20 Important Changes in Income Tax Act,1961, that will be applicable from the 1st of April 2020.
1. New Tax Regime applicable to Individuals, HUFs:
For Individuals and Huf’s new tax regime has been brought to tax these persons at a concessional rate. Accordingly, section 115BAC has been inserted in the law under which Six different slabs have been prescribed which shall be availed after forgoing some benefits and deduction.
2. How to Switch Over between Old Vs New Tax Regime:
Switching over to new tax regime from the old tax regime is possible for the persons who have income from the business of profession. These persons cannot switch over freely and can only do once and after that have to follow the new regime only.
However, persons who don’t have income from business or profession can switch to new regimes easily and freely every year.
This option of switching over can be opted for before filing of Income Tax return.
3. Change in Section 6: Residential Status
A citizen of India or PIO who has a total income of more than INR 15 lacs, excluding foreign income, shall be Resident But RNOR, If he stays in India for a period of more than 120 days and less than 182 days.
4. Deemed Residency Status:
A Citizen of India shall be said to be the resident if, his total income other than foreign income exceeds INR 15 lacs during the FY and he is not to be taxed in any other country for being having residency or Domicile of that country.
5. Income from FTS or Royalty:
As per section 115A of the Income Tax Act,1961 Non Resident person is not required to file his income tax return if he has income from royalty, dividend, interest or fees for technical services and TDS on such income has been deducted under the provisions of Chapter XVII-B at the rate or rates not less than as prescribed under section 115A(1).
6.Contribution to EPF, NPS, and superannuation Fund:
Employers’ contribution to EPF, NPS, and Superannuation has now an applicable upper limit of Rs. 750000/- per annum. And any amount above such limit shall be considered as part of the salary of the employee.
7. Changes in section 44AB: Audit limit enhanced
The Tax Audit limit under section 44AB has been increased from Rs. 1 Crore to Rs. 5 Crores with the condition that cash payment does not exceed 5% of the total payments in the year and cash receipt not exceeds the 5% of the GR or turnover.
8. Taxation of Dividends:
One major amendment has been made in budget 2020 about the taxability of dividends. Now as per the amendment dividends received by the assessee has to be added to his total income and are taxable as per individual tax slabs applicable to them. Companies are no longer liable to pay DDT.
9. Limit under Section 43CA, 50C, 56:
Limit of difference in SDV and sales consideration has been increased from the existing 5% to 10% under safe harbor rules.
10. Cost of property not to exceeds SDV of Immovable property on 01.04.2001.
While calculating the capital gains on immovable property, the cost as per fair market value cannot be taken in excess of the stamp duty value as on 01.04.2001.
11. Changes in taxability of Income from Mutual Funds:
Income from MF is now taxable in the hands of the Unitholder. And TDS has to be deducted @10% ( same has been reduced to 7.5% from 14.05.2020) if exceeds Rs.5000/- and is received by Resident person.
If Non Resident person than TDS @20% (15% from 14.05.2020) will be deducted.
12. Changes in Section 43B :
Allowing Deduction for amount disallowed u/s 43B, to insurance companies, shall be allowed on paid basis under section 43B.
13. TDS on ESOP for start -ups
To provide ease and remove the cash flow burden on employee of New Start-Ups, the eligible start-ups are required to pay deducted TDS within 14 days of following..
- 48 months from the end of the relevant assessment year during which ESOP was granted.
- The date on which securities were sold.
- Date of leaving of the organization by the employee.
Whichever is earlier.
14. Change in definiton of Works Contract u/s 194C:
Under section 194C an amendment has been made in the definition of ‘work’ to cover the raw material provided by the assessee or his associate in contract of manufacturing.
Associate has been defined as the person who has placed in relation the customer as the person placed in relation to the assessee under the provisions of section 40A(2)(b).
15. Housing Loan deduction:
An Additional deduction for repayment of housing loan has been given under section 80EEA for INR 150000/- which shall be allowed house loan under affordable housing loan scheme and loan sanctioned up to 31.03.2021.
16. Changes under section 194J:
TDS under section 194J has been reduced to 2% from the existing rate of 10% and which is further reduced to 1.50% from 14.05.2020 till 31.03.2021.
17. Tds on Cash payment u/s 194N:
TDS has to be deducted at the rate of 5% (3.75% from 14.05.2020) if the amount is withdrawn exceeds Rs. 1 crore during the whole year.
For persons who have not filed their ITR’s in the last 3 preceding year, TDS has to be deducted at the rate of 2% (1.50% from 14.05.2020) if the amount withdrawn exceeds Rs. 1 crore during the whole year.
18. Tds on E-commerce operator u/s 194O:
From 1st Oct 2020, an ECO has to deduct TDS at the rate of 0.75% on the amount paid to its e-commerce participants against the sale of goods or services.
The threshold for Individuals and Huf’s is Rs. 5 lacks if Aadhar and PAN is provided by the e-commerce participant.
19. Limit on cash donation:
Donations in cash have been limited to Rs. 10000/- under section 80GGA for organizations engaged in scientific research or rural development projects.
20. Deduction on donation in PM CARES fund u/s 80G:
To fight with the pandemic coronavirus PM has appealed to contribute to the PM Cares fund to peoples of India. Accordingly, Deduction has also been given for such donation under section 80G of the income tax Act. This donation is eligible for a 100% deduction under section 80G.
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