Salient Tax Updates of Budget 2020-21:
1. Tax Slabs Changed:
A new Section 115 BAC is being introduced whereby an individual and HUF can opt to pay tax as per new tax rates in case it forgo all exemptions and deductions which include deduction under section 80C of PF, LIC, standard deduction, House Rent Allowance, minor income exemption under section 10(32), interest deduction on Home loan under section 24(b) in respect of self occupied house, deduction under section 57(iia) of 1/3rd of Family Pension and also other deductions available under the act. This option to be exercised while filing return in case one does not have business income. For others options required while filing return for A.Y. 2021-22 and once exercised it will be irreversible.
2. New tax rate @22% for co-operative societies u/s 115BAD.
3. AMT u/s 115JC shall not apply and its credit u/s 115JD will not be available to people opting for section 115BAC and 115BAD.
4. Limit for audit u/s 44AB has been increased to 5 crore from existing 1 crore without any corresponding amendment in section 44AD.
5. Due date for filing return of income in case of audit u/s 139 has been changed from 30th September to 31st October and due date for filing Audit report is 30th September.
6. Dividend Distribution Tax being abolished wef 1.4.2020. Dividend now to be taxed as normal income in the hands of shareholder. Benefit of section 80M will be available to a company in respect of dividend income received by it and distributed by it one monthly before the due date of filing return.
No deduction of expenditure against dividend income will be allowed under section 57 except interest which will not exceed 20% of dividend income.
7. All Indian Citizens to be deemed resident of India if they are not resident of any other country. Such Indian Citizen shall be required to pay tax on global income.
8. For the purpose of determining residential status, the number of days for stay in India will be 120 days as against 182 days.
For Resident but not ordinary resident now test will be of non resident in 7 out of 10 preceding years as against present condition of 9 out of 10 preceding years.
9. Section 80M
has been inserted to allow deduction of dividend received by domestic company from another domestic company.
10. TCS at the rate of 0.1% will be applicable on sale of goods if total sales to one person is more than Rs 50 lakhs by a person having turnover of more than Rs 10 crore.
11. TCS in foreign remittance under LRS exccding Rs 7.00 lakh at the rate of 5%. Also on oversea tour package &5%.
12. Amendment in TDS provision of section 194A, 194J and TCS u/s 206C.
13. TDS u/s 194-O on e-commerce payment to e commerce participant at the rate of 1%.
TDS on FTS reduced under section 194J to 2%
14. Charitable Trust Registration and 80 G exemption to be for 5 years . All existing trust to apply again. 80 G exemption holder to submit annual statement of donation received . Failure to submit such statement fee of Rs 200 per day for each day of default under section271G and penalty of Rs 10000 to Rs 1.00 lakh under new section 271J.
15. Penalty for false entry of invoice or omitted invoice @100% of such transactions under new section 271AAD.
16. The limit for difference u/s 50C and 43CA has been increased from 5% to 10%.
17. Vivad se Vishwash Scheme to reduce litigation. Only tax amount to be paid . Full waiver of interest and penalty . In case of penalty and interest dispute which is not related to income only 25% of such interest and penalty to be paid.
In case payment is made after 31.3.2020 the amount to be paid is 110% of tax in dispute and 30% in case of penalty.
This will help all taxpayers having issues on demonetization, penny stock, share capital to pay just tax and get out of the dispute. Scheme has not been out in public domain but in the Annexure to the budget speech some clarity is coming out. Apparently there is no rider and no exclusion. It should be applicable to all type of defaults and additions.
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