CA Pooja Madhan
  1. Insertion of new sections 194K and 194O
  2. Section 194K has been inserted to provide that any person responsible for paying to a resident any income in respect of units of mutual funds as per section 10(23D) or units from the administrator or the specified undertaking or units from the specified company shall at the time of credit of such income in excess of Rs. 5000 to the account of the payee or at any time of payment thereof by any mode whichever is earlier deduct income tax thereon at the rate of ten percent.
  3. Section 194O has been inserted to deepen the tax net by bringing participants of e-commerce within the tax net.

The tax has to be deducted by the e-commerce operator at the rate of one percent at the time of credit of amount of sale or service or both to the account of e-commerce participant or at the time of payment thereof to such participant by any mode whichever is earlier.(Subject to a threshold of Rs. Five lakhs and E-Commerce participant has furnished his PAN or Aadhaar number to the e-commerce operator)

  • Tax rate if Resident Co-operative Societies;

A new section 115BAD has been inserted to provide concessional rate of tax in case of resident Co-operative Societies, a co-operative society resident in India shall have an option to choose concessional income tax rate of 22% for assessment year 2021-22 onwards in respect of its total income so however that if it fails to satisfy the conditions in any previous year the option shall become invalid and other provisions of the Act shall apply.

The conditions to avail the concessional rates are as mentioned below;

The co-operative societies income shall be computed without giving effect of the following;

  1. Deduction under the provisions of section 10AA or clause (iia) of sub section (1) of section 32 or section 32AD or section 32AB or Section 32ABA or sub clause (ii) or sub clause (iia) or sub clause (iii) or sub section (1) or sub section (2AA) or section 35 or section 35AD or Section 35CCC or under any provisions of Chapter VI-A
  2. Set off of carry forward losses or depreciation from any earlier assessment year

The option once exercised cannot be withdrawn, a surcharge at the rate of 10% shall be levied on such co-operative societies

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  • Individual and HUF Tax Slabs:

On satisfying certain conditions, an individual or HUF shall from the AY 2021-22 onwards, have the option to pay tax at the below mentioned reduced rate;

Total Income Rate of Income Tax
Upto 2,50,000 Nil
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%

        This option has to be exercised for every year where the individual or HUF doesn’t have any business income, in case of business income option once exercised shall be valid for all subsequent previous years.

The option shall become invalid if the individual or HUF fails to satisfy the conditions applicable in any previous year; the conditions applicable for the exercise of this option as as mentioned below;

  • The total income of the Individual or HUF shall be computed; without giving effect to the following;
  • Leave Travel Concession as per section 10(5)
  • HRA as per section 10(13A)
  • Some of the allowances contained in section 10(14)
  • Allowances to MPs and MLAs as per section 10(17)
  • Allowance of income of minor as per section 10(32)
  • Exemption to SEZ as per Section 10AA
  • Standard deduction as per section 16
  • Interest under section 24 in case of self occupied property
  • Additional depreciation as per section 32(1)(iia)
  • Deductions under section 32AD , section 33AB and section 33ABA
  • Deduction in respect of donation or expenditure on scientific research as per section 35
  • Deduction as per section 35AD and 35CCC;
  • Deduction of family pension as contained in section 57(iia)
  • Any deduction under chapter VI-A except deduction under section 80CCD(2) (employer contribution on account of notified pension scheme) and Section 80JJAA (for new employment)

       The individual or HUF exercising option under this section shall be allowed only the following allowances under section 10(14) of the Act;

  1. Transportation allowance given to a handicapped employee to meet expenditure for commuting between the place of residence and the place of duty.
  2. Conveyance allowance given to an employee to meet the expenditure of the conveyance to perform his duty
  3. Any allowance given to meet the cost of tour, travel or the transfer.
  4. Daily allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

Also the exemption under Rule 3 with regard to free food and beverage through vouchers given to an employee , will not be available to an individual exercising this option.

  • Extension of Tax incentives for the approval of affordable housing scheme under section 80-IBA

Section 80-IBA states on the fulfilment of the certain conditions, an assessee having income from business of developing and building affordable housing projects, be allowed a deduction of an amount equal to 100% of the profits derived from such business, for availing the deduction under this section the project has to be approved by the competent authority during the period 1st June 2016 to 31st March 2020 has now been extended till 31st March 2021.

Similar extension has been granted under section 80EEA till 31st March, 2021.

Amendment in section 115BAB

Section 115BAB provides that any new manufacturing domestic company set up or or after 1st October, 2019 which commence manufacturing or production by 31st March 2023 and do not avail any specified incentives or deduction may opt to pay tax at the rate of 15%.

On the basis of representations received from various stakeholders, the benefit of the concessional rate of income tax under section 115BAB  shall also include generation of electricity as manufacturing.

  • Exemption to non residents from filing return of income in certain cases

Section 115A of the Act has been amended in order to provide that a non resident shall not be required to file return of income under section 139(1) if;

  1. His total income consists only dividend or interest income or royalty FTS; and
  2.  TDS has been deducted on such income under the provisions of Chapter XVI-B, at the rates which are not lower than the prescribed rates under section 115A
  • Reduction in rate of TDS under section 194J on fee for technical services(Other than professional services)

It has been proposed to reduce the rate of TDS under section 194J on fee for technical services to two percent from existing ten percent.

  • Modification of provisions related to residential status;
  • In the exception provided in clause (b) of Explanation 1 of sub section (1) to section 6 for visiting India in that year be hereby decreased to 120 days from existing 182 days
  • An individual or HUF shall be not ordinary resident in India in a previous year if he has been a non resident in India in seven out of ten previous years.
  • An Indian citizen who is not liable to pay tax in any other country shall be deemed to be resident in India.
  • Amendment with respect to Chartiable Insitutions
  • similar to exemptions under clauses (1) and (23C), exemption under clause (46) of section 10 shall be allowed to an entity even if it is registered under section 12AA subject to the condition that the registration shall become inoperative. If the entity wishes to make it operative in the future, it will have to file an application and then it would not be entitled for deduction under clause (46) from the date on which the registration becomes operative.
  •  (ii) the registration under section 12AA would also become inoperative in case of an entity exempt under clause (23C) of section 10 as well, to have uniformity. The condition about making it operative again would also be similar to what is proposed for clause (46) of section 10.
  • an entity approved, registered or notified under clause (23C) of section 10, section 12AA or section 35 of the Act, as the case may be, shall be required to apply for approval or registration or intimate regarding it being approved, as the case may be, and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five previous years at one time calculated from 1st April, 2020.
  • an entity already approved under section 80G shall also be required to apply for approval and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five years at one time.
  • application for approval under section 80G shall be made to Principal Commissioner or Commissioner.
  • an entity making fresh application for approval under clause (23C) of section 10, for registration under section 12AA, for approval under section 80G shall be provisionally approved or registered for three years on the basis of application without detailed enquiry even in the cases where activities of the entity are yet to begin and then it has to apply again for approval or registration which, if granted, shall be valid from the date of such provisional registration. The application of registration subsequent to provisional registration should be at least six months prior to expiry of provisional registration or within six months of start of activities, whichever is earlier.
  • the application pending for approval, registration, as the case may be, shall be treated as application in accordance with the new provisions, wherever they are being provided for.
  •  deduction under section 80G/ 80GGA to a donor shall be allowed only if a statement is furnished by the donee who shall be required to furnish a statement in respect of donations received and in the event of failure to do so, fee and penalty shall be levied.
  • similar to section 80G of the Act, deduction of cash donation under section 80GGA shall be restricted to Rs 2,000/- only.
  • These amendments will take effect from 1st June, 2020
  • Increase of threshold limit for tax audit under section 44AB in certain cases

The threshold limit for person carrying on business is hereby increased to five cores from existing one crore if the following conditions are satisfied;

  1. Receipts in cash in aggregate doesn’t exceed five percent of the total receipts
  2. Payments in cash in aggregate doesn’t exceed five percent of the total payments
  3.  
  4. Further the dues dates for filing return of income under section 139(1)  has been substituted as 31st October as against 30th September.

Also the distinction between a working partner and a non working partner has been removed with respect to the due dates as mentioned in sub clause (iii) of clause (a) of Explanation 2 of sub section (1) of section 139 of the Act.