The Union Budget 2019-20: An Overview

The Union Budget 2019-20:

 DIRECT TAX                                                          

  • No Income Tax Liability for Resident Individual earning Income upto Rs. 5,00,000 p.a.
  • Basic tax rate remains unchanged for Firms and LLPs at 30%.
  • 25% Tax Rate for all companies with annual turnover of upto Rs.400 Crores.
  • Proposed to increase rate of surcharge as under:
Income Range Financial Year 2018-19 From Financial Year 2019-20 Effective Changed Rates
50L to 1 Cr 10% 10% (unchanged) 34.32%
1 Cr to 2 Cr 15% 15% (unchanged) 35.88%
2 Cr to 5 Cr 15% 25% 39%
Above 5 Cr 15% 37% 42.74%
  • To discourage cash payments, 2% TDS to be deducted for withdrawal more than Rs. 1 Crore in a year from a Bank Account under section 194N (w.e.f 01.09.2019).
  • TDS of 5% on Contractual payments or Professional fees exceeding Rs. 50 Lakhs in a year paid by Individual or HUF under section 194M (w.e.f 01.09.2019).
  • TDS on immovable property shall now be deducted on consideration of Rs 50 Lakhs or more inclusive of incidental charges (Car parking fees, maintenance fees, etc.)
  • Additional Income Tax Deduction of Rs. 1.5 Lakhs for interest on Loans for purchase of

Affordable Residential Housing Property under section 80EEA.

  • Income Tax Deduction of Rs. 1.5 Lakhs for interest on Loans for purchase of Electric Vehicles

under section 80EEB.

  • Interchangeability of Aadhaar and PAN for filing ITR. Now Taxpayers not having a PAN can file their Income Tax Return by quoting their Aadhaar No.
  • Aadhaar Card for NRIs with Indian passports to be issued after arrival in India, without waiting for mandatory 180 days.
  • Gifts to Non-resident by a person resident in India (unless otherwise exempt), shall be taxable income in the hands of Non-residents.
  • Mandatory filing of Income Tax Returns for Persons who have deposited amount exceeding Rs. 1 Crore in one or more bank accounts or incurred expenditure for Foreign Travel exceeding Rs. 2 Lakhs or has incurred electricity expenses in excess of Rs. 1 Lakh.
  • Faceless E-assessment for Scrutiny assessments with no Personal Interactions. Case selection for scrutiny on random basis.

 INDIRECT TAX                                                          

  • Implementation of fully automated GST refund module.
  • Reduction of GST rate on electric vehicles from 12% to 5%.
  • Taxpayers having Annual Turnover upto Rs. 5 Crores can now file quarterly return for GST.
  • Customs duty on gold and precious metals hiked to 12.5% from 10%.

·    Changes in rates of Petrol and Diesel are summarized below;

Tax Commodity From To
Excise Duty Petrol Rs. 7 per litre Rs. 8 per litre
Excise Duty Diesel Oil Re. 1 per litre Rs. 2 per litre
Road and Infrastructure Cess Petrol and Diesel Oil Rs. 8 per litre Rs. 9 per litre
  • Sabka Vishwas Legacy Dispute Resolution Scheme introduced for central excise and service tax and cess pending as on 30 June 2019.
S. No. Description Tax dues Relief available
1 Show cause notice (SCN)/appeals – Involving duty INR 50 lakh or less 70%
More than INR 50 lakh 50%
2 SCN/appeals – Involving late fee/penalty only Full amount
3 Arrears INR 50 lakhs or less 60%
More than INR 50 lakhs 40%
4 Enquiry/investigation/audit INR 50 lakhs or less 70%
More than INR 50 lakhs 50%

 CORPORATE                                                          

  • Suggestions have been made to SEBI to consider increasing minimum public shareholding in listed companies from the current threshold of 25 % to 35%.
  • STT is proposed to be applied only on the difference between the settlement price and the strike price in case of exercise of options.
  • Buy-back Tax at 23.3% proposed to be extended to listed shares as well.
  • Exemption under section 10(34A) for income from buy-back to shareholders is now extended to shareholders of listed companies.
  • Clarity on filing Master File is provided. A person is required to be file it even when there are no international transactions.
  • Interest on non-performing assets (NPAs) is taxed on receipt basis in case of banks. This benefit is now being extended to Non-banking financial companies (NBFCs).

 START-UPS                                                          

  • Exemption of Capital Gain on sale of House Property for investment in Start-ups extended to 31st March 2021.
  • Some of the conditions relating to carry forward and set off of losses in case of start-ups are proposed to be relaxed.
  • Start-ups and Investors will not be subject to scrutiny in respect to valuation of share premium.

 ALTERNATIVE INVESTMENT FUND (AIF)                                                          

  • Exemptions for capital gain arising out of securities traded in IFSC to category III AIF.
  • Losses (other than business loss) of Category I and II AIFs will now be passed on to Unit Holders, subject to the units being held for more than one year (w.e.f. 01.04.2020).
  • No requirement for justification of FMV for shares of Start-ups has now been extended to Category II AIFs as well.

Disclaimer:

This material has been prepared for private circulation only, You should consult your tax, legal and accounting advisors before engaging in any transaction. Tax law is subject to continual change, at times on a retrospective basis and may result in incremental taxes, interest or penalties. Should the law or its interpretation change, the article may be inappropriate.

ACCEPTANCE OF PAYMENT THROUGH PRESCRIBED ELECTRONIC MODES

The Finance (No.2) Act, 2019 introduced section 269SU in the Income-tax Act, 1961 (‘Act’), wherein businesses with turnover exceeding INR 50 crores were required to provide the facility to customers for making payment through prescribed electronic modes from 1 November 2019.

The additional electronic modes were recently notified by the CBDT vide Notification No. 105/2019 dated 30th December, 2019.

The notification introduced Rule 119AA to the Income-tax Rules, 1962 wherein in addition to the existing electronic modes of payment the following three electronic modes of payment were prescribed:

1Debit Card powered by RuPay
2Unified Payments Interface (UPI) (BHIM-UPI); and
3Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code)).

Further, the CBDT vide Circular No. 32/2019 dated 30th December, 2019 clarified that the prescribed additional modes of electronic payment are required to be installed and operationalized on or before 31st January 2020.

Failure in the said installation and operationalization would attract a penalty of Rupees Five thousand per day as per the provisions of Section 271DB of the Act.

Changes in Income tax return for AY 2020-21

As per recent notification issued by the CBDT, there are certain significant changes that have been made in:

  • ITR form 1 (applicable for resident individual assessees with income up to Rs. 50 Lakhs), and
  • ITR form 4 (applicable for assessees opting for presumptive taxation of income).

Additional details to be disclosed in ITR 1:

  • TAN of employer
  • Name, Aadhar and PAN of the tenant in both ITR 1 and ITR 4 (i.e., in case the assessee earns rental income).

Additional details to be disclosed in ITR 4:-

  • Passport Number, if holding an Indian passport. We would suggest you send us the passport expiry date also to determine the validity of the passport.
  • Particulars of Cash and Bank transactions relating to presumptive business: –
ParticularsCash Bank (aggregate amount of all bank accounts)
Opening balance
Receipts during the financial year
Payment/Withdrawal during the financial year
Closing Balance

Acceptance of payment through prescribed electronic modes

In order to achieve the mission of the Government to move towards a cashless economy, to reduce generation and circulation of black money and to promote digital economy, the Government proposed to insert a new section 269SU in the Income Tax Act, 1961.

Analysis of section 269SU:

Applicable From1st November, 2019
Eligible AssesseeEvery person
Eligibility conditionTurnover or Gross receipts in business should exceed Rs. 50 cr. in immediately preceding Financial year.
ProvisionEligible assessee shall mandatorily provide a facility for accepting payment
through electronic mode of payment.
Non-complianceNon-compliance shall attract penalty of a sum of Rs 5000 per day, for every day during which such non-compliance continues.

Important pointers of the Taxation Laws (Amendment) Ordinance, 2019

With a view to provide the much needed stimulus to corporates and push economic growth, the Taxation Laws (Amendment) Ordinance, 2019 has been promulgated by the President of India. The aim of the ordinance is to give certain tax benefits to corporates and to withdraw the enhanced surcharge from certain income arising from investment in capital market.

The salient features of these amendments are as under: –

  1. From Financial Year 2019-20, domestic companies will have an option to pay income tax at 22% plus applicable surcharge and cess provided that they do not avail any exemptions/incentives (Section 115BAA).
  2. New domestic manufacturing companies incorporated on or after 1st Oct 2019 but before 31st March 2023 will have an option to pay tax at 15% plus applicable surcharge and cess provided that they do not avail any exemptions/incentives (Section 115BAB).
  3. Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%. However, No MAT on companies opting for benefits of Section 115BAA and 115BAB
  4. Taxation Laws (Amendment) Ordinance, 2019 introduces a new surcharge of 10% which shall be charged from a company opting for taxability under Section 115BAA or Section 115BAB. Such surcharge shall be levied irrespective of the total income of the company.
  5. The enhanced surcharge as introduced in Budget, 2019 will not be applicable on capital gain arising on sale of equity share in a company or a unit of an equity-oriented fund or a unit of a business trust liable for securities transaction tax, in the hands of an individual, HUF, AOP, BOI, AJP.
  6. The enhanced surcharge shall also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs).
  7. In order to provide relief to listed companies which have already made a public announcement of buy-back before 5th July 2019, it is provided that tax on buy-back of shares in case of such companies shall not be charged.

Income Tax Notifies higher depreciation on certain category of Vehicles

CBDT under vide notification no. 69/2019/ F. No. 370142/17/2019-TPL dated 20 September 2019, has enhanced the depreciation rates applicable to motor cars / motor buses / motor lorries / motor taxis purchased during the period 23 August 2019 to 31 March 2020.

The existing and new notified rates of depreciation are tabulated hereunder:

S.No.PARTICULARSDEPRICIATION RATES
Existing ratesAcquired & Put to use between
23 August 2019 to 31 March 2020
1Motor cars, other than those used in a
business of running them on hire
15%30%
2Motor buses, motor lorries and motor taxis used in a
business of running them on hire
30%45%

Cess and Surcharge on TDS based on section 206AA

Gist of 206AA

As per Income Tax Act, TDS is to be deducted for certain payments to be made at the rates as specified. However, in case the payee is unable to furnish PAN, the tax shall be deducted at the higher of the following rates:

  1. at the rate of 20% or
  2. at the rate specified in the relevant provision of this Act or
  3. at the rates specified in Finance Act in force.

In case the payee is Non-Resident

  • If the TDS is being deducted under normal provisions of Income Tax Act in case of a non-resident payee, then cess and surcharge shall be levied.
  • Please note that where the payment is being made to a Non-Resident and the rate of TDS is 20% as above, then no cess and surcharge shall be levied.

Fees for Delayed filling of return Under Section 139(1)

The following fees shall be imposed u/s 234F for delay in furnishing return.

IncomeDate Of FurnishingAmount of Fee
Up to Basic Exemption LimitAfter due date u/s 139(1)Nil Fee
Basic Exemption Limit to 5,00,000After due date u/s 139(1)Fee of Rs 1,000
Above 5,00,000Before 31st December of the Assessment YearFee of Rs 5,000
After 31st December of the Assessment YearFee of Rs 10,000

CBDT instruction on conduct of assessment proceedings through ‘E-Proceedings’ facility

The CBDT has issued an instruction dated August 20, 2018 for the conduct of assessment proceedings through the E-proceedings facility during the year 2018-19.

In all the assessment cases u/s 143(3), proceedings shall be conducted electronically.

E-proceedings NOT mandatory in the following cases: –

·         Assessment in case of search or requisition, or in the hands of any other person, re-assessment and best judgement.

·         In set-aside assessments

·         Assessment framed in non- Permanent Account Number (PAN) cases.

·         ITR was filed in paper mode

·         In case where substantial hearing had already taken place in the conventional mode.

Amendment in PAN Application Form

CBDT vide draft notification dated August 31, 2018 has notified the amendment in permanent account number (PAN) application Form (Form 49A and Form 49AA).

At present, providing Father’s name in the PAN application Forms is mandatory, however the applicant has been given option to select name of either father or mother, which the applicant may like to be printed on PAN card.

However, post this amendment, providing father’s name shall not be mandatory in PAN application Forms, where mother is the single parent. In such cases where the applicant opts not to provide fathers name, mother’s name is to be compulsorily furnished.

Revision of monetary limits for filing of appeals by the Department

The Central Board of Direct Taxes vide Circular No. 3/2018 dated 11th July, has revised the monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court.

Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:

S. No.Appeals/ SLPs in Income-tax mattersMonetary Limit (Rs.)
1Before Appellate Tribunal20,00,000
2Before High Court50,00,000
3Before Supreme Court1,00,00,000

It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.