The Hon'ble Finance Minister presented the Budget 2020 on 1 February 2020. Please find below the key proposals pertaining to personal tax announced in the Union Budget 2020.
The criteria for determining Residential Status has been changed.
|Income Slabs (INR)||Existing Effective
Tax Rate under NPTR*
|0 – 250,000||0%||0%|
|250,001 – 500,000||5.2%||5.2%|
|500,001 – 750,000||20.8%||10.4%|
|750,001 – 1,000,000||20.8%||15.6%|
|1,000,001 – 1,250,000||31.2%||20.8%|
|1,250,001 – 1,500,000||31.2%||26%|
|1,500,001 – 5,000,000||31.2%||31.2%|
|5,000,001 – 10,000,000||34.32%||34.32%|
|10,000,001 – 20,000,000||35.88%||35.88%|
|20,000,001 - 50,000,000||39%||39%|
It is proposed that the aggregate sum in a FY of employer contributions in excess of INR 7.5 lakhs to the following funds would be taxable as perquisite in the hands of the employee:
Further, the annual accretion by way of interest, dividend or other similar amount credited to the account on the above excess contribution will also be taxable.
Normally, the employer is required to deduct tax on the notional gains at the time of allotment of shares under an ESOP. It is now proposed, in the case of eligible start-ups, to defer the corresponding tax payment on perquisite arising from ESOPs by giving additional time to pay the tax, in order to ease the cash outflow for employees of eligible start-ups who exercise ESOPs. The tax is now proposed to be deducted/paid within 14 days from the earliest of the following events:
However, the tax has to be computed on the basis of existing valuation mechanism and tax rates applicable in the FY in which the shares were allotted to the employee.
Currently, first time home buyers can claim additional deduction up to INR 1.5 lakhs in respect of interest on loan sanctioned for house property of stamp duty value upto INR 45 lakhs, provided the loan is sanctioned between 01 April 2019 and 31 March 2020. It is now proposed to extend this benefit for one more year, i.e. if the loan is sanctioned by 31 March 2021.
It is proposed that authorised dealers will be mandated to collect 5% tax, if the aggregate amounts received from a remitter exceeds INR 7 lakhs in a financial year for remittance outside India under the LRS of the RBI. Such rate shall be increased to 10% in case the remitter does not furnish PAN / Aadhaar.
In case you have not filed your India tax return for the Financial Year (FY) 2018-19, you can still opt to file the same as belated tax return by 31 December 2019 and 31 March 2020 with a late fee of INR 5,000 and INR 10,000 respectively. However, if your total income does not exceed INR 5,00,000, in that case, the fee amount shall not exceed INR 1,000.
In case you have already filed your return but would like to revise the same for any omission or error, the same can be amended/ revised upto 31 March 2020.
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The Central Board of Direct Taxes (CBDT) has released clarifications in the form of frequently asked questions (FAQs)1 regarding certain disclosures in the income-tax return (ITR) forms, applicable to the financial year 2018-19 (assessment year 2019-20).
In this tax insight we have summarised the key clarifications which are relevant for individual taxpayers.
Release of these clarifications is a welcome step as taxpayers were facing challenges in reporting certain details in the absence of guidance in the instructions to the ITR forms. According to the FAQs, assets reported under Schedule FA and held as on 31 March 2019, are also to be included in Schedule AL, as applicable. Foreign assets are required to be reported on accounting year basis. Where accounting year is different from financial year, ordinarily residents (ROR) need to compile details of their foreign assets and corresponding liabilities as on 31 March 2019 and include them in Schedule AL. Then, what happens to those who already would have filed their returns excluding the foreign assets and liabilities in Schedule AL, assuming that duplication of disclosures was not intended? A similar situation may apply to the disclosures of other items clarified now, where taxpayers have reported details based on some interpretation. Further clarification will help taxpayers, or else it may result them to revise their returns. It makes up a case for further extension of filling deadline at least for ROR foreign nationals who may need time to compile additional details in the light of these clarifications.
For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor.
The Central Board of Direct Taxes, vide its order1 under section 119 of the Income-tax Act, 1961 (the Act), extended the due date of filing income tax returns for the financial year 2018-19 from 31 July to 31 August 2019. This will apply to all taxpayers2 who were required to file their returns by 31 July 2019.
This is a welcome step that will provide adequate time to the taxpayers to comply with the filing requirement. Taxpayers were facing difficulties in meeting the 31 July deadline due to multiple reasons, namely, collating details to meet up with additional disclosure requirements introduced in the income-tax return forms, late receipt of Form 16 due to extension of the due date for the issuance of Form 16 by the employer to 10 July 2019, multiple revision in the tax filing software (utility) etc.
The extension also provides relief to the taxpayers from late filing fees of INR 50003 and also interest under section 234A of the Act (at 1% per month), if they file their returns by 31 August 2019.
However, taxpayers should be careful in paying up the tax due, if any, by 31 July 2019 to avoid any additional monthly interest (at 1% per month) under section 234B of the Act if the same is paid in August 2019 at the time of filing the return.
1) F. No 225/157/2019/ITA.II dated 23 July 2019
2) Individuals, HUFs, non-corporate taxpayers etc. whose accounts are not liable for audit under the Act or under any other law in force currently were required to file their returns by 31 July 2019.
3) INR 1000 for those having total income below INR 500,000
Please find below the key proposals pertaining to personal tax announced in the Union Budget 2019. These proposals are in addition to the changes introduced by the Government in the Interim Budget 2019.
|Taxable income (INR)||Present||Proposed|
|Exceeding 50 lakhs but not exceeding 1 crore||34.32%||34.32%|
|Exceeding 1 crore but not exceeding 2 crore||35.88%||35.88%|
|Exceeding 2 crore but not exceeding 5 crore||35.88%||39.00%|
|Exceeding 5 crore||35.88%||42.74%|
While the global economy is battling with strong headwinds, India"s economy is seeing a robust growth and is on the path to emerging as one of the fastest growing economies in the world. The Finance Minister has presented the Interim Budget 2019. This publication provides an overview of key announcements and proposals made in the Interim Budget and its likely impact.
The announcement about financial support will provide some relief to farmers and will address to some extent issues faced in the farm sector. Interest subvention schemes will improve the credit uptake and address farmers" loanrelated stress. Overall, the announcement for the farm sector is expected to boost rural consumption and demand.
Provisions relating to interest rebate will encourage more MSMEs to register under GST, which will promote compliance under GST, expand the tax base and boost formalisation of the economy. Improved access and the reduced cost of credit will lower organisations" production costs and make them more competitive. With the implementation of the GeM platform, MSMEs will have access to a larger market.
The Pradhan Mantri Shram-Yogi Maandhan Yojana has been announced for workers in the unorganised sector with a monthly income upto INR 15,000. The scheme will provide them with an assured monthly pension of INR 3,000. The scheme is contributory and the government will make a matching contribution.
The scheme will provide old age social security and encourage savings among unorganised sector workers. Increased enrolment should lead to further formalisation of the economy.
In the Affordable Housing sector, benefits under Section 80-IBA of the IT Act were extended by a year for projects approved till March 2020. This will allow Real Estate developers to deduct 100% of profits derived from development of affordable housing projects.
Extension of benefits in the real estate sector will give a boost to construction activity, particularly in affordable housing. Exemption from levy of tax on inventories is likely to encourage investment in the sector. From the consumers" point of view, benefits of rollover in capital gains and exemptions on income tax on rent will boost housing demand, and is also expected to increase investments in a second house.
While there are no changes proposed in personal Income Tax rates and slabs, the Government has made certain key proposals to provide relief to small taxpayers, especially to middle class and salaried earners in the form of:
Proportionate exemption on long-term capital gains arising from proceeds of sale of residential house extended to purchase of two residential houses from one house, subject to:
Domestic companies with a turnover not exceeding INR 250 crore during FY 2016- 17 continue to enjoy a reduced tax rate of 25% (increased by applicable surcharge and cess). The base year for this reduced tax rate is proposed to be extended to domestic companies with turnover not exceeding INR 250 crore for FY 2017-18.
The provisions relating to TDS on rental payments provide for a monetary threshold of INR 1.8 lakh. This threshold has been enhanced to INR 2.4 lakh.
Certain key amendments have been proposed in the Interim Budget to provide relief and give an impetus to the Real Estate sector, including the affordable housing market:
The Government has estimated the CGST collection for FY 2019-20 at INR 6.10 lakh crore. This assumes a growth of around 20% over the revised estimate FY 2018-19 at INR 5.04 lakh crore.
Given that overall growth in GST collection in the current year over last year is only 8% (INR 97,100 crore vs INR 89,700 crore on a month-on-month basis), it will be interesting to see how this ambitious target is achieved by the Government. It will need substantial expansion in the tax base and stringent control over revenue leakages.
The proposed amendments in stamp duty provisions are largely aimed at rationalising the various stamp duty provisions as well as streamlining the stamp duty collection mechanism. It is intended to designate stock exchanges and depositories to collect stamp duty on sale or transfer of securities. Such collection will be transferred to the respective state government within the prescribed time. The amendments also propose changes to the rates of duties. It also appears that exemption of stamp duty on transfer of dematerialised shares is proposed to be done away with.
The thrust of this Budget was on social infrastructure, ease of living and technologyled governance aimed at inclusive and equitable growth. The salaried class with taxable income of up to INR 5 lakh will have higher disposable incomes. Direct Benefit Transfer to farmers will support rural demand. The Pradhan Mantri Shram-Yogi Maandhan Yojana will provide social security to a large number of marginal wage earners in the country. The Real Estate sector will see more activity and the allied sectors of steel and cement will get a boost. With enhanced spending and direct benefit transfers, there is an obvious concern about inflationary pressures. However, given that capacity utilisation is still around 70%, we believe that expectations of inflationary pressure will be muted. The Government"s vision to create a tech-enabled tax system is a welcome initiative. In all, this Budget has set the tone for considerable future discourse.