellers by E-commerce Platforms.
“In order to widen and deepen the tax net by bringing participants of e-commerce within the tax net, it is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of one percent,” the Finance Bill had mentioned.
The proposal also puts forward the following requirements:
This proposal will be applicable not only to electronic retailers such as Amazon and Flipkart but also to cab and restaurant aggregators like Uber, Ola, Swiggy, Zomato, etc. Major Firms in this sector have informed that they are evaluating the impact of this proposal and is too early to comment upon the effect.
Sellers associated with this sector are predicting that this will reduce cash flow for them and that the government should consider E-Commerce platforms TDS at a reduced rate.
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The Finance minister while presenting Budget 2020 proposes that the Insurance coverage deposit limit will be increased from Rs 1 lakh to Rs 5 lakh per depositor.
Nirmala Sitharam also informed the august House that a robust mechanism is in place to monitor the health of all Scheduled Commercial Banks and that depositors’ money is safe.
Further, she stated that the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a depositor, which is now `one lakh to `five lakh per depositor.
Each depositor in a bank is insured up to a maximum of 5,00,000 (Rupees five Lakh) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank’s license or the date on which the scheme of amalgamation/merger/reconstruction comes into force.
The DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to Rupees five lakh within two months from the date of receipt of claim list from the liquidator.
The DICGC pays the bank concerned, the difference between the full amount of deposit or the limit of insurance cover in force at the time, whichever is less and the amount received by him under the reconstruction/amalgamation scheme within two months from the date of receipt of claim list from the transferee bank / Chief Executive Officer of the insured bank/transferee bank.
After Budget 2020 deposit of insurance coverage has been increased to a maximum of 5,00,000 for each user for both principal and interest amount. A maximum of 5,00,000 to be ensured to all those accounts If the depositor has accounts in different banks. However, if there are more accounts in the same bank, all of those are treated as a single account.
While presenting Budget 2020 finance minister proposes about the Insertion of a new section for the penalty to a person who to evade tax liability made any false entry or omission of any entry which is important for computation.
If during any proceedings under this act, if assessing officer found any malpractice in the books of accounts maintained by assessee, then he shall direct that person to pay penalty.
The penalty should be a sum equal to the aggregate amount of such false entry or omitted made by assessee in the books of accounts.
The new section 271AAD of the Income tax act inserted elaborates as:
(1) Without prejudice to any other provisions of this Act, if during any proceeding under this Act, it is found that in the books of account maintained by any person there is—
(i) a false entry; or
(ii) an omission of any entry which is relevant for computation of total income of such person, to evade tax liability, the Assessing Officer (AO) may direct that such person shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
(2) Without prejudice to the provisions of sub-section (1), the Assessing Officer (AO) may direct that any other person, who causes the person referred to in sub-section (1) in any manner to make a false entry or omits or causes to omit any entry referred to in 50 that sub-section, shall pay by way of penalty a sum equal to the aggregate amount of such false or omitted entry.
Subscribe Taxscan Premium to view the JudgmentThe Finance Minister Nirmala Sitharaman on Saturday through the union Budget has proposed the following 16 amendments to the Central Goods and Service taxes (CGST) aiming to improve the scope and productivity of the tax regime.
On presenting Budget 2020, finance minister proposes to exempt levy of stamp duty on transactions in stock exchanges established in International Financial Services Centre(IFSC).
This provision will come into force on the 1st day of April 2020. In section 9A of the Indian Stamp Act, 1899 in sub-section (2) new proviso will be amended as no stamp duty will be chargeable in respect of the instruments of transaction in stock exchanges and depositories established in any International Financial Services Centre (IFSC) set up under section 18 of the Special Economic Zones Act, 2005.
The new section 73B is inserted after section 73A of Indian Stamp Act, 1899 will state the power to issue directions and to authorize certain authorities to issue instructions etc.
The Central Government has the power to issue directions relating to such matters and subject to such conditions which is necessary and authorize the Securities Exchange Board of India Act,1992 or Reserve Bank of India Act, 1934 can issue instructions, circulars or guidelines can be given in writing.
The Amendment of section 9A elaborates as:
The provisions of this Part shall come into force on the 1st day of April 2020. In section 9A of the Indian Stamp Act, 1899, in sub-section (2), the following proviso shall be inserted, namely:––
“Provided that no such duty shall be chargeable in respect of the instruments of transaction in stock exchanges and depositories established in any International Financial Services Centre (IFSC) set up under section 18 of the Special Economic Zones Act, 2005.”.
The insertion of new section 73B of Indian Stamp Act, 1899 elaborate as
The Central Government may:
(a) Issue directions relating to such matters and subject to such conditions, as it deems necessary.
(b) in writing, authorise the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 or the Reserve Bank of India (RBI) constituted under section 3 of the Reserve Bank of India (RBI) Act, 1934 to issue instructions, circulars or guidelines, for carrying out the provisions of Part AA of Chapter II and the rules made thereunder”.
Last year, in Finance Budget, 2019 the Govt. had inserted Section 9A to the Indian Stamp Act, 1899 whereby it was proposed to consolidate the stamp duty provisions relating to issue, sale or transfer of securities under the newly inserted section 9A and 9B of the Indian Stamp Act, 1899. The Amendment Act also proposed a uniform system for collection and payment of stamp duty on the issue and transfer of securities.
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In a budget 2020 presented yesterday has announced significant changes into co-operatives. Cooperative societies are currently tax at a rate of 30% with surcharge and cess.
As a major concession, and in order to bring parity between the cooperative societies and corporates, the Finance Minister has proposed to provide an option to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess with no exemptions/deductions.
The Finance Minister also proposed to exempt these societies from Alternative Minimum Tax (AMT), just like companies under the new tax regime are exempt from the Minimum Alternate Tax (MAT).
As a major concession and in order to bring parity between the cooperatives societies and corporates, the Union Budget proposed to provide an option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions. These cooperatives are currently the Co-operatives tax rate at 30% with surcharge and cess.
The Finance Minister also proposed to exempt these cooperative societies from Alternate Minimum Tax (AMT) just like Companies that under the new Co-operatives Tax Rate regime are exempted from the Minimum Alternate Tax (MAT).
Subscribe Taxscan Premium to view the JudgmentIn a relief to middle-class people, the Union Finance Minister in Budget 2020 has proposed an additional deduction up to Rs. 1.5 lakhs for Interest paid on Loans taken for an affordable house extended till 31st March, 2021.
In the last budget, the Finance Minister had announced an additional deduction of up to one lakh, fifty thousand rupees for interest paid on loans taken for the purchase of an affordable house.
For the realization of the goal of Housing for All and affordable housing, an additional deduction of up to one lakh fifty thousand rupees for interest paid on loans taken for the purchase of an affordable house was announced in last year’s budget. The deduction was allowed on housing loans sanctioned on or before 31st March 2020.
In order to ensure that more persons avail of this benefit and to further incentivize affordable housing, the Finance Minister proposed to extend the date of loan sanction, for availing this additional deduction by one more year.
Referring to the tax holiday provided on profits earned by developers of Affordable Housing projects approved by 31st March 2020, Smt Nirmala Sitharaman proposed to extend the date of approval of affordable housing projects for availing this tax holiday by one more year.
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Finance Minister Nirmala Sitharaman proposed a 100% tax exemption for the Sovereign Wealth Fund of foreign governments.
“In order to incentivize the investment by the Sovereign Wealth Fund of foreign governments in the priority sectors, I propose to grant 100% tax exemption to their interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March 2024 and with a minimum lock-in period of 3 years,” said Finance Minister in her budget speech.
Apart from the National Investment and Infrastructure Fund (NIIF) – the country’s only sovereign Foreign wealth fund Investments, India has already seen a large pool of infrastructure investments by global sovereign wealth funds such as the Middle East based Abu Dhabi Investment Authority, etc and Singapore based GIC, etc.
The government believes that such tax exemption coupled with the abolition of dividend distribution tax (DDT) will give benefits to the global yield-seeking infrastructure investors in India and will also help accelerate further investments in the sector as a number of SWFs are already significantly invested or are considering investing in the Indian infrastructure sector. The said amendments are proposed to section 80-IA of the Income Tax Act.
The government will provide tax exemptions for a sovereign wealth fund which is wholly owned and controlled, directly or indirectly, by the Government of a foreign country and it is set up and regulated under the law of such a foreign country.
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In a Union Budget 2020 presented today, the Union Finance Minister Smt. Nirmala Sitharaman has proposed the various Indirect Tax Proposals.
GST:
Customs Duties:
Trade Policy Measures
Unprecedented Milestones and Achievements of Indian Economy
Two cross-cutting developments: Proliferation of technologies (Analytics, Machine Learning, robotics, Bioinformatics, and Artificial Intelligence).
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