Glimpse Of Income tax Amendments

Brought in By Finance Bill (2), 2019

Change in Income Tax rates

There is no change in rates of income tax in present budget except

  • Rate of surcharge in respect of individual, HUF, AOP & BOI expanded from 02 tier to 04 tier in following manner
  • Income exceeding 50 Lakhs but up to Rs. 01 crore10% of income Tax
  • Income exceeding 01 crore but up to Rs. 02 crore15% of income Tax
  • Income exceeding 02 crore but up to Rs. 05 crore25% of income Tax
  • Income exceeding 05 crore37% of income Tax
  • The companies having turnover up to Rs. 400 Crore will be subject to 25 % of tax instead of 30% of corporate tax rate. Earlier this limit was Rs. 250 crores only.

Change in TDS provisions

  • Insertion of new section 194M

This provision require every individual or HUF who is availing any contractual or professional or technical services either for personal use or for business purpose ( where his accounts are not subject to tax audit) to deduct tax on payments made for availment of such services.
The rate of tax would be 05 % of total amount paid.
The liability arises if total amount paid exceeds Rs. 50 Lakhs in a year.
NO requirement of obtaining TAN and tax will be paid on PAN itself.

  • Amendment in TDS provison upon sale of immovable property.

Section 194IA require every individual or HUF to deduct TDS @ 01% where there is sale of immovable property other than agriculture land and consideration exceeds Rs. 50Lakh.
The definition of term consideration widened and will include now payments made on account of certain amenities also like club membership, car parking, electricity and water facility etc. also.

  • Insertion of new section 194N

If there is cash withdrawal  from bank account exceeding 01 crore in a year then bank will deduct TDS @ 02 % on whole amount of cash withdrawal so made.

  • Amendment in TDS provisions relating to Life Insurance maturity proceed

Currently there is provision for deduction of TDS @ 01% whenever there is payment of maturity for Life Insurance and such insurance policy is not eligible for exemption U/s 10(10D). However the TDS deduction happens on gross value whereas the gross value itself includes the premium paid by the recipient.
So the proposal is to deduct TDS by insurance companies on net basis i.e. total amount paid net of insurance premium already paid.

  • Amendment in provisions relating to disallowance of expenditure in event of non deduction of TDS upon certain payments

If there is failure to deduct TDS on any payment made to resident, and such resident makes payment of tax at its own and accordingly files return on time then neither the Deductor will be assessee in default nor there would be any disallowance of such expenditure.

This provision extended for payments made to Non residents as well.

  • Electronic filing of application
  • Application for Obtaining Nil or lower withholding tax order or certificate to be made online instead of manual process existing now. Section 195
  • Online filing of details by Banks and similar institutions for Form 15G& H received. Section 206A

PAN & Return of Income

  • Interchangeability of PAN & Aadhar

In case of certain high value transactions and other scenario where ever quoting of PAN is mandatory, Aadhar can be quoted in lieu of PAN. Further PAN will be allotted in prescribed manner.

Also if a person fails to intimate his Aadhar number then his PAN will be made inoperative in prescribed manner.

  • Mandatory furnishing of return of Income

Currently the mandatory filing of Income tax return is only in respect of companies & firms. Except them a person is required to file his return of income only if its total income exceeds maximum limit not chargeable to tax. However the amendment mandates every person (other than company & Firms) to file his return of income in following scenario;

  • Deposit of Rs. 1 crore of more in current account in whole year
  • Payment of Rs. 2 Lakh or more on foreign travelling
  • Payment of electricity bill for Rs. 01 Lakh or more
  • If his total income before claiming deduction under section 54, 54B, 54D, 54EC, 54G, ,54GA & 54GB exceeds maximum amount not chargeable to tax

Move Towards Cash Less Ecomomy

  • Accepting payment through prescribed electronic modes

For business having turnover or gross receipts Exceeding Rs. 50 crore in preceding financial year have to make such arrangement for accepting payment through prescribed electronic modes.

The consequential amendment in section 271DB to impose penalty for non compliance.

The consequential amendment in Payments and Settlements System Act, 2007 so that No bank or any such similar agency can charge any fees directly or indirectly for use of such electronic facility.

  • Amendments in provisions relating to disallowance of cash expenditure in business transaction

There are various provisions in the Act which prohibit cash transactions and allow/encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account.

Section 13A, 40A, 43CA, 269SS, 269ST, 35AD, 43C are the section reference through which expenditure in cash is prohibited.

In order to encourage other electronic modes of payment, it is proposed to amend the above section so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account.

This move is possibly to include newly emerged payment banks system like Paytm, Amazon Pay etc.

  • Reporting in respect of specified financial transaction

Proposal is to include more persons to report the SFT other than those who are currently supposed to report.

Deduction from Total Income

  • Deduction in respect of National pension Scheme.
  • Exemption for receipt at the time of maturity or opting out of scheme is not chargeable to tax subject to 40% of total payment received. This limit of 40 % increased to 60%
  • Contribution made by central government or other employer to the NPS Account of employee is allowed as deduction subject to 10% of his total salary income. This limit increased from 10% to 14%.
  • Deduction in respect of Interest on housing loan.

The deduction of Rs. 150000/– is proposed for interest paid on housing loan taken for residential house property acquired under affordable housing scheme  provided the stamp value of house property so acquired doesn’t exceed Rs. 45 Lakhs and assessee doesn’t own any other residential house property on the date of purchase.

  • Investment linked deduction.
  • Interest paid on loan taken for purchase of electric vehicle: 

The deduction from total income would be there in respect of loan taken for purchase of an electric vehicle. The deduction amount would be Rs. 1.5 Lakh provided the purchase of electric vehicle should be between 01st April 2019 to 31st March 2023 and at the time of purchase assessee should not have another electric vehicle.

  • Investment in eligible Start-ups

The sunset date to make investment in eligible start ups so that benefit of deduction under section 54GB can be availed extended from 31st March 2019 to 31st March 2021. Also the attached condition to have 50% of share capital or voting rights reduced to 25%. Also the condition restricting transfer of new asset being computer or computer software relaxed from the current five years criteria to three years.

Miscellaneous

  • Revocation of approval to Trusts and other institutions U/s 12AA

The cancellation of registration of trust or similar institution for seeking availing exemption from taxes on income will now happen also on the ground of non compliance with any other law if that compliance is necessary for achievements of its objectives.
This will obviously covers non compliance under FEMA law, PMLA law etc.

  • Additional tax @ 20% on buyback of securities through distributable profits

In respect of buyback of shares by unlisted companies 20% of their distributed income on account of buyback is charged as tax. The scope of this section now extended to listed companies as well

Accordingly Section 10(34A) amended and exemption in respect of individual shareholder is available in respect of both i.e. listed as well as unlisted companies.  

  • Income deemed to accrue or arise in India

The scope of “Income deemed to accrue or arise in India” now includes Gift made (in the form of Money exceeding Rs. 50000/- or any immovable property situate in India where the stamp value exceeds Rs. 50000/-) by person resident in India to person non resident.

  • Issue of shares for inadequate consideration by Angel Investors

Under the provisions of section 56, the aggregate consideration received by any company for issue of shares where the consideration received is more than the face value of such shares, the amount which exceeds the fair market value of the shares shall be charged to tax.
 However there is exemption from this income in case of Tier-I Angel Investor.
This benefit now extended to Tier-II angel Investor also.

  • Interest income taxability in respect of Banks etc.

Currently in case of banks and similar corporations interest received on certain categories of bad or doubtful debts shall be chargeable to tax in the previous year in which it is credited to its profit and loss account actually received, whichever is earlier.

This facility being extended to deposit taking NBFC also.

Accordingly subsequent amendment in section 44B for allowability of expenditure pertaining to interest on loan availed from Deposit taking NBFC on actual basis only.