What key amendments made by Finance Act 2020 are applicable from 01-04-2020?

1. Change Relating to Residential Status [Section-6]:

1.1 Number of days to stay in India reduced for NRI:

A Citizen of Indian or person of Indian origin having total income exceeding Rs. 15 lakh other than foreign income (except income derived from a business controlled in or a profession set up in India), who comes on a visit to India in the previous year, shall be considered as NOR in India if his stay in India during the previous year is 120 days or more and less than 182 days;

However, if his stay in India is exceeding 182 days then the OR/NOR shall be determined according to old provision.

1.2 Indian Citizen shall be deemed to be a NOR:

A Citizen of India having total income exceeding Rs. 15 lakh other than foreign income (except income derived from a business controlled in or profession set up in India) and not liable to pay tax in any other country, shall be considered NOR in India even if he does not satisfy any other conditions mentioned under section 6.

2 Tax Deducted at Sources [Chapter – XVIIB]

2.1 TDS on payment of Dividend [section 194 and 195]:

With effect from 01-04-2020, the Indian company shall be liable to deduct TDS @ 10% under section 194 if the aggregate of the amount of dividend exceeds Rs. 5000/- and dividend is payable to a resident in India.

However, TDS shall be deducted @20% under section 195 without any threshold limit if the amount of dividend is payable non-resident or foreign company. However, the provision of the DTAA shall be applicable if beneficial to the assessee.

Therefore, income of the dividend shall be taxable in the hand of recipient with effect from 01-04-2020 and liable to tax as per normal provision of the Act.

2.2 TDS on Fee for professional or technical services [section 194J]:

With effect from 01-04-2020, the rate of TDS has reduced to 2% from existing 10% under section 194J in respect of –

> Fee for technical services;

> Royalty in the nature of consideration for sales, distribution or exhibition of cinematographic films.

2.3 TDS on Dividend on Units [section 194K]:

With effect from 01-04-2020, TDS shall be deducted under section 194K @ 10% under section 194 on dividend from units if the aggregate of the amount of dividend exceeds Rs. 5000/- and dividend is payable to a resident in India.

However, TDS shall be deducted @ 20% under section 195 without any threshold limit if the amount of dividend is payable to non-resident or foreign company. However, the provision of the DTAA shall be applicable if beneficial to the assessee.

Therefore, the income of the dividend shall be taxable in the hand of the recipient with effect from 01-04-2020 and liable to tax as per normal provision of the Act.

2.4 TDS on payment of Cash [section 194N]:

To expend the scope of section 194N, with effect from 01-07-2020, the threshold limit for deduction of tax on cash withdrawal from a bank or a Post Office reduced from Rs. 1 crore to Rs. 20 lakh if the person, has not filed return of income for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired. The deduction of tax under this situation shall be at the rate of:

> 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year; or

> 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year.

In the above situation, the tax shall be deducted on the amount exceeding Rs. 20 lakhs or Rs. 1 crore, as the case may be.

2.5 TDS on payment made by e-commerce operator to e-commerce participant [section 194O]: w.e.f 01-10-2020

With effect from 01-10-2020, under section 194O, TDS @1% on the amount payable for sales of goods or provision of services by the e-commerce operator while making the payment to the e-commerce participant.

However, no TDS shall be deducted if the aggregate the amount payable to an individual or HUF does not exceed Rs. 5 Lakh and such e-commerce participant has furnished his Permanent Account Number or Aadhaar number to the e-commerce operator.

3 NON RESIDENT E-COMMERCE OPERATORS ARE LIABLE TO PAY EQUALISATION LEVY:

The Finance Bill, 2020, as passerby the Lok Sabha, has extended the scope of Equalisation Levy to cover within its scope the consideration received or receivable for e-commerce supply or services made or facilitated by an e-commerce operator.

3.1 Scope of Equalisation Levy

With effect from 01-04-2020, there will two transaction in respect of which equalization levy shall be charged:

> 6% on the sum received or receivable by a non-resident for the online advertisement services rendered to specified persons;

> 2% on the sum received or receivable by an e-commerce operator from e-commerce supply of goods or services made or provided or facilitated too-

# A person resident in India; or

# A person who buys such goods or services or both using internet protocol address located in India; or

# A non-resident person in the following circumstances:

√ Sale of advertisement which targets a customer who is resident in India or a customer who accesses the advertisement through internet protocol address located in India; and

√ Sale of data collected from a person who is resident in India or from a person who uses internet protocol address located in India.

3.2 Threshold limit to charge Equalisation Levy on e-commerce transaction

Equalisation levy shall not be charged if the sale, turnover or gross receipts of the ecommerce operator from e-commerce supply or services made or provided or facilitated to the persons mentioned above is less than Rs. 2 crore during the previous year.

3.3 Who is liable to pay Equalisation Levy to Govt:

In case of advertisement the obligations to deduct equalisation levy from the sumpaid or payable to the non-resident advertiser is on the payer. However, in the case of non-resident e-commerce operator this obligation to deposit the equalisation levy on the recipient i.e. e-commerce operator. Thus, any person responsible for paying any sum to a non-resident e-commerce operator will not be liable to withhold the amount towards equalisation levy and deposit it with the Central Govt. This obligation is on e-commerce operator only.

3.4 Due date for deposit of Equalisation Levy

The equalisation levy on online advertisement services which is payable on monthly basis by 7th day of the next month. However, the equalisation levy in respect of online supply of goods and services by the e-commerce operator shall be paid to the credit of central government on quarterly basis as follows:

3.5 Annual Statement of Equalisation Levy

Every e-commerce operator is liable to prepare and submit a statement of equalisation levy in respect of all e-commerce supply made during the financial year on or before 30th June of the financial year immediately following the financial year in which equalisation levy is chargeable.

4. Tax Collected at Sources (TCS) [section 206C] w.e.f 01-10-2020

4.1 TCS of foreign remittance

With effect from 01-10-2020, TCS @ 5% (10% in case No PAN/Aadhaar) shall be collect by an authorised dealer on the aggregate amount of remittance outside India under Liberalised Remittance Scheme of the Reserve Bank of Indiaexceeding Rs. 7,00,000/- during the financial year by any person.

4.2 TCS on remittance for purchases of foreign tour package

With effect from 01-10-2020, TCS @ 5%(10% in case No PAN/Adhaar) shall be collect by a seller of an overseas tour program package on the receipt of any amount from a buyer of such package.

4.3 TCS on sales of goods

With effect from 01-10-2020, TCS @ 0.1% (5% in case No PAN/Adhaar)shall be collect by a seller on the aggregate sales consideration for goods exceeding Rs. 50 Lakh during the previous year.

In all the above cases where the TDS/TCS is already collected in respect of the same transaction under any other sections of the act, there is no requirement to collect TCS under the above provisions/

5 Person having income from Business or PROFESSIONAL can OPT OUT ONLY ONCE FROM CONCESSIONAL TAX REGIME

An Individual and HUF, who are willing to switch in concessional tax regime, are required to exercise the option on or before the due date of furnishing the return of income. Once the option is exercised, it will be applicable to forthcoming years as well. If assessee having income from business or profession that have opted for such a regime can opt out only once and would not be eligible to exercise such option again, unless the individual ceases to have income form business or profession. However, if the taxpayer does not have any business or profession income, the assessee shall have a choice to decide every year if he wants to opt for concessional tax regime.

6 Summary of the amendment applicable from 01-04-2020 i.e for FY 2020-21

1. New Tax incentive scheme is available for Individual, HUF and co-operative society;

2. Provision for determination of resident status for NRI has changed;

3. Safe Harbour limit of 5% increased to 10% under section 43CA, 50C, and 56 of the Act;

4. Contribution to EPF, NPS and superannuation fund restricted to Rs. 7,50,000/- per annum, amendment made in perquisites in lieu of salary, any employer contribution exceeding such amount is included in the salary;

5. Deduction for payment to insurance companies shall be allowed on payment basis under section 43B;

6. Threshold limit for tax audit under section 44AB has been extended from 1 Crore to 5 Crore in certain cases (condition of expenses and receipts are not in cash);

7. Cash donation limit under section 80GGA restricted to Rs. 2000/- only;

8. Non-resident is exempt from filing ITR under section 115A having income from FTS or Royalty;

9. Deferring TDS on ESOP for startups (48 months or cessation of employment, whichever is earlier);

10. TDS shall be deducted @10 on the payment of divided instead of DDT for resident where dividend exceeding Rs.5000 ;

11. TDS shall be deducted @2% on payment made for FTS and Royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films;

12. Definition of work contract has amended under section 194C;

13. Benefit of concessional tax scheme under section 115BAB to the domestic company shall be available the company engaged in the business of generation of electricity;

14. No deduction shall be allowed under chapter VI-A other than 80JJAA or 80M to the domestic company opting concessional tax scheme under section 115BAA and 115BAB;

15. Additional deduction under section 80EEA of Rs. 150000/- shall be allowed on House loan under affordable Housing scheme if loan sanctioned up to 31-03-21;

16. Deduction under section 80IBA shall be available for affordable housing project for FY 2020-21.