highlights of budget
highlights of budget

Income Tax Proposals

Tax Rate For Individuals

No Change in Income Tax Slab Rates For Individuals

Tax Rate: As Provided in Interim Budget 2019, Rebate u/s 87A worth ₹ 12,500 is available to Individuals having Net Total Income upto ₹ 5,00,000. Hence Individual having Income Below ₹ 5,00,000 are not required to Pay any Tax ( Though Basic Exemption is Still ₹ 2,50,000)

Tax on Super Rich: For Rich and Super Rich Individuals, enhanced Surcharge at the rate of 25% for Individuals having Income Exceeding ₹ 2 Crore and Surcharge at the rate of 37% for Individuals having Income Exceeding ₹ 5 Crore would be applicable.

Revised Effective Tax Rate and Example:

Income tax Slabs:

Particulars Slab Rate Effective Tax Rate
Individual/HUF/BOI/AOP  
0 – 2,50,000 0% 0%
2,50,001 – 5,00,000* 5% 5.2%
5,00,001 – 10,00,000 20% 20.8%
10,00,001 – 50,00,000 30% 31.2%
50,00,000 – 1,00,00,000 30 + 10% surcharge 34.32%
1,00,00,001 – 2,00,00,000 30 +15% surcharge 35.88%
2,00,00,001 – 5,00,00,000 30 +25% surcharge 39%
5,00,00,001 & Above 30 +37% surcharge 42.74%
Firm/LLP  
0 -1,00,00,000 30% 31.2%
1,00,00,001 & Above 30% + 12% surcharge 34.94%
Company  
0- 1,00,00,000 1,00,00,001– 10,00,00,000 10,00,00,001 & Above Turnover(<400 Cr) 25% 25 + 7 % Surcharge 25 + 12 % Surcharge Turnover(400 Cr+) 30% 30 + 7 % Surcharge 30 + 12 % Surcharge T/o(<400 Cr) 26% 27.82% 29.12% T/o(400 Cr+) 31.2% 33.38% 34.94%

In Case of Individual, if Net Taxable income is Less than ₹ 5,00,000 , Tax Rebate of ₹ 12,500 is available . Thereby Net Tax Payable will be Nil (* In case of senior citizen, tax rate is 0% upto income of ₹ 3 Lacs and In case of super senior citizen (above 80 Years), Tax rate is 0% upto income of 5 lacs)

Example of Tax Impact to Individuals/HUF

Particulars
Gross Taxable Income 7,00,000 8,00,000 40,00,000 60,00,000 1,50,00,000 3,00,00,000 7,00,00,000
Deduction u/s 80C (1,50,000) (1,50,000) (1,50,000) (1,50,000) (1,50,000) (1,50,000) (1,50,000)
Deduction us 80D:- Self :- Parents (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000)
Net Taxable Income 5,00,000 6,00,000 38,00,000 58,00,000 1,48,00,000 2,98,00,000 6,98,00,000
Tax Payable 12,500 32,500 9,52,500 15,52,500 42,52,500 87,52,500 2,07,52,500
Surcharge NIL NIL NIL 1,55,250 6,37,875 21,88,125 76,78,425
Rebate u/s 87A 12,500 Not Available Not Available Not Available Not Available Not Available Not Available
Education Cess @ 4% 1,300 38,100 68,310 1,95,615 4,37,625 11,37,237
Net Tax Payable Nil 33,800 9,90,600 17,76.060 50,85,990 1,13,78,250 2,95,68,162

INCOME TAX –PROCEDURAL MATTERS

Interchangeability of PAN and Aadhaar

  • For any Individual not possessing PAN, Aadhaar Number can now be used as interchangeable with PAN for any matter where PAN is required
  • It will Enable Crores of Individual Not Possessing PAN but having Aadhaar Number to File Income Tax Return.

Faceless Assessment

  • Proposal to Introduce Complete Faceless Scrutiny Assessment (The Scheme will Implemented in Phased Manner)
  • Electronic notices to be issued without disclosure of name, designation and location of Assessing Officers.

Mandatory Return Filing

Certain New Categories of Individual Mandatory Required to File Income Tax Return (Even if Total Income does not Exceeds ₹ 2.5 Lacs as under)
• Expenditure incurred is more than ₹ 2 Lacs for foreign travel
• Electricity expenditure exceeding ₹ 1 Lacs
• Deposits in current account exceeding ₹ 1 crore

Prefilled Return Data

Prefilled tax returns forms pertaining to salary, bank interest, capital gain from securities and dividends, etc., will be made available for taxpayers for ease of return filing.

TAX CHANGES FOR CORPORATE

Proposals for Corporate

Tax Rate @ 25%

  • Extension of Beneficial Tax Rate @ 25% to all domestic Companies having turnover upto 400 Crore in Financial 2017-18

Buy Back Tax

  • Buy back tax made applicable even in case of Buy-back of shares by listed company @ 20% (plus surcharge & cess). (Once Tax is deducted by company, buy back is exempt in hands of Share Holders)

Public holding for Listed Co’s

  • For Listed Companies, requirement of minimum Free Float Public holding Increased From 25% to 35% under monitoring of SEBI

IFSC Tax Benefits

  • 100% profit-linked deduction in any 10-year block within a 15-year period to a unit in IFSC-International Financial Service Centre (GIFT City)
  • Any dividend paid out of accumulated income derived from operations in IFSC shall also not be liable for Dividend distribution Tax

TDS

TDS on Cash Withdrawals

TDS @ 2% would be applicable on Cash Withdrawals exceeding ₹ 1 crore from a bank account in a Financial year.

TDS on Payments by Individuals

TDS at the rate of 5% to be applied on contractual work or professional fees payments (Whether for Business or Personal Purpose) made by an individual/HUF, where annual aggregate of payments for any contract exceeds ₹ 50 lakh in a year.

TDS on Life Insurance

TDS on taxable insurance payment required at the rate of 5% on net income component after deducting insurance premium ( as against earlier withholding tax at the rate of 1% on gross amount of pay-outs)

TDS on Immovable Property

While Purchase of Immovable Property , TDS deduction also required on value of ancillary charges such as club membership fee, car parking fee, electricity and water facility fees, maintenance fees, advance fees and any other charges of similar nature.

Tax Proposals – For Startups

Carry Forward of Losses

The Start-ups can now carry forward losses even if any of the co-founder is no more a member, if co-founders holding more than 51% shares are members of the startups.

Angel Investment Valuation

No Income Tax scrutiny on Angel Investment Valuation, even if value is higher than market value.

Capital Gain Deduction

Deduction is now provided till 31-03-2021 if the capital gain on sale of Residential house is invested in start-up provided that he should hold atleast 25% of shares of company.

REAL ESTATE

Deduction for Housing Loan Interest

Additional deduction of ₹ 1.5 lakhs to individuals, for interest paid on loan, provided:

  • Loan sanctioned by a financial institution between 1 April 2019 and 31 March 2020.
  • Stamp duty value of property not exceeding ₹ 45 lakhs.
  • Individual not owning any other residential property on date of sanction of loan.

Affordable Housing project

The carpet area limit for affordable housing projects for availing 100% tax holiday has been increased as follows:

Cities Maximum carpet area Condition
Metro – cities 60 sq. mt. The stamp value of any unit in project should not exceed Rs. 45 Lakhs.
Non – Metro cities 90 sq. mt.

INDIRECT TAX

GST

  • Provision to transfer balance in electronic cash ledger from one head to another head
  • Interest applicable on net cash liability (Earlier it was leviable on Gross Output Liability)

Litigations of Pre-GST Regime

  • Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 being introduced for quick closure of litigations from pre-GST regime (Central Excise and Service Tax)

Increase in Excise on Fuel

  • Special additional excise duty and road and Infrastructure cess increased by ₹ 1 each on petrol and diesel.

Customs Duty

  • Proposal to increase Customs duty on products, such as tiles, vinyl floorings, CCTV cameras, auto parts, optical fibres, optical fibre bundle and cables
  • Basic Custom Duty on Gold Proposed to be Increased to 12.5% from existing 10%

Others

Non-resident receiving Gift taxable u/s 56

  • Necessary amendments in under Section 9 of Income Tax Act introduced to clarify gift received India is income deemed to accrue or arise in India and taxable for non-resident in India.

Automotive

  • Deduction up to ₹ 1.5 lakh introduced for interest paid on loan taken to purchase an electric vehicle.
  • Suggestion to GST council to reduce GST rate from 12% to 5% for electric vehicles.

Rationalization of STT on Options

  • Securities Transaction Tax (STT) to be levied only on the difference between settlement price and strike price (Earlier it was levied on settlement Price)

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