UNION BUDGET 2020
Personal Taxation
Existing Income Slab (In Inr)
Status of Individuals – General Category
250,000
Nil
250,001-500,000
5%
500,001-10,00,000
INR 12500+20% on excess of INR 5 lakhs
10,00,001 & Above
INR 112,500+30% on excess of INR 10 lakhs
New Income Slab (In INR)
Status of Individuals – General Category
250,000
Nil
250,001-500,000
5%
500,001-750,000
INR 12,500 + 10% on excess of INR 5 lakhs
750,001-10,00,000
INR 37,500 + 15% on excess of INR 7.5 lakhs
10,00,001-12,50,000
INR 75,000 + 20% on excess of INR 10 lakhs
12,50,001-15,00,000
INR 1,25,000 + 25% on excess of INR 12.5 lakhs
15,00,000 and above
INR 1,87,500 + 30% on excess of INR 15 lakhs
The option for new tax rates shall be exercised for every previous year where the individual or the HUF has no business income, and in other cases the option once exercised for a previous year shall be valid for that previous year and all subsequent years.
The option shall become invalid for a previous year or previous years, as the case may be, if the Individual or HUF fails to satisfy the conditions and other provisions of the Act shall apply;
The condition for concessional rate shall be that the total income of the individual or HUF is computed, without any exemption or deduction of the following:
Clause (5) – Leave Travel Allowance, Clause (13A) – House Rent Allowance, Clause (14) – Conveyance Allowance, Children Educational Allowance, Lunch Allowance, Uniform Allowance, Transport Allowance etc subject to certain exceptions of Section 10 of the Act.
Clause (17) – Allowances to MPs/MLAs, Clause (32) of section 10 – Allowance for income of minor
Section 10AA – Exemption for SEZ unit
Section 16 – Standard Deduction, Entertainment allowance, professional tax.
Clause (b) of Section 24 – Interest on housing loan of self occupied or vacant property(Loss under house property)
Section 32 – Additional depreciation, Deduction under section 32AD, 33AB & 33ABA
Section 35 – Deduction for donation on scientific research
Section 35AD – Investment linked incentives
Section 35CCC – Expenditure on agricultural extension project
Section 57 – Deduction from Family Pension
Deductions in respect of Chapter VI-A except section 80CCD (NPS) and section 80JJAA(Incentives for employment generation)
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.
Tightening of residency provisions
It is proposed that the exception provided in clause (b) of Explanation 1 of sub-section (1) to section 6 for visiting India in that year be decreased to 120 days from existing 182 days.
an individual or an HUF shall be said to be “not ordinarily resident” in India in a previous year, if the individual or the manager of the HUF has been a non-resident in India in seven out of ten previous years preceding that year. This new condition to replace the existing conditions in clauses (a) and (b) of sub-section (6) of section 6. an Indian citizen who is not liable to tax in any other country or territory shall be deemed to be resident 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.
CBDT has provided clarification that the new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. It is further clarified that Indian citizen who become deemed resident of India under proposed provision, income earned outside India by him/her shall not be taxed in India unless it is derived from an Indian business or profession.
Deferring TDS or tax payment in respect of income pertaining to Employee Stock Option Plan (ESOP) of start- ups.
In order to ease the burden of payment of taxes by the employees of the eligible start-ups or TDS by the start-up employer, it is proposed to amend section 192 of the Act, and insert sub-section (1C) therein to clarify that for the purpose of deducting or paying tax under sub-sections (1) or (1A) thereof, as the case may be, a person, being an eligible start-up referred to in section 80-IAC, responsible for paying any income to the assessee being perquisite of the nature specified in clause (vi) of sub-section (2) of section 17 of the Act, in any previous year relevant to the assessment year 2021-22 or subsequent assessment year, deduct or pay, as the case may be, tax on such income within fourteen days —
after the expiry of 48 months from the end of the relevant assessment year; or
from the date of the sale of such specified security or sweat-equity share by the assessee; or
from the date of which the assessee ceases to be the employee of the person; whichever is the earliest on the basis of rates in force of the financial year in which the said specified security or sweat equity share is allotted or transferred.
Similar amendments have been carried out in section 191 (for assessee to pay the tax direct in case of no TDS) and in section 156 (for notice of demand) and in section 140A (for calculating self-assessment). These amendments will take effect from 1st April, 2020.
Rationalization of tax treatment of employer’s contribution to recognized provident funds, superannuation funds and national pension scheme.
Proposed to provide a combined upper limit of INR 750,000 in respect of employer’s contribution in a year to NPS, superannuation fund and recognised provident fund and any excess contribution is proposed to be taxable. Consequently, it is also proposed that any 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 may be treated as perquisite to the extent it relates to the employer’s contribution which is included in total income. This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year
Removing dividend distribution tax (DDT) and moving to classical system of taxing dividend in the hands of shareholders/unit holders.
Dividend or income from units are taxable in the hands of shareholders or unit holders 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 maximum 20 per cent of the dividend or income from units.
To remove cascading effect, set-off will be available in case of holding-subsidiary companies.
WHT at 10% if dividend exceeds INR 5,000 for resident shareholders. WHT at 20% (plus applicable surcharge or cess) or lower treaty rate for NR shareholders
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.
Corporate Taxation
Corporate tax rate remains unchanged
Resident co-operative societies have an option to opt for taxation under newly inserted section 115BAD of the Act. A new section 115BAD has been proposed to be inserted to provide an option to the cooperative societies to pay tax at the rate of 22% plus 10% surcharge and 4% cess. The income of such societies shall be computed without claiming specified exemption, deduction or incentive available under the Act. Provisions of Alternate Minimum Tax (AMT) shall not apply to such co-operative societies.
Existing domestic company may opt to pay tax at 15 percent (section 115BAB) or 22 percent (section 115BAA), if it does not claim any incentive and deduction provided under that section. Surcharge is at 10 percent in both cases.
It is now proposed to amend the provisions of section 115BAA and section 115BAB to not allow deduction under any provisions of Chapter VI-A other than section 80JJAA or section 80M, in case of domestic companies opting for taxation under these sections.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years. In case of the domestic company opting to pay tax at the rate of 22 per cent. under said section, it was provided that, a) Failure to satisfy specified conditions would disqualify it for the concessional rate and normal provisions of the Act shall apply.
b) Deemed loss or depreciation arising out of amalgamation attributable to any incentive, deduction or exemption, shall not be allowed in computation of income.
(c) For FY 2020-21, where there is unabsorbed depreciation allowance in respect of a block of asset which has not been given full effect to in earlier FYs, corresponding adjustment shall be made to the written down value of such block of assets as on 1st April, 2020.
(d) It shall be entitled to deduction under section 80LA of the Act, subject to fulfilment of conditions contained therein, in respect of a Unit in the International Financial Services Centre, if any.
(e) It is provided that such company shall not be subjected to MAT and carry forward and set off of MAT credit would not be allowed.
Amendment of section 115BAB of the Act to include generation of electricity as manufacturing
Beneficial corporate tax rate of 17.16% extended to domestic companies engaged in generation of electricity
Such entities are entitled to claim deduction for inter-corporate dividends
Tax Witholding
Amendment of section 194LC of the Act to extend the period of concessional rate of withholding tax and also to provide for the concessional rate to bonds listed in stock exchanges in IFSC.
Section 194LC of the Act, provided for a concessional rate of Tax Deductible at Source (TDS) at 5% by a specified company or a business trust, on interest paid to non-residents on the following forms of borrowings (approved by the Central Government) made in foreign currency from sources outside India
Extend the period of said concessional rate of TDS of 5% to 1st July, 2023 from 1st July, 2020
provide that the rate of TDS shall be 4% 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 recognised stock exchange located in any IFSC
This amendment will take effect from 1st April, 2020.
Section 194LD of the Act – Extend the period of concessional rate of withholding tax and also to extend this concessional rate to municipal debt securities.
Section 194LD of the Act provides for lower TDS of 5% in case of interest payments to Foreign Institutional Investors (FII) and Qualified Foreign Investors (QFIs) on their investment in Government securities and RDB of an Indian company subject to the condition that the rate of interest does not exceed the rate notified by the Central Government in this regard. The section further provides that the interest should be payable at any time on or after 1st June, 2013 but before 1st July, 2020
extend the period of rate of TDS of five per cent 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 a FII or QFI in respect of the investment made in municipal debt security.
This amendment will take effect from 1st April, 2020.
TDS on E-commerce transactions – Rationalisation measures
E-commerce operator, whether resident or non-resident of India now liable to deduct tax at source at the rate of 1% on payments made to e-commerce participant being a resident in India, for sale of goods or services, including digital products.
The sum credited or paid to an e-commerce participant (being an individual or HUF) by the e-commerce operator shall not be subjected to provision of this section, if the gross amount of sales or services or both of such individual or HUF, through e-commerce operator, during the previous year does not exceed INR 500,000 and such e-commerce participant has furnished his Permanent Account Number (PAN) or Aadhaar number to the e-commerce operator.
Amount directly paid by purchaser of goods or services to e-commerce participant deemed to be included in the gross amount
Where e-commerce participant does not have PAN or Aadhar, tax deduction would apply at the rate of 5%
Once tax has been deducted by e-commerce operator on the gross amount, no further liability to deduct tax exists under any other provisions. However, certain specified services not connected with sale of goods and services not covered by the exclusion. This amendment will take effect from 1st April, 2020.
Reducing the rate of TDS on fees for technical services (other than professional services)
It is proposed to reduce rate for TDS in section 194J in case of fees for technical services (other than professional services) to 2% from existing 10%. The TDS rate in other cases under section 194J would remain same at 10%. This amendment will take effect from 1st April, 2020.
Withholding tax for works contract to include manufacturing or supplying a product by a contractor, using the raw material supplied by an associate of customer
Widening the scope of section 206C to include TCS on foreign remittance through Liberalised Remittance Scheme
(LRS) and on selling of overseas tour package as well as TCS on sale of goods over a limit.
Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcohol, liquor, forest produce, scrap etc. Sub-section (1) of the said section, inter-alia, provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of certain goods a sum equal to specified percentage, of such amount as income-tax. In order to widen and deepen the tax net, it is proposed to amend section 206C to levy TCS on overseas remittance and for sale of overseas tour package, as under:
An authorised dealer receiving an amount or an aggregate of amounts of INR 700,000 or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS, if he receives sum in excess of said amount from a buyer being a person remitting such amount out of India, at the rate of 5%. In non-PAN/Aadhaar cases the rate shall be ten per cent.
A seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of five per cent. In non-PAN/ Aadhaar cases the rate shall be ten per cent.
The above TCS provision shall not apply if the buyer is,-
Liable to deduct tax at source under any other provision of the Act and he has deducted such amount.
The Central Government, a State Government , an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.
“Overseas tour program package” is proposed to be defined to mean any tour package which offers visit to a country or countries or territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expense of similar nature or in relation thereto
Capital Gains
Increase in safe harbour limit of 5% under section 43CA, 50C and 56 of the Act to 10%
Safe harbour limit of 5% under Section 43CA, 50C and 56 has been extended to 10%. These provisions shall not apply if the stamp duty value of an immovable property does not exceed 10% of the consideration or Rs. 50,000, whichever is higher.
Rationalization of provisions of section 55 of the Act to compute cost of acquisition
It is proposed to provide that in case of a capital asset, being land or building or both, the 29 fair market value of such an asset on 1st April, 2001 shall not exceed the stamp duty value of such asset as on 1st April, 2001 where such stamp duty value is available. Stamp duty value shall mean the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.
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.
Business Income
Providing an option to the assessee for not availing deduction under section 35AD
Section 35AD of the Act, relating to deduction in respect of expenditure on specified business, provides for 100% deduction on capital expenditure (other than expenditure on land, goodwill and financial assets) incurred by the assessee on certain specified businesses. Under sub-section (1) of section 35AD, the said deduction of 100% of the capital expenditure is allowable during the previous year in which such expenditure has been incurred. Further, sub-section (4) provides that no deduction is allowable under any other section in respect to the expenditure referred to in sub-section (1). At present, an assessee does not have any option of not availing the incentive under said section
Therefore, it is proposed to amend sub-section (1) of section 35AD to make the deduction thereunder optional. It is further proposed to amend sub-section (4) of section 35AD to provide that no deduction will be allowed in respect of expenditure incurred under sub-section (1) in any other section in any previous year or under this section in any other previous year, if the deduction has been claimed by the assessee and allowed to him under this section.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
Increase in threshold limit for tax audit in certain cases
The threshold limit for getting the accounts audited is proposed to be increased from Rs. 1 crore to Rs. 5 crores provided cash receipt or payment does not exceed 5% of total receipt or payment, as the case may be.
Further, 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 assessees at least one month prior to the due date of filing of return of income. Further, the due date for filing return of income under sub-section (1) of section 139 is proposed to be amended by:-
Providing 31st October of the assessment year (as against 30th September) as the due date for an assessee referred to in clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act;
Removing the distinction between a working and a non-working partner of a firm with respect to the due date as mentioned in sub-clause (iii) of clause (a) of Explanation 2 of sub-section (1) of Section 139 of the Act.
These amendments will take effect from 1st April, 2020.
Exempting non-resident from filing of Income-tax return in certain conditions. Section 115A of the Act provides for the determination of tax for a non-resident
Therefore, it is 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.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years
Allowing deduction for amount disallowed under section 43B, to insurance companies on payment basis
Section 44 of the Act provides that computation of profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or a co-operative society shall be computed in accordance with the rules contained in the First Schedule to the Act.
Section 43B of the Act provides for allowance of certain deductions, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by the assessee, only in the previous year in which such sum is actually paid
Therefore, it is proposed to insert a proviso after clause (c) of the said rule 5 to provide that any sum payable by the assessee which is added back under section 43B in accordance with clause (a) of the said rule shall be allowed as deduction in computing the income under the rule in the previous year in which such sum is actually paid
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
Deductions and Exemptions
Filing of statement of donation by donee to cross-check claim of donation by donor – It is proposed that;
Section 80G is proposed to be amended to provide that entities receiving donation shall be required to file a statement of the donation received and shall issue a certificate to donor. The mechanism shall be similar to TDS/TCS. These amendments will take effect from 1st June, 2020.
Exemption in respect of certain income of wholly owned subsidiary of Abu Dhabi Investment Authority and Sovereign Wealth Fund
Provide exemption to any income of a specified person in the nature of dividend, interest or long-term capital gains arising from an investment made by it in India, whether in the form of debt or equity, in a company or enterprise carrying on the business of developing, or operating and maintaining, or developing, operating or maintaining any infrastructure facility as defined in Explanation to clause (i) of sub-section (4) of section 80-IA of the Act or such other business as may be notified by the Central Government in this behalf.
In order to be eligible for exemption, the investment is required to be made on or before 31st March, 2024 and is required to be held for at least three years.
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.
Exemption in respect of certain income of Indian Strategic Petroleum Reserves Limited.
A new clause is proposed to be inserted in section 10 to provide an exemption in respect of income accruing or arising to Indian Strategic Petroleum Reserves Limited (ISPRL), being a wholly-owned subsidiary of Oil Industry Development Board under the Ministry of Petroleum and Natural Gas. This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.
Extension under section 80-IBA
In the Affordable Housing sector, benefits under Section 80-IBA of the IT Act were extended by a year for projects approved till March 2021. This will allow Real Estate developers to deduct 100% of profits derived from development of affordable housing projects. Extension of benefits in the real estate sector will give a boost to construction activity, particularly in affordable housing. Exemption from levy of tax on inventories is likely to encourage investment in the sector. From the consumers’ point of view, benefits of rollover in capital gains and exemptions on income tax on rent will boost housing demand, and is also expected to increase investments in a second house. 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.
Extending time limit for sanctioning of loan for affordable housing for availing deduction under section 80EEA of the Act to 31st March 2021
The existing provisions of section 80EEA of the Act provide for a deduction in respect of interest on loan taken from any financial institution for acquisition of an affordable residential house property. The deduction allowed is up to INR 150,000 and is subject to certain conditions. One of the conditions is that loan has been sanctioned by the financial institution during the period from 1st April, 2019 to 31st March, 2021. 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.
Rationalization of provisions of start-ups
The existing provisions of section 80-IAC of the Act provide for a deduction of an amount equal to 100% of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of seven years, at the option of the assessee, subject to the condition that the eligible start-up is incorporated on or after 1st April, 2016 but before 1st April, 2021 and the total turnover of its business does not exceed twenty-five crore rupees.
In order to further rationalise the provisions relating to start-ups, it is proposed to amend section 80-IAC of the Act so as to provide that-
the deduction under the said section 80-IAC shall be available to an eligible start-up for a period of three consecutive assessment years out of ten years beginning from the year in which it is incorporated;
the deduction under the said section shall be available to an eligible start-up, if the total turnover of its business does not exceed one hundred crore rupees in any of the previous years beginning from the year in which it is incorporated.
Assessment and Appeals
Modification of e-assessment scheme
It is proposed to amend sub-section (3A) of section 143 of the Act to,-
(i) expand the scope so as to include the reference of section 144 of the Act relating to best judgement assessment in the said sub-section;
(ii) provide that Central Government may issue any direction under sub-section (3B) of the said section upto 31st March, 2022.
This amendment will take effect from 1st April, 2020.
Amendment in Dispute Resolution Panel (DRP)
It is proposed that the provision of section 144C of the act 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.
Provision for e-appeal
It is Proposed to insert sub-section (6A) in section 250 of the Act to Empowering Central Government to notify an e-appeal scheme for disposal of appeal so as to impart greater efficiency, transparency and accountability.
Eliminating the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible.
Optimizing utilization of the resources through economies of scale and functional specialisation.
Introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).
Such directions are to be issued on or before 31st March 2022. It is proposed that every notification issued shall be required to be laid before each House of Parliament. This amendment will take effect from 1st April, 2020.
Providing check on survey operations under section 133A of the Act
It is proposed that in a case where the information has been received from the prescribed authority, no income-tax authority below the rank of Joint Director or Joint Commissioner, shall conduct any survey under the said section without prior approval of the Joint Director or the Joint Commissioner, as the case may be; and
in any other case, no income-tax authority below the rank of Commissioner or Director, shall conduct any survey under the said section without prior approval of the Commissioner or the Director, as the case may be.
This amendment will take effect from 1st April, 2020.
Clarity on stay by the Income Tax Appellate Tribunal (ITAT) – No stay by ITAT unless 20% of the disputed tax is deposited
It is proposed to provide that stay under the first proviso to section 254(2A) shouldn’t be provided by ITAT unless assessee deposits or furnish security for atleast 20% of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act.
Further stay under second provision to section 254(2A) can only be granted on an application made by the assessee, if the delay in not disposing of the appeal is not attributable to the assessee and the assessee has deposited 20% of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act. The total stay granted by ITAT cannot exceed 365 days.
Provision for e-penalty
The Central Government may notify an e-scheme for the purposes of imposing penalty so as to impart greater efficiency, transparency and accountability. In this scheme the interface between the Assessing Officer and the assessee in the course of proceedings shall be eliminated to the extent it is feasible technically.
Insolvency Professionals can act as “authorised representative”
Section 288 is proposed to be amended to provide that Insolvency Professional can appear before any Income-tax Authority or the Appellate Tribunal on behalf of an assessee as its “authorised representative”
Penalty for fake invoice
It is proposed to introduce a new provision in the Act to provide for a levy of penalty on a person, if it is found during any proceeding under the Act that in the books of accounts maintained by him there is a (i) false entry or (ii) any entry relevant for computation of total income of such person has been omitted to evade tax liability. The penalty payable by such person shall be equal to the aggregate amount of false entries or omitted entry. It is also propose to provide that any other person, who causes in any manner a person to make or cause to make a false entry or omits or causes to omit any entry, shall also pay by way of penalty a sum which is equal to the aggregate amounts of such false entries or omitted entry. The false entries is proposed to 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 services or both; or
invoice in respect of supply or receipt of goods or services or both to or from a person who do not exist.
This amendment will take effect from 1st April, 2020.
Others
Modification in conditions for offshore funds’ exemption from “business connection”
Section 9A of the Act provides for a special regime in respect of offshore funds by providing them exemption from creating a “business connection” in India on fulfilment of certain conditions. It has been proposed that certain conditions for offshore funds shall be relaxed.
Excluding interest paid or payable to Permanent Establishment of a non-resident Bank for the purpose of disallowance of interest under section 94B.
It is, therefore, 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.
Modification of the definition of “business trust”
Section 115UA of the Act provides for a taxation regime applicable to business trusts. Under the said regime, the total income of the trust, excluding capital gains income is charged at the maximum marginal rate. Further, the income by way of interest and rent, received by the business trust from a Special Purpose Vehicle (SPV) is accorded pass through treatment i.e. there is no taxation of such interest or rental income in the hands of the trust and no withholding tax at the level of SPV. The business trusts are also required to furnish return of income and adhere to other reporting requirements
Therefore, it is proposed to amend clause (13A) of section 2 of the Act to modify the definition of “business trust” so as to do away with the requirement of the units of business trust to be listed on a recognised stock exchange.
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
Expanding the eligibility criteria for appointment of member of Adjudicating Authority under the Prohibition of Benami Property Transaction Act, 1988
The existing provisions of section 9 of the PBPT Act, inter-alia, provides that, a member of the Indian Revenue Service who has held the post of Commissioner of Income-tax or equivalent post in that Service; or a member of the Indian Legal Service who has held the post of Joint Secretary or equivalent post in that Service is qualified for appointment as a Member of the Adjudicating Authority. It is proposed to amend the said section so as to provide that a person who is qualified for appointment as District Judge shall also be eligible for the appointment as a Member of the Adjudicating Authority.
This amendment will take effect from 1st April, 2020.
Transfer Pricing
Permanent Establishment (PE) Attribution
Section 92CB of the Act empowers the Central Board of Direct Taxes (Board) for making safe harbour rules (SHR) to which the determination of the arm’s length price (ALP) under section 92C or section 92CA of the Act shall be subject to. As per Explanation to said section the term “safe harbour” means circumstances in which the Income-tax Authority shall accept the transfer price declared by the assessee. This section was inserted in the Act to reduce the number of transfer pricing audits and prolonged disputes especially in case of relatively smaller assessees. Besides reduction of disputes, the SHR provides certainty as well.
In view of the above, it is proposed to amend section 92CB and section 92CC of the Act to cover 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.
Deferral of ‘significant economic presence’ (SEP) provisions
Applicability of the SEP provisions deferred to AY 2022-23 since OECD is expected to finalise the BEPS 2.0 report by end of 2020
Due Date for filing of transfer pricing report in Form 3CEB
Due date for filing of Form 3CEB advanced by one month to 31 October of the relevant Assessment Year
Indirect Taxes
Customs Duty
BCD maintained at 10%.
Detailed process laid down to test compliance with Rules of Origin (ROO) under Preferential Trade Agreements
Reliance on certificate of origin issued by notified authorities in exporting country no longer sufficient; importer to provide declaration of compliance, maintain proper records, and provide data to prove compliance with ROO
Preferential trade benefits may be disallowed or temporarily suspended in case importer fails to provide requisite information for verification
In case of suspension, goods may be released subject to furnishing of security or payment of differential duty in prescribed manner
Power to prohibit import or export of goods for “prevention of injury to the economy of the country” was previously restricted to gold and silver; now extended to ‘all goods’
Amendments made in safeguard provisions related to protection against surge in quantity of import of any article or under such conditions that causes serious injury to the domestic industry
Measures to now include application of a tariff rate quota, in addition to imposition of a safeguard duty
Tariff rate quota measures, where used, shall not be fixed below the average level of imports in last 3 representative years unless deemed necessary
Anti-dumping rules made more comprehensive and wider in scope to strengthen the anti-circumvention measures
Amendments made to rules related to countervailing duty on subsidized articles to enable investigation into cases of circumvention of such duties
Health cess of 5% imposed with effect from 2 February 2020 on import of various medical devices falling under CTH 9018, 9019, 9020, 9021 and 9022. To be levied as duty of Customs
Social Welfare Surcharge exempted on certain goods
including all commercial vehicles (including electrical vehicles), if imported in CBU
Social Welfare Surcharge exemption withdrawn in case of certain goods covered under Chapter 84 and Chapter 85
Amendments introduced to Customs Tariff Act, to enable application of safeguard measures including tariff rate quota, in order to curb increased quantity of imports of goods which causes or threatens to clause serious injury to domestic industry
Electric motor vehicles to attract higher duties for CBU, SKD and CKD wef 1 April 2020
BCD increased on dairy products
Imported toys, dolls to attract 60% BCD
Furniture from 20% to 25%
Exemptions withdrawn/ rates revised for parts and components of products, including for mobile phones, refrigerators, air conditioners, printers etc
GST
Enabling provisions inserted for cancellation of voluntary registrations by GST authorities
Delay in application for revocation of cancellation of registrations can be condoned for a cumulative period of 60 days
Removal of difficulty orders can now be issued up to 30 June 2022
Eligibility criteria under composition scheme to apply equally for goods as well as services
100% penalty to be imposed on persons retaining benefit of certain transactions and at whose instance such transactions are conducted supplies without or with false invoices, invoices in violation of provisions of GST laws, supplies without provision of goods or services, etc.
GST compliances
Introduction of new return regime with effect from 1 April 2020, reiterated
E-invoicing regime proposed to be implemented in a phased manner