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Income Tax

Key Takeaways from Union Budget 2020

February 3, 2020 by Team Instabizfilings

Blog Details

Finance Minister Nirmala Sitharaman presented the Union Budget 2020-21 in the Lok Sabha. This is the second budget after Narendra Modi led National Democratic Alliance returned to power for a second term. This year's Union Budget centres around three ideas - Aspirational India, Economic development, A Caring Society.

 

Infrastructure

National Logistics Policy to be launched soon

Roads: Accelerated development of Highways.

Railways: Four station redevelopment projects

150 passenger trains through PPP mode.

More Tejas type trains for tourist destinations.

Port: Corporatizing at least one major port.

Air: 100 more airports to be developed under UDAAN.

Power: Efforts to replace conventional energy Efforts to replace conventional energy meters by prepaid smart meters.

Gas Grid: Expand National Gas Grid to 27,000 km

Infrastructure Financing: Rs 103 lakh crore National infrastructure Pipeline projects announced.

An international bullion exchange to be set up at GIFT City.

 

Industry Commerce and Investment

Scheme to encourage manufacturing of mobile phones, electronic equipment and semi conductor packaging.

National Technical Textiles Mission for a period of 4 years

NIRVIK Scheme for higher export credit disbursement launched

Setting up of an Investment Clearance Cell to provide end to end facilitation.

To encourage private sector to build Data Centre Parks throughout the country India to provide Rs 273 billion (USD 3.84 billion) for promotion of industry and commerce

 

MAJOR TAX PROPOSALS

Personal Tax Slabs

 

Changes in Tax Slabs

Old Tax Slabs

Existing Tax Slabs

Rate of Tax

Upto 2,50,000

0%

From 2,50,001 to 5,00,000

5%

From 5,00,001 to 10,00,000

20%

Above 10,00,000

30%

 

New Tax Slabs

Tax Slabs

Rate of Tax

Upto 2,50,000

0%

From 2,50,001 to 5,00,000

5%

From 5,00,001 to 7,50,000

10%

From 7,50,001 to 10,00,000

15%

From 10,00,001 to 12,50,000

20%

From 12,50,001 to 15,00,000

25%

Above 15,00,000

30%

 

Taxpayers will now be able to avail a lower income tax rate on various slabs by foregoing certain deductions and exemptions, Sitharaman announced in the budget. The new regime will be optional and those who want to stick to claiming deductions will be allowed to do so.

 

Corporate Tax Rates

The new effective tax rate, which will apply to domestic companies availing the benefit of section 115BAA is 25.168%. The break up such tax rate is as follows:

Base tax rate

Surcharge applicable 

Cess

Effective tax rate

22%

10%

4%

22*1.1*1.04 = 25.168%

Such companies will not be required to pay minimum alternate tax (MAT) under section 115JB of the act.

The domestic companies opting for section 115BAA will not be able to claim MAT credits for taxes paid under MAT during the tax holiday period. The companies would not be able to reduce their tax liabilities under section 115BAA by claiming MAT credits.

 

Concessional corporate tax rate of 15 per cent to new domestic companies in manufacturing and power sector.

 

Dividend Distribution Tax Abolished

In a move that will offer some relief to India Inc., the Narendra Modi-led government eliminated the dividend distribution tax that’s levied on dividends issued by companies. So far, companies were required to pay DDT at 15 percent, though including surcharge and cess put the effective rate at 20.56 percent.

 

Startups

Eligible startups with a turnover of up to Rs 25 crore are permitted to deduct 100% of its profits for three continuous assessment years of seven years if the overall turnover is under Rs 25 crore. This limit is now increased to Rs 100 crore. Furthermore, the eligibility period to deduct is increased to 10 years from 7 years

 

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.

 

Co-operative Society

Finance Minister Nirmala Sitharaman on Saturday proposed reduction of tax on cooperative societies to 22 per cent plus surcharge and cess, from 30 per cent at present.

 

Direct Taxes

Tax audit threshold has been increased from Rs 1 crore to Rs 5 crore provided turnover/ gross receipts in cash does not exceed 5% during the previous year. Also, payment made in the P.Y in cash does not exceed 5%. For such taxpayers, the due date for tax audit has been extended to the 31st of October from the 30th of September.

 

Under section 194J- fees for technical services, TDS has been reduced to 2% from 10%.

 

Under Section 80EEA, the additional deduction of Rs.1.5 lakh for interest paid on home loans will now be allowed for the loans sanctioned till the 31st of March 2021.

 

Section 194: Dividend paid by Indian companies, to a shareholder, who is resident in India, TDS @ 10% if the dividend amount exceeds 5000 during the FY.

 

Section 194K: Dividend paid by MF to a resident TDS 10% will be deducted only if the dividend amount exceeds 5000 during the FY

 

Section 194: Dividend on shares paid by company exceeding Rs 5000 will be subject to TDS @ 10%

 

Section 194-O: Any payment made by e-commerce operator to the participant, the operator will have to deduct 1% TDS only if the annual amount paid or credited exceeds Rs 5 lakh.

 

Section 206AA: in relation to 194O has been amended to 5% instead of 20% in case of not furnishing the PAN.

 

Agriculture

The government aims to double farmers income by 2022

Help 15 lakh farmers solarise their grid-connected pump sets

“KisanRail” and “KrishiUdaan” for seamless transport of perishable farm goods

Increasing coverage of artificial insemination to 70%

Raise fishery exports to Rs 1 lakh crore by 2024-25

 

Education

About 150 higher educational institutions will start apprenticeship embedded courses

Special bridge courses to improve skill sets of those seeking employment abroad

Ind-SAT to be conducted in Africa and Asia under study in India programme

Allocation of Rs 99,300 crore for the educational sector in 2020-21

Allocation of Rs 3,000 crore for skill development

 

Water, Wellness, and Sanitation Goals

More than 20,000 empanelled hospitals under PM Jan Arogya Yojana

“TB Harega Desh Jeetega” campaign launched to end TB by 2025

Expansion of Jan AushadhiKendra Scheme to all districts by 2024

Focus on liquid and greywater management along with waste management

 

Click here to view a brief Presentation on Budget 2020


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