Key changes in income tax w.e.f 01 – April – 2020

ey changes in income tax w.e.f 01 – April – 2020

1) Taxpayers can now choose between two options ( one claiming deductions, other not claiming deductions ) to arrive at their tax liability. They can choose options beneficial to them.

2) Salary taxpayers can switch between two options every year, whereas businessmen and professionals can choose it only once.

3) The dividend would now be taxed in hands of taxpayers. No DDT to be paid by companies. Also, a surcharge on dividend income capped at 15 percent of dividend income.

3) TDS to be deducted on dividend payment by the company or mutual funds on the amount exceeding Rs 5,000 in a year.
Do note that tax would not be deducted on the capital gain portion earned on the mutual funds.

4) Govt has amended sections 6 & 115C(e), thereby bringing citizens/persons of Indian origins into tax regime who were not paying tax elsewhere in the world . However, relaxation has been given to those earning less than Rs 15 lakh of Indian income. The status of such deemed resident would be Resident and Non ordinarily resident.
5) Section 206C (1 H ) has been inserted which says that TCS would be collected @ 0.1 percent from the buyer who purchases goods exceeding Rs 50 lakhs from a seller whose turnover during the last financial year was Rs 10 crore or more.
Export sales would be excluded from such provisions. Also, If TDS is being deducted from a particular transaction, it won’t attract this provision.

6) Equalization levy of 2 percent( applicable surcharge also) would be applicable to e-commerce operators (non-resident whose annual turnover exceeds 2 crores.
This would cover the online supply of goods, services or facilitating platforms for goods or services.
However the same won’t affect the existing transactions covered under Equalisation levy and also if the non-resident has any PE in India.

7) TDS has to be deducted by e-commerce operator ( resident ) @ 1 percent while making payments to Individual & HUF if Gross sales or receipts exceed 5 lakhs in a year. However, a higher TDS of 5 percent (irrespective of limit) be charged if no PAN / Aadhar number not provided.

Also, this section does not apply if payment is made to non-resident individual or HUF.

8) TDS under section 194 N on cash withdrawals exceeding 20 lakhs would be levied @ 2 percent (5 percent if more than 1 crores ) if ITR not filed for continuous 3 years.
However, it also mentions that if the return is filed not within the limit specified under 139(1), then also provision would apply. But how would the bank implement this would be a challenging task.

9) TCS provisions on overseas foreign tour package would be levied at 5 percent. However, it also covers cases where it is sold by overseas your operator, thereby bringing them under TCS provisions, which would be another challenge.

10) Section 206C(1 G ) is being brought to levy TCS on all transactions undertaken through the LRS route where the sum exceeds 7 lakhs per authorized dealer. TCS would be levied at 5 percent in all cases except in case of education loan money being sent where TCS would be levied at 0.5 percent. This TCS would only be levied on Resident individual and not on any other taxpayers.
This would lead to a dual TCS burden on those who are going abroad for leisure purposes as they would be first taxed under overseas tour package and later under LRS.

11) TDS Would be deducted at 20 percent in case the dividend is paid by an Indian company to a non-resident.

Notes:
TDS and TCS provisions have been deferred till 01 Oct 2020, whereas the Equalisation levy provision is applicable from 01 April 2020.