R Sogani & Associates Chartered Accountants FINANCE ACT,...

R Sogani & Associates Chartered Accountants

A.Y. 2020-21 Finance Act, 2019- An Overview

FINANCE ACT, 2019

The tax proposals for the current fiscal year were put forward in the interim budget presented by then Finance Minister Piyush Goyal on 1st February, 2019, and the Union Budget presented by Finance Minister Nirmala Sitharaman on 5th July, 2019. Both of the proposals have received the green flag from our Hon’ble President on 21st February, 2019 and 1st August, 2019 respectively. The Finance Bill, therefore, has culminated into the Finance Act, 2019.

The Finance Act has led to the introduction of more than two dozen official amendments across various acts.

Attached are the key highlights of the changes introduced by the Finance Act, 2019, to the Income Tax Law.



MAJOR CHANGES IN INCOME TAX ACT, 1961

1. Changes in Income Tax Rates

Change in Surcharge Rates Although, there is no change in the Slabs and Income Tax Rates for Individuals, HUFs, AOPs and BOIs, but the surcharge has been significantly increased of income above Rs. 2 crore as under:

Total Income (Rs.) Existing Surcharge

Rate

(F.Y. 2018-19)

New Surcharge Rate

(F.Y. 2019-20)

50 Lakhs to 1 Crore 10% 10%

1 Crore to 2 Crores 15% 15%

2 Crores to 5 Crores 15% 25%

Exceeding 5 Crores 15% 37%

Rebate u/s 87A The rebate u/s 87A has been extended to all the Individuals and HUFs whose total income is up to Rs. 5 Lakhs. Therefore, no tax is now payable by Individuals and HUFs having total income upto Rs. 5 Lakhs.

Change in Tax Rates for Domestic Companies

Domestic Companies having total turnover/gross receipts not exceeding INR 400 crores in Financial Year 2017-18 (instead of Rs. 250 crores as prescribed earlier) shall be taxed at the concessional corporate tax of 25% instead of 30%. Prescribed Rates of Income Tax and TDS are being given separately in Annexure I and II.



2. Measures for Promoting Cashless Economy

Mandating acceptance of payments through electronic modes

Every person, whose turnover or gross receipts during immediately preceding previous year exceeds Rs. 50 crores, is now required to provide facility for accepting payments through prescribed electronic modes as discussed

below, in addition to the existing electronic modes of payments, if any, under newly inserted section 269SU. In case of failure to provide such facility, penalty of Rs. 5,000 per day can be imposed. The provision will be applicable from 1st November, 2019.

Other Modes Prescribed for Making Payments There are various provisions in the Act, which prohibit cash transactions and allow payment or receipt only through account payee cheque, account payee bank draft or electronic clearing system through a bank account.

At present there are few payment modes like Oxigen, ecoPayz, PayPal, Venmo, freecharge, etc which were earlier not covered under the ambit of the existing provisions. Therefore, it is now provided to allow such other electronic modes as may be prescribed, in addition to the existing permissible modes of payment for the purpose of the provisions of the Act. Other electronic modes will be notified in due course.

TDS on cash withdrawal to discourage cash transactions

Every bank shall deduct tax @ 2% on cash payments to account holder (i.e. on withdrawals for recipient) exceeding Rs. 1 crore from all the accounts in aggregate a maintained with it in a previous year. Deduction shall be made on the sum that exceeds Rs.1 crore. This provision will be applicable from 1st September, 2019.



3. Widening and Deepening of Tax Base

TDS on Payments made by Individual/HUF to Contractors, Commission Agent, Broker or Professionals At present, there is no liability on Individual/ HUF to deduct TDS while making payment to resident contractors, commission agents, brokers or professionals, when it is for personal use or if such Individual/HUF is not subjected to tax audit. It is now provided u/s 194M that Individual or HUF, not covered under existing provisions u/s 194C, 194H or 194J, is required to deduct tax on payment made for Contract Work, Commission, Brokerage or Professional Services @ 5% if aggregate of such sum exceeds Rs. 50 Lakhs to a resident during a financial year. Such individual or HUF shall be able to deposits the tax deducted using their PAN and shall not be required to obtain TAN.

TDS at the time of Purchase of Immovable Property

At present, section 194-IA levies TDS @ 1% on the amount of consideration paid for purchase of immovable property other than agricultural land. The term consideration for immovable property is not defined, and, thus, the buyer does not include the other contractual payments (eg: club fees, parking fees, etc) for calculation of TDS.

Therefore, it is not provided that the following charges shall be included in the term ‘Consideration for Immovable Property’ and thus, TDS will be levied on the same:

• Club Membership Fee

• Car Parking Fee

• Electricity or Water Facility Fee

• Maintenance Fee

• Advance Fee

• any other charges of similar nature, which are incidental to transfer of the immovable property.



4. Increase of Threshold Limits for TDS

Payment of Interest u/s 194A At present, the Banks, Co-operative Society and Post Office are required to deduct TDS @ 10% if the payment of interest to a resident exceeds Rs. 10,000 in a financial year. This limit has now been increased to Rs. 40,000.

Payment of Rent u/s 194I At present, threshold for deduction of tax on the payment of rent is Rs. 1,80,000 in a financial year. This limit has now been increased to Rs. 2,40,000.

5. Standard Deduction on Salary increased

At present, salaried individuals are allowed a standard deduction of Rs. 40,000 on the salary income. This limit has now been increased to Rs. 50,000.

6. Deduction for Investment in Two Residential Houses

At present, deduction from capital gains tax on sale of a residential house is allowed to Individuals/HUF u/s 54 to the extent of the sale proceeds utilized for investment in one residential house. It is now provided that the assessee, being an Individual/HUF, can invest in two residential houses instead of one residential house for claiming deduction u/s 54 where capital gain does not exceed Rs. 2 crores. However, this option of deduction can be exercised by the assessee only once in a lifetime.



7. Option to claim two houses as Self Occupied Property

The Annual Rental Value (ARV) for a Self Occupied Property (SOP) being a residential house is taken as NIL. The option to claim SOP as NIL is available only for one residential house. It has now been increased to two residential house properties, that is, assessee can claim Self Occupied Property status for two house properties (i.e. ARV shall be NIL for these properties). However, the deduction of interest u/s 24(b) for both the properties in aggregate shall not exceed Rs. 2,00,000.

8. Notional Income of House Property Held as Stock-in-Trade

Before 2017, the common view was that the notional rent from vacant house property held as Stock-in-Trade by entities involved in the Real Estate business will not be liable to taxation. However, Honb’le Delhi High Court in the case of Ansal Housing, had taken a view that such house property, if vacant and held as stock in trade is also liable for notional value of rent and tax thereon. To reduce the adverse impact of this decision, Finance Act, 2017 specified that the notional value of rent of such house property shall be considered to be NIL if it is held as stock-in-trade, and it is not let out during the whole or any part of the year, provided that this benefit would be available for a period up to one year from the end of the financial year in which the completion certificate is obtained from the relevant authority.

Now, the benefit of this exemption has been extended to two years, i.e. the notional rent from vacant house property held as stock-in-trade is to be offered for taxation after the expiry of two years from the end of the financial year in which the certificate of completion is obtained from competent authority.



9. Tax Incentives for Affordable Housing

Modification of Conditions Prescribed in Section 80-IBA At present, 100% deduction of profits derived from Affordable Housing Project is provided u/s 80-IBA, subject to compliance of certain conditions. These conditions are further aligned with the definition given under GST Act as under:

Condition Earlier Now Maximum Carpet Area of Residential Unit

30 Sq. mts in metropolitan cities.

60 sq. mts for other cities.

60 sq. mts in metropolitan cities.

90 sq. mts for other cities.

Maximum Stamp Duty Value of Residential Unit

No such condition.

Rs. 45 lacs.

Deduction for Interest Paid for Affordable Residential Unit

A new deduction u/s 80EEA is provided to Individual in respect of interest payment up to Rs. 1,50,000 on loan taken for residential house property from any financial institution, subject to the following conditions:

Condition Period of Sanction From 1.04.2019 to 31.03.2020

Maximum Stamp Duty Value Rs. 45 lakhs. Eligibility condition

Assessee should not own any other residential property as on the date of

sanction of loan.

10. Condition of Carry Forward or Set off of Losses by Start Ups Relaxed

At present, Section 79 of the Act provides conditions for carry forward and set off of losses in case of a closely held company. Clause (a) of this section



applies to all such companies, except an eligible start-up, while clause (b) applies only to such eligible start-up. Under clause (a), no loss incurred in any preceding years shall be carried forward and set off against the income, there is any change in shareholding for 51% or more. Under clause (b), the loss incurred in any preceding year shall be carried forward and set off against the income, if, all the shareholders of such company continue to hold those shares and such loss has been incurred during the period of seven years beginning from the date of incorporation. It is now provided that in the case of closely held eligible start-up, loss shall be allowed to be carried forward and set off against the income on satisfaction of either of the two conditions stipulated currently at clause (a) or clause (b). For other closely held companies, there would be no change.

11. Tax Incentive for Electric Vehicles

In order to promote the usage of electric vehicles, a new deduction u/s 80EEB is provided to Individual in respect of interest on loan taken for purchase of electric vehicle upto Rs. 1,50,000.

12. Tax on Buy-Back of Shares by Listed Company

At present, distributed income on account of buy back of Unlisted shares by the company attract additional income tax @ 20% in the hands of Company u/s 115QA. The consequential income arising in the hands of shareholders is exempt from tax. This provision has now extended to the companies whose



shares are listed on recognized stock exchange. Thus any buy back of shares from a shareholder by a company listed on recognized stock exchange, on or after 5th of July, 2019, shall also be covered by the provision of section 115QA of the Act.

This is prepared for Client’s service and is for internal use only. We recommend that before taking action on any specific issue, professional advice should be sought

For R. Sogani & Associates Chartered Accountants

Place: Jaipur (Rakesh Kedia) Date: 9th August, 2019 Partner


A.Y. 2020-21 Income Tax Rates

Annexure I INCOME TAX RATES

A.Y. 2019-20 & A.Y. 2020-21

I. INDIVIDUALS/HUF

a. Individuals (other than Resident Senior & Super Senior Citizens) & HUF

INCOME SLABS A.Y. 2019-20 A.Y. 2020-21

0 – 2,50,000 Nil Nil

2,50,001 – 5,00,000 5% 5%

5,00,001 – 10,00,000 20% 20% 10,00,001 & above 30% 30%

b. Resident individuals – Senior Citizens (Age of 60 years or more but less

than 80 years)


0 – 3,00,000 Nil Nil

3,00,001 – 5,00,000 5% 5%

5,00,001 – 10,00,000 20% 20% 10,00,001 & above 30% 30%

c. Resident individuals – Super Senior Citizens (Age 80 years & above)

Income Slabs A.Y. 2019-20 A.Y. 2020-21

0 – 5,00,000 Nil Nil

5,00,001-10,00,000 20% 20% 10,00,001 & above 30% 30%



d. Rebate u/s 87A in case of Resident Individuals

PARTICULARS A.Y. 2019-20 A.Y. 2020-21

Total income

Upto Rs. 3,50,000 : 100% of tax paid or Rs.

2,500, whichever is lower.

Upto Rs. 5,00,000 : 100% of tax paid,

that is, Rs. 12,500.

e. Surcharge Rates for Individuals/HUF


Upto 50 lakh Nil Nil

More than 50 lakh upto 1 crore 10% 10%

More than 1 crore upto 2 crore 15% 15% More than 2 crore upto 5 crore 15% 25%

More than 5 crore 15% 37%

II. PARTNERSHIPS AND LLPS

Income Slabs A.Y. 2019-20 A.Y. 2020-21

Whole of the Total Income

30% 30%

Plus Surcharge for income above 1 crore 12% 12%

Note: Alternate Minimum Tax (AMT) for non-corporate assessees (including LLPs) @ 18.5%.



III. COMPANY (DOMESTIC)

Gross Turnover or Gross Receipts Slabs A.Y. 2019-20 A.Y. 2020-21

Specified previous year 2016-17 2017-18

Turnover or Gross Receipts

are less than or equal to Rs.

200 crores in the specified

previous year.

25% 25%

Turnover or Gross Receipts

are more than 200 crores but

upto 400 crores in the

specified previous year.

30%

25%

Others 30% 30%

Plus Surcharge 7% for income above 1

crore and 12% for income above 10 crore

7% for income above 1 crore and 12% for

income above 10 crore

Note: Minimum Alternate Tax (MAT) for corporate assessees @ 18.5%.

IV. HEALTH & EDUCATION CESS

Health and Education Cess is applicable to all assessees, on Tax Payable + Surcharge, if any, as under:

PARTICULARS A.Y. 2019-20 A.Y. 2020-21

Health & Education Cess 4% 4%


A.Y. 2020-21 TDS Law- An Overview

Annexure II TDS LAW - AN OVERVIEW

A.Y. 2020-21 w.e.f. 1st April, 2019

APPLICABLE TO ALL PERSONS:

Nature of Payment Rate of TDS Monetary Limits Requiring TDS/Remarks

Salary u/s 192

No specific rate. Tax payable on

Total Salary is to be deducted in 12 equal monthly instalments.

Estimated Gross Salary exceeds Rs.5 lakh.

Employer is required to obtain Form 12BB from the employee for investment and other incomes.

Transfer of Immovable Property

other than Rural Agricultural Land u/s

194- IA

1% of Consideration for

Immovable Property

If purchase consideration is equal to or exceeds Rs. 50 lakh.

Consideration for Immovable Property includes charges that are incidental to transfer of the immovable property, like car parking fees, maintenance fees etc.

TAN is not required for deduction of tax under this section.

APPLICABLE TO INDIVIDUALS/HUFS NOT COVERED UNDER TAX AUDIT:

Payment made to contractors and

professionals u/s 194M

5%

Applicable w.e.f 1st September, 2019. Payment or credit for contract

work, commission, brokerage or professional services to a resident in a financial year exceeding Rs. 50 lakh in aggregate.



Applicable even if the expense is personal in nature.

TAN is not required, for deduction of tax under this section.

Not Applicable If such transaction is already

covered u/s 194J or 194C.

Rent u/s 194-IB

5%

Amount credited or paid exceeds Rs. 50,000 per month.

Applicable to Individuals/HUFs not covered under Tax Audit.

TAN is not required for deduction of tax under this section.

APPLICABLE TO SPECIFIED INDIVIDUALS/HUFS AND ALL OTHER PERSONS:

Interest

u/s 194A 10%

Amount credited or paid exceeds Rs. 5,000.

In case, payer is a Banking Co. /Co-operative Bank/Post Office, the limit is Rs. 40,000.

The threshold for senior citizens is Rs. 50,000.

Payments Made to Contractors u/s 194C

If recipient is an Individual or HUF- 1%.

2% in other cases.

Amount credited or paid exceeds Rs. 30,000 to a contractor in a single payment or Rs. 1 lakh in the aggregate during the financial year to a contractor.

No liability of deducting tax on Individual/HUF under this section if amount is paid/credited to contractor exclusively for personal purposes.

Rent u/s 194-I

Plant or Machinery or Equipment- 2%

Amount credited or paid exceeds Rs. 2.40 lakh in aggregate in a financial year to a single person.



Land or building or furniture or fittings- 10%.

Fees for Professional and Technical

Services u/s 194J

10%

Amount credited or paid exceeds Rs. 30,000 in a financial year.

No liability of deducting tax on Individual/HUF under this section if amount is paid/ credited exclusively for personal purposes.

2% in case of a payee, engaged only in the business of operation of call center.

Commission or Brokerage u/s 194H 5% Amount credited or paid exceeds

Rs. 15,000 in a financial year.

TAX COLLECTED AT SOURCE

Sale of Scrap and Timber u/s 206C

Scrap - 1%

Applicable when scrap is purchased by buyer for trading.

“Scrap" means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons.

Not required when scrap is purchased by the buyer for further manufacturing or processing, provided that the declaration for the same is submitted in Form No. 27C.

Timber – 2.5%



EQUALISATION LEVY

Payment to a Non-resident for online

advertising and digital advertising u/s 165

6%

Applicable When payment made to a non-

resident exceeds Rs. 1 lakh for services of online advertising, digital advertising and any other specified services.

Not Applicable When the non-resident has a

permanent establishment (PE) in India and the specified service is connected with such permanent establishment.

When aggregate amount of consideration payable does not exceed Rs. 1 lakh in a financial year.

When payment is not for the purposes of carrying out business and profession.

Notes:

S. No. Particulars

1.

Time limit for deposition of tax deducted

For the month of March, on or before 30th April where income is credited or paid in the month of March.

i. In any other case on or before 7 days from the end of the month in which the deduction is made.

ii. In case of deduction of tax u/s 194-IA/194IB, on or before 30 days from the end of the month in which tax is deducted. Payment should be accompanied by Form No. 26QB or 26QC respectively.

iii. In case of Equalisation levy, the amount deducted shall be paid within a period of 7 days from the end of the month, in which such levy was so deducted.



2.

Interest for late deduction/deposition of tax

i. If no tax is deducted, simple interest @ 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted.

ii. If tax is deducted but not deposited in time then simple interest @ 1.5% per month or for part of the month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

3.

Penalty for late deduction/deposition of tax If no tax is deducted or deducted but not deposited, then penalty to the extent of such tax amount can be imposed.

4.

Prosecution for late deduction/deposition of tax If the tax deducted or collected at source is not deposited within the due date, the assessee shall be punishable with rigorous imprisonment for a minimum period of 3 months, which can extend to 7 years. This is in addition to interest & penalty.

5.

Time limit for filing of return of TDS Quarterly Statements

i. In case of IV Quarter (Jan-Mar), on or before 31st May of the financial year immediately following the financial year in which deduction is made.

ii. For remaining quarters, within 1 month from the end of the relevant quarter.

iii. No other statement needs to be filed separately for tax deducted u/s 194-IA and 194-IB.

iv. Furnishing of statement of Equalisation Levy- A v. Annually in Form No. 1 on or before the 30th June immediately

following that financial year.

6.

Late fee for delay in filing of return If TDS/TCS return is not filed in time, then, a late fee of Rs.200 per day till the failure to file return continues, shall be levied. However, the penalty should not exceed the amount of TDS for which statement was required to be filed. Additionally, a penalty ranging from Rs. 10,000 to Rs. 1,00,000 shall also be levied for not furnishing TDS/TCS return within one year from prescribed time or for furnishing incorrect statements in TDS/TCS return.

7. No TDS is required to be deducted on GST amount.



8. Specified Individuals/HUFs are those Individuals/HUFs that are covered under tax audit.

9. Surcharge and Health & Education Cess are not applicable in case of payment other than salary to a resident.

10.

i. Details of various Form i.e. 15G, 15H, are to be furnished electronically with the returns of tax deducted at source. Delay will attract penalty @ Rs. 100 per day of delay.

ii. Form 27C received, is to be deposited with Commissioner of Income Tax on or before the seventh day of the month next following the month in which the declaration is furnished to him. Delay will attract penalty @ Rs. 100 per day of delay.

iii. 15G/ 15H Form can be issued for interest income and rental income.

11.

Tax is not required to be deducted u/s 194C in case of payment made to transporters in the following case:

i. A declaration of owing less than or equal to 10 goods carriage at any time during the year and

ii. Furnishing of Permanent Account Number.

12.

Payments to transporters without deducting tax (as they have quoted PAN) are to be reported by deductor with PAN details in the TDS Quarterly Statements.

13.

Every deductee including transporter is required to furnish his Permanent Accountant Number to the deductor. Otherwise tax will be deducted at the rate of 20%.

14.

Time Limit for issue of certificate

Nature of Payment

Form No. Periodicity Due date of Issue

Salary 16 Annually

On or before June 15 of the financial year immediately following the financial year in which tax is deducted.

Other than Salary 16A Quarterly Within 15 days from the due date for

filing the TDS return.

206C 27D Quarterly Within 15 days from the due date for furnishing the statement of TCS.

R Sogani & Associates Chartered Accountants FINANCE ACT,...

Documents

Transcript of R Sogani & Associates Chartered Accountants FINANCE ACT,...