KEY HIGHLIGHTS OF BUDGET 2020

I. CHANGE IN RESIDENTIAL STATUS

If an individual who is a citizen of India or person of Indian origin visits India for 120 days or more in a financial year and had spent more than 365 days in last four years, then such an individual will also become ‘resident’ in India.

Previously it was 182 days or more in a financial year.

An individual, being a citizen of India, shall be deemed to be resident in India in any previous year, if he is not liable to tax in any other country.
A person is said to be “not ordinarily resident” in India in any previous year, if such person is—
- a) has been a non-resident in India in 7 out of 10 previous years preceding that year.
- b) in case of a Hindu undivided family whose manager has been a non-resident in India in 7 out of 10 previous years preceding that year.
The clarification has come after the Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction:
The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. The interpretation of the proposed provision that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there, is not correct, as per the press release.

II. TURNOVER LIMIT FOR TAX AUDIT

1) The threshold limit to get accounts audited for the person carrying business was Rs.1 Crore.
2) The threshold limit for the person carrying on business has been increased from Rs. 1 Crore to Rs. 5 Crores if BOTH the following conditions are satisfied.

III. DUE DATE FOR TAX AUDIT.

The due for tax audit has been extended in the income tax act itself from 30th September to 31st October.

IV. RATIONALIZING THE PROCESS OF REGISTRATION OF TRUSTS, INSTITUTIONS, FUNDS

V. TAX ON EMPLOYER’S CONTRIBUTION TO PROVIDENT FUND AND OTHER FUNDS

1) As of now employer’s contribution to Provident fund will not be included in the employee’s income for the purpose of computation of tax.
2) Budget 2020 proposes to tax on the employer’s contribution to PF and NPS on the amount which exceeds Rs.7,50,000. The Budget has also proposed that even interest and dividend earned during the previous year would also be taxable.

VI. DEEMED CONSIDERATION

1) In case of transfer of asset, if value adopted for the purpose of stamp duty does not exceed 110% of the actual consideration received, then consideration so received shall be deemed to be the full value of consideration for computing capital gains on transfer of such capital assets.
2) Before the amendment it was 105% instead of 110%

VII. DEDUCTION FOR INTEREST ON HOUSING LOAN

VIII. DEDUCTION ON INTER-CORPORATE DIVIDEND

Under section 80M, for a dividend paying company it can avail deduction to the extent as below :

IX. ABOLISHMENT OF DIVIDEND DISTRIBUTION TAX

Companies were required to pay DDT at the rate of 15% plus surcharge of 10% and cess of 4% on the dividend distributed by the company. But with effect from 01-04-2020, Companies will be not be required to pay DDT on Dividend paid.

X. TAX ON DIVIDEND RECEIVED BY INDIVIDUALS

XI. EXEMPTION ON TAX ON ESOP

In the case of startups, employees possessing Employee Stock Option Plans (ESOPs) may defer paying taxes up to five years from the time of exercise, till the time they leave the startup, or until they sell their shares, whichever is earlier.

XII. TDS ON DIVIDEND INCOME

Companies were required to deduct TDS u/s 194 on dividend at the rate in force if the dividend paid exceeds Rs. 2500.
With the changes proposed in the present Budget. Companies will be required to deduct TDS at the rate of 10% if the dividend paid is more than Rs.5000. The TDS will be deducted only if it is paid in cash.

XIII. NEW TAX REGIME FOR INDIVIDUALS

The government has proposed a new income tax regime under Section 115BAC that comprises a significant change in the tax slabs rates.

Taxpayers have been provided with an option whether they want to pay taxes according to the new regime or if they want to continue paying taxes according to the existing regime.