BUDGET 2020: Direct Tax Proposals
BUDGET 2020: Direct Tax Proposals
To stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations. ·
Personal Income Tax:
o Significant relief to middle class taxpayers.
o New and simplified personal income tax regime proposed:
|Taxable Income Slab (Rs.)||Existing tax rates||New tax rates|
|Above 15 Lakh||30%||30%|
o Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime.
o Remaining exemptions and deductions to be reviewed and rationalised in coming years.
o New tax regime to be optional – an individual may continue to pay tax as per the old regime and avail deductions and exemptions.
o Measures to pre-fill the income tax return initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no assistance from an expert to pay income tax.
o New regime to entail estimated revenue forgone of Rs. 40,000 crore per year.
- Corporate Tax:
o Tax rate of 15% extended to new electricity generation companies.
o Indian corporate tax rates now amongst the lowest in the world.
- Dividend Distribution Tax (DDT):
o DDT removed making India a more attractive investment destination.
o Deduction to be allowed for dividend received by holding company from its subsidiary. o Rs. 25,000 crore estimated annual revenue forgone.
o Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.
o Tax payment on ESOPs deferred.
- MSMEs to boost less-cash economy:
o Turnover threshold for audit increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.
o Parity brought between cooperatives and corporate sector.
o Option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions.
o Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).
- Tax concession for foreign investments:
100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments.
- Affordable housing:
o Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021.
o Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till 31st March, 2021.
Tax Facilitation Measures
- Instant PAN to be allotted online through Aadhaar.
- ‘Vivad Se Vishwas’ scheme, with a deadline of 30th June, 2020, to reduce litigations in direct taxes: o Waiver of interest and penalty – only disputed taxes to be paid for payments till 31st March, 2020. o Additional amount to be paid if availed after 31st March, 2020.
o Benefits to taxpayers in whose cases appeals are pending at any level.
- Faceless appeals to be enabled by amending the Income Tax Act.
- For charity institutions:
o Pre-filling in return through information of donations furnished by the done. o Process of registration to be made completely electronic.
o Unique registration number (URN) to be issued to all new and existing charity institutions. o Provisional registration to be allowed for new charity institutions for three years.
o CBDT to adopt a Taxpayers’ Charter.
- Losses of merged banks: o Amendments proposed to the Income-tax Act to ensure that entities benefit from unabsorbed losses and depreciation of the amalgamating entities.