Simplifying Budget

PROPOSED BUDGET'S IMPACT

You might have got loads of memorandum copies, finance bill copies and other things from various platforms, this article we shall not copy paste whatever given in those instead let's try on trying to apply those things on how it might affect us or how it is to be read on.

Another thing to be noted is every year after a budget is laid down, a debate, and discussion happens and until it is incorporated in Act, it goes through several amendments and hence in case if you are not in favor of change, do keep your hopes high J

We Citizens have been given opportunity by every government which presents budget to have its say, for this budget it was provided up to 20th January, 2020. Which on a majority is never taken seriously by citizens and hence would request the readers to grow awareness on this in case you got any suggestion you can provide it to the government via online measures?

Moving ahead this article we have given data trying to simplify things as much as possible, any misinterpretation of any proposed budget feel free to mention the same in the comments section for others to get exact proposed

1. Resident Co-Operative Society Tax Rate to be reduced

• All Co-operative Societies were earlier taxed at in a specially mentioned slab rates for them which had a rate of 30% for income above Rs.20,000/-
• In Budget, resident co-operative society has been given an option to pay tax at 22% subject to conditions mentioned therein.
• Resident Co-operative Society is those which are formed in apartment associations etc.

2. Incentives to Individual & HUF

a. This is the most hot topic as of now, Further the budget has given a different set of calculation of tax for individual and HUF, and it is optional.

b. Further in case if you are planning to opt for the same do remember the following points

i. This option if exercised by individual or huf which has business income then he cannot go back to old scheme, if he doesn't have business income then every year he can opt for the scheme which ever is beneficial.

ii. You Cannot Claim Exemptions of (Means while calculating income do not reduce the following)

• House Rent Allowance (Salary)
• Any Perquisite Exemption (Salary)
• Any Allowance received by Member of parliament (Salary)
• Minor Child Exemption
• 10AA  Exemptions
• Professional Tax Paid (Salary)
• Additional Depreciation(Normal can be taken) (Business)
• Interest on House Loan Paid (Self Occupied House Property)
• Deduction on family pension
• All other Deductions other than NPS AND EMPLOYMENT RELATED TO BUSINESSMEN.

iii. From my perspective this new tax rate is suitable for HUF's however. I put my view as this has been brought to make people habituated and align towards upcoming DIRECT TAX CODE (DTC) which anyway was being rumored to have no exemptions.

iv. NUMERIC EXAMPLE BEING, Let's take a example of Yash & Rahul their total earning taxation is as provided below

Figures are hypothetical; we are trying to provide you the way of working out tax

3. TAXATION OF  STARTUP

• Here by startup we mean that organization that is registered as startup with DPIIT.
• Budget Proposed to provide deduction of total profits in case if any earned for continuous 3 years out of first 10 years(earlier 7 years) subject to maximum turnover of Rs.100 crores (Earlier 25 crores)
• Now the catch here is in case of a startup being a Private Limited, if they want to apply for concession tax rate of 15% (Manufacturing company) they need to opt this in the first year of manufacturing itself but the problem is if they opt for 15% then they can't claim 80-IAC… read it again and refer to 115BAB you will get the problem ;)
• 115BAB says you want 15% tax you need to opt on or before filing first return of income, now if I opt this 115bab says you cannot claim startup benefit, so I think government needs to check this problem out.

4. Reducing the rate of TDS For Technical Services

• Earlier there were many litigations due to a particular transaction getting covered under 194J (10%) or 194C (2%)
• To avoid this litigation 194J has been proposed to be amended by stating that technical services under 194J would also be 2%.
• So Apart from Professional fees (10%) & Director sitting fees (10%) rest all under 194J would also be 2%.

5. TDS ON E-COMMERCE TRANSACTIONS

• Let's understand this via example, an individual sells goods via Amazon and Amazon collects payments from Customer deducts its charges and pays remaining to that individual.
• So now the proposed thing is Amazon once it gets amount from Customer it needs to deduct 1% tds from total amount in the name of individual (Businessman) and then pay rest to him after deduction of commission and gst and TCS under GST.
• Limits provided are that if businessmen is individual or HUF do not deduct if total transaction value does not exceed 5 lakhs for others it starts from Rupee one.

6. TCS On sale of Goods

a. Budget Proposes this is applicable only that if you are seller of goods having following

1. Total Sales to customer exceeds 50 lakhs
2. Turnover Exceeds 10 crores

b. Then we need to collect more amounts at the rate of 0.1% from such customer and pay to government.

7. DIVIDEND DISTRIBUTION TAX REMOVED

• Earlier when company used to earn profits (Profit after payment of income tax), if it wanted to distribute profit (Dividend) to shareholder it had to pay another tax of 15% to distribute it to shareholders. So let's say company heard 150 crores profit and paid tax of 30% (For better clarity) as income tax now it is left with 105 crores, and  if it announces it would pay dividend then out of 105 crores ,15.75 crores again was paid as tax to government and remaining was  given to shareholders.
• Budget proposed to remove the above provision and states that dividend received by shareholders would be taxed in their respective hands and hence the above 105 crores now would be taxable in the hands of shareholder in their respective tax rate (Earlier exempt in hands of shareholder).
• No Deduction would be allowed against such Dividend income other than interest paid on loan taken to buy that share and interest on such loan should not exceed 30% of dividend income.
• Now TDS Would is deducted on dividend income if amount is more than Rs.5, 000/- at the rate of 10%.

8. TAX AUDIT THRESHOLD

a. Existing situation require businessmen to get tax audit if his turnover is more than 1 crore, now the budget proposes that the limit would be increased to 5 crores with a condition that

1. Cash receipt should not be more than 5% of total receipt during the year.  AND
2. Cash Payments should not be more than 5% of total payments made DURING such year.

b. If both condition satisfied then only tax audit not required up to 5 crores.

c. However for TDS Deduction limit etc, it says if individual or huf conducting business has cross turnover of 1 crore in last year then from this year need to start deducting TDS (Whether opted for 5 crore or not).

9. FORM 26AS TO BE DELETED

Now in form 26AS details are available only with respect to Tax deduction and tax collections and hence govt has proposed to remove this and come up with a form where it would contain along with TDS/TCS Also details of share purchase, land purchase etc.

10. General Points

• Income Tax return can be filed with a dsc of any person whoever has been authorized by board or partners in case of companies,llp,partnership firms.
• 80G Deduction can be claimed (In case person opts old scheme) only if trust files the return and mentions the person name and amount (Pre filled).
• If you book a foreign tour, then 5% Additional amount to be paid as TCS (No Limits) and if PAN not provided then 10% TCS.

FROM ABOVE POINT IT SEEMS LIKE BOOK KEEPING, ADVISORY, CONSULTING SERVICES WOULD BE ON RISE TO PROVIDE CLIENT WITH COMPLIANCE IN ACCORDANCE WITH PROVISIONS OF LAW.

The author can also be reached at cayashchopra@gmail.com