In the union budget 2020, the following section 115BAC shall be inserted in the Income Tax Act, with effect from the 1st day of April, 2021, with new income tax slabs and lower rates. These income tax rates are optional and are available to those who are willing to forego some exemptions and some deductions.
Direct Taxes
1. Tax rate reduced for new companies to 22% and for manufacturing companies 15%
2. New simplified personal tax regime for Individual tax payers. The revised slab can be availed if they do not claim deductions and certain exemptions.
For income :
Upto 5,00,000 nil
Rs 5,00,000 -7,50,000: 10%
Rs 7,50,000 – 10,00,000 : 15%
Rs10,00,000 – Rs 12,50,000 20%
Rs 12,50,000- Rs 15,00,000 : 25%
More than Rs 15,00,000 : 30%
3. Companies not required to deduct dividend distribution tax and will be taxed only in the hands of the recipient. Parent company to be allowed deduction of dividend received subsidiary
4. Concessional tax rate of 15% extended to power generation companies
5. Investment made in Infrastructure and other specified sectors
6. Tax rate of 194LC at 5% for interest payment to non resident in respect of money borrowed or bond issued upto June 30,2023 and for 194LD at 5% for interest on borrowing from foreign institutional or qualified investor and municipal bonds
7. Interest payment on bonds listed on exchange by ILFS – 4%
8. Option to Cooperative societies to pay tax at 22% with no exemption or deduction. Exempt from alternative minimum tax
9. Affordable housing tax breaks extended by one year. Additional 1.5 lakhs tax benefit on interest paid on affordable housing loans to March 2021
10. Turnover threshold for tax audit raised to Rs 5 crore from Rs 1 crore
11. 100% tax concession to sovereign wealth funds on investment in infra projects
12. Income from Charitable institutions fully exempt from taxation. Donation to such institution allowed as deduction.
13. Registration of charity institutions to be made completely electronic, donations made to be pre-filled in IT return form to claim exemptions for donations easily.
14. Faceless appeals against tax orders on lines of faceless assessments
15. For tax payers who have appeals pending only disputed tax is to be paid by tax payer and no interest or penalty if the same is paid within March 31,2020. Post March 31,2020 certain amount levied uptill June 30,2020
16. Startup ESOP taxes deferred by 5 years
Other Areas
1. New scheme to provide subordinate debt to MSME
2. Decriminalise some norm violations in Companies Act
3. Increase the bank deposit insurance from Rs 1 lakh to Rs 5 lakh
4. New system for instant allotment of PAN
5. A new scheme NIRVIK to be launched this year itself for exporters
6. A debt ETF consisting of government securities will be launched.
7. For NBFCs and HFCs, liqduity constraints will be addressed.
8. FPI Limit in corporate bonds will be raised to 15% from 9%.
9. LIC to be listed at stock exchanges
Two important changes in Income tax (TDS/TCS)
— TCS to be collected by seller whose turnover exceeds Rs. 10 cr. In previous year from each buyer on amount exceeding 50 lacs @0.1% for sale of goods.
-TDS rate u/s 194J for technical payment changed from 10% to 2% to avoid litigations in respect of 194J Vs 194C
