An overview of Direct Tax Proposals in Union Budget 2020

Here I am presenting the simplified and summarized version of Direct Tax Proposals in Union Budget 2020 presented by Honorable Finance Minister of India on Feb 1, 2020. This article will help you to grasp the new insertions/amendments without going into the depth of each and every section.

Let's Begin.

• In order to simplify the taxation structure, a new scheme "Vivaad se Vishwas Scheme" has been introduced which will reduce or simplify the litigations under which an assessee will not be required to pay heavy penalties and interests in case of any pending dispute with the department. Only pending tax amount have to be paid. Currently, the assessee files further appeals because of heavy penalties and interest amounts and after the implementation of this scheme, the assessees under dispute will no longer be required to pay any penalty and interest which will automatically reduce the litigations.
• There will be 2 slabs of Income tax rates, one which is already existing and the new one has been proposed in the budget. Under the existing slabs, lot of deductions are allowed during the computation of Income Tax but under the new proposed slab (optional), slab rates will be more simplified due to lower tax rates but on the same side, lot of deductions will not be given like 80C etc.
• After the faceless assessments, now faceless appeals (e-appeals) and faceless penalties (e-penalties) system will be implemented which is intended to bring more transparency in the system.
• New Section 271AAD has been introduced, according to which if an assessee pass a false entry or omit an entry in the books with an intention to evade tax, the penalty will be equal to the amount of the false or omitted entry. For eg: if the amount of the false or omitted entry is Rs. 50 lacs then the penalty will also be Rs. 50 lacs.
• For the people coming to visit to India, the residential status will now be checked on the basis of residency of 120 days in India, earlier it was 182 days. Other provisions are still the same.
• If someone is a citizen of India, he will be deemed to be a resident of India if he is not paying tax in any other nation due to any policy of that particular country and therefore will be required to pay tax in India.
• If an assessee is Non Resident for 7 years out of the previous 10 years then an assessee will be Not Ordinary Resident (NOR).

• Now the following incomes of Non Residents from Indian operations will also be taxable in India:

1. The advertisement which will target the customers residing in India.
2. Sale of data to person residing in India.
3. Sale of goods or services using data collected from the person residing in India.

• The perpetual registrations under Section 12AA, 10(23C) has been removed. Now the registrations will be granted for 5 years only. Also the existing registered trusts and societies have to re-apply for the registration again within 3 months of the commencement of Finance Act 2020 so as to get the 5 years certificate.
• Now the new concept of provisional registration for 3 years will be introduced under Section 12AA. The provisional registration is for the trusts and societies who are not doing any activity and permanent registration have to be applied immediately after the commencement of activities.
• Now the trusts and societies cannot register themselves under Section 12AA and Section 10(23C) at the same time. They have to opt any one of them.
• New section 12AB has been introduced under which Charitable trusts and societies will get registration earlier which was granted in 12AA.
• Limit of Section 44AB has been increased from Rs. 1cr to 5 cr for the following assessees:

1. Whose aggregate of the all amounts received during the year inc. amount received for sale, turnover or gross receipts during the previous year in cash does not exceed 5% of the said amount and,
2. Aggregate of all payments made inc. amount received for expenditure during the previous year does not exceed 5% of the said payment.

• For computing the Fair Market Value (FMV) on 01/04/2001 the upper cap is of stamp duty value wherever available.
• Dividend Distribution Tax (DDT) under Section 115-O has been removed. Now the recipient of the dividend has to pay tax. Also the TDS provisions related to Dividend will be applicable on the recipient.
• New proviso to Section 57, now the assessee will not get deduction of more than 20% of his dividend income on the said dividend income apart from the interest expense.
• New Section 115BAD to be introduced under which a concessional tax rate of 22% will be imposed on Co-operative societies subject to various conditions.
• New Section 119A has been introduced which says, The board shall adopt and declare a taxpayer's Charter and issue such orders, instructions, directions & guidelines to other Income Tax Authorities as it may be deem fit for the administration of such chapter. This Charter will be taxpayer centric which will look into the problems of taxpayers.
• Amendment in Section 133A (Power of Survey) says, In case any information for the assessee has been given by prescribed authority, then after the approval of Joint Commissioner any AO can visit for the survey but In case, No Information has been given by the prescribed authority, then power to take action of survey is only held after the approval of Director or the Commissioner.
• Amendment Section 194A says, If total receipts or turnover of Co-operative society in the previous year exceeds Rs. 50 crores and the society has paid the interest of Rs. 50,000 to senior citizen or Rs. 40,000 to other than senior citizen then the co-operative society has to deduct TDS under this section.
• Amendment in Section 194C says, if the contractor purchase goods from the customer or its associate for the production of goods for the said customer then the TDS needs to be deducted (Earlier associates of the customer was not covered).
• Amendment in Section 194J says, TDS on Fees for technical services not being the professional services will be 2%.
• New Section 194-O has been proposed which says, where sale of goods or provision of services of e-commerce participant is facilitated by e-commerce operator through its digital or electronic facilities or platform, such e-commerce operator has to deduct TDS of 1% on gross sale amount of e-commerce participant. But it will not be applicable on e-commerce participants under the following 3 conditions:

1. Who is individual/HUF and,
2. Whose gross amount of sale is not more than Rs. 5 lacs and,
3. Who has submitted his PAN/Aadhaar details to the e-commerce operator.

• Amendment in Section 206AA says, Assessees covered under Section 194A has to deduct TDS @ 5% in case Assessee is not having PAN.
• New insertion in section 206C as 206C(1G) says, every person being a seller of overseas tour programme who receives any amount from the buyer being the person who purchases such package shall at the time of debiting the amount to the buyer, collect from the buyer a sum equal to 5% of such amount as income tax.
• Also as per Section 206C(1G), being an authorized dealer who receives an amount in aggregate of Rs. 7 lacs or more in a financial year from the buyer of the currency being a person remitting such amount out of India under the liberalized remittance scheme, then TCS has to be collected at the rate of 5%.
• New insertion in section 206C as 206C(1H) says, every person being a seller who receives any amount as consideration for sale of any goods of the value or aggregating to value exceeding Rs. 50,00,000 in the previous year, then other than the goods covered in sub sections (1), (1F) or (1G) shall at the time of receipt of such amount collect from the buyer TCS @ 0.1%. in case buyer is not having PAN then rate will be 1%. (only those sellers are covered whose turnover is Rs. 10 cr or more in the preceeding previous year).
• New Section 234G has been proposed which says, if Institutions covered under Section 35 do not issue certificates on time to the donors then fee of Rs. 200 per day has to be paid by such institutions.
• Amendment in Section 254 says, if an assessee needs stay for longer period then usual then he has to pay 20% of the tax amount to the dept.

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