As you know government has announced budget on 1 Feb 2020 

This budget is applicable for next financial year (Financial Year 2020-21 or Assessment Year 2021-22)

Here we provide you easy summary for the same covering important topics.You can also download it in pdf from here

 

New Optional income Tax Rate for Individuals

Govt has introduce new income tax rates for individuals under Section 115BAC

This is applicable for Financial year 2020-21 (Assessment year 2021-22)

1.png

 

How to calculate using new Slab rate

Example part 1 budget.png

Example part 2 budget.png

 

New Income Tax Rate is Optional

If the taxpayer opts for new scheme, he will not get benefit of standard deduction, loss from house property, Chapter VI A deduction like 80C, 80D, etc

If Old Rate Claimed If New Rate Claimed
Standard Deduction of 50000 No Standard Deduction
80C, 80D etc Benefit No 80C, 80D etc
Loss from House Property Max 2 Lacs No Loss from House Property

 

Example  1 budget.png

 

Surcharge Rate for Individuals Changed in case having Income from Sale of Shares

Currently, Surcharge Rate for Individuals is

Income Upto

Surcharge Rate

Upto 50 Lacs

0%

50 lac- 1 Crore

10%

1 Crore -2 Crore

15%

2 Crore - 5 Crore

25%

> 5 Crore

37%

 

In current year,Surcharge Rate has been kept same

But an exception has been provided for Income under Section 111A (Short Term Capital gain on sale of

shares and Section 112A on long term capital gain on shares)

Max Surcharge Rate on them cant be more than 12%

4.png

 

New Section 194O on TDS Deducted by E commerce Operators

Suppose a dealer sells his goods oline through E commerce operators like Flipkart Amazon

Customer pays Flipkart/Amazon and Amazon pays to Dealer after deducting its charges

Now Amazon will also deduct 1% TDS if amount paid is more than 5 lacs

TDS Section

Description

Cutoff

Rate

Section 194O

TDS on Payments by Ecommerce Operators to E Commerce Participants

500000

1%

If no Tds Budget.png

 

TDS if no Pan Number for Section 194O is 5%

Earlier

Now

Normal Sections (194C/194J/194H)

Normal Sections (194C/194J/194H)

If No Pan Number

If No Pan Number

TDS Deducted @ 20%

TDS Deducted @ 20%

 

New Section 194O

 

If  No Pan No

 

TDS Deducted @ 5%

 

Due date for ITR and Audit report Made Different

Earlier for those business whose accounts were required to be audited

Due date for Audit and ITR was same (30 Sep extended to 31 Oct)

Now due date for both have been made different

Audit Report had to be filed one month before ITR Due date

Earlier Now
Due Date for Audit Business
Tax Audit Report 30 Sep   31 Oct Tax Audit Report 30-Sep
ITR 30 Sep   31 Oct ITR 31-Oct

 

Now 2 Rates for TDS under Section 194J

Earlier there was only 1 rate under Section 194J of 10%

Now 2 TDS Rates were deducted under Section 194J

10% for Professional Services

2% for Other than Professional Services

Earlier Now
TDS Under Section 194J of TDS Under Section 194J of
Professional 10% Professional 10%
Technical Other than Professional 2%
Royalty
Non Compete Fees

 

 

Turnover Limit for Section 44AD

Earlier

If turnover of a business uptp 2 crore

it can opt for presumptive income scheme under 44AD 

He has to pay Tax @ 8%  for Bank turnover and 6% for Cash Turnover

 

Now 

In this scheme, turnover limit is increased to 5 Crore provided

Total cash receipts are not more than 5% of total receipts

and

Total cash payments are not more than 5% of total payments

Earlier Now
If turnover upto 2 cr If turnover upto 2 cr
8%/6% is profit

8%/6% is profit

(for Normal business)

 

If turnover upto 5 cr

8%/6% is profit 

Max 5% cash transactions

 

Who is required to Deduct TDS

TDS is now to be deducted in case turnover > 1Crore in case of proprietorship business instead of 2 Crore earlier

  Earlier

TDS was required to be deducted if deductor is

  • Company (Always)
  • Partnership (Always)
  • Proprietorship (If last year audit was compulsory)

Audit was compulsory if turnover > 2crore in case of business and gross receipts > 50 lacs in case of professions

Now

TDS is required to be deducted if deductor is

  • Company (Always)
  • Partnership (Always)
  • Proprietorship (If last turnover was more than 1 Crore in case of business and 50 lacs in case of professionals)

 

Dividend Distribution Tax Abolished                               

If Companies wanted to distribute its profit (dividend) to it shareholders, it had to pay dividend distribution tax                                                           

Rate of DDT was 15% + Surcharge + Cess = Effective 20.56%                                                      

This was exempt in the hands of shareholder upto 1000000                                                 

Now DDT has been abolished and this dividend is taxable in hands of shareholder

Earlier Now
Companies paid DDT No DDT

Shareholder Dividend Income was exempt upto 10 lacs

Shareholder Dividend Income is taxable

TDS Rate on

Dividend Distribution was

Companies have to now Deduct TDS on this dividend income under

Section 194

if Dividend more than 2500 5000

 

Faceless Scrutiny and appeal in Income Tax

Earlier

Scrutiny of Income Tax Return was done online

However for Appeal. We had to visit Income Tax Department and file appeal manually

Now, even appeal is done online and no need to visit income Tax Department

Earlier

Now

Scrutiny Online

Scrutiny and Appeal both online

Appeal Manual

 

Instant Pan Card Generation from Aadhar Card

Earlier,Pan Card is to be manually applied

Various documents had to be submitted like Photograph, Address proof and age proof

Whole procedure used to take at least 7 days

 

Now, Pan Card is Instantly Generated from Adhar card and no more documents are required

Earlier

Now

Pan Card Documents Required

Pan Card Documents Required

Address Proof

Adhar Card

(Instant Generation)

Age Proof

Photo

 

New TCS Rates Introduced

On Certain Transactions, Seller has to collect TCS (Tax Collected at Source) from the buyer

like Sale of Scrap etc

Following New Services have been added In TCS Chart in Section 206C

Transaction

TCS Rate

Cutoff

Remittance out of India by a Money changer

5%

7 lacs

Sale of Overseas Tour package by Tour Operator

5%

-

Sale of Any Goods if turnover of Seller is more than 10 Crores

0.10%

50 Lacs

 

Download PDF here

 
Download Finance Act 2020 pdf
  1. Tax Practical
  2. Budget Amendments - Changes in 2020
  3. Budget Changes Finance Act 2020 (FY 2019-20 AY 2020-21)


Transcript

New Optional income Tax Rate for Individuals Govt has introduce new income tax rates for individuals under Section 115BAC This is applicable for Financial year 2020-21 (Assessment year 2021-22) Earlier Now Financial Year 2019-20 Financial Year 2020-21 (Assessment Year 2020-21) (Assessment Year 2021-22) Income Upto Tax Income Upto Tax Upto 250000 0% Upto 250000 0% 250001 to 500000 5% 250001 to 500000 5% 500001 to 1000000 20% 500001 to 750000 10% Above 1000000 30% 750001 to 1000000 15% 1000001 to 1250000 20% 1250001 to 1500000 25% Above 1500000 30% Rebate Rebate if income between 250000-500000 if income between 250000-500000 Max 12500 Rebate Max 12500 Rebate Cess 4% Extra Cess 4% Extra How to calculate using new Slab rate TAX ON INCOME 1100000 INCOME TAX RATE TAX 250000 0% 0 250000 5% 12500 (First 250000 Is Tax Free,On Balance We Calculate 5% Till 500000 Only) 250000 10% 25000 On Remaining ,We Calculate 10% Till 7.5 Lac 250000 15% 37500 On Remaining ,We Calculate 15% Till 10 Lac 100000 20% 20000 On Remaining ,We Calculate 20% 1100000 95000 TAX ON INCOME 1400000 INCOME TAX RATE TAX 250000 0% 0 250000 5% 12500 (First 250000 Is Tax Free,On Balance We Calculate 5% Till 500000 Only) 250000 10% 25000 On Remaining ,We Calculate 10% Till 7.5 Lac 250000 15% 37500 On Remaining ,We Calculate 15% Till 10 Lac 250000 20% 50000 On Remaining ,We Calculate 20% Till 12.5 Lac 150000 25% 37500 On Remaining ,We Calculate 25% 1400000 162500 TAX ON INCOME 5000000 INCOME TAX RATE TAX 250000 0% 0 250000 5% 12500 (First 250000 Is Tax Free,On Balance We Calculate 5% Till 500000 Only) 250000 10% 25000 On Remaining ,We Calculate 10% Till 7.5 Lac 250000 15% 37500 On Remaining ,We Calculate 15% Till 10 Lac 250000 20% 50000 On Remaining ,We Calculate 20% Till 12.5 Lac 250000 25% 62500 On Remaining ,We Calculate 25% Till 15 Lac 3500000 30% 1050000 On Income More Than 15 Lacs,We Calculate 30% 5000000 1237500 New Income Tax Rate is Optional If the taxpayer opts for new scheme, he will not get benefit of standard deduction, loss from house property, Chapter VI A deduction like 80C, 80D, etc If Old Rate Claimed If New Rate Claimed Standard Deduction of 50000 No Standard Deduction 80C, 80D etc Benefit No 80C, 80D etc Loss from House Property Max 2 Lacs No Loss from House Property Example 1 Suppose a Person has Salary Inome of 50000 per month Tax as per Current Slab Rate and New Slab Rate is as follows Particular Current New Option 1 Option 2 Monthly salary 50000 50000 Annual salary 600000 600000 Less: Standard deduction 50000 -- (no standard deduction is available) Net annual salary 550000 600000 Tax 22500 22500 REBATE 0 0 NET TAX 22500 22500 CESS 4% 900 900 NET TAX + CESS 23400 23400 Example 2 Suppose a Person has Business Income of 800000 during the year He has claimed Deduction for 150000 in Section 80C Tax as per Current Slab Rate and New Slab Rate is as follows Particular Current New Option 1 Option 2 Annual salary 800000 800000 Less: Standard deduction 50000 -- Net annual salary 750000 800000 Less Deduction - Chapter VIA 80C 150000 -- If you choose this new tax slab, no other deductions and exemptions under Chapter VI-A other than 80JJAA and 80CCD (2) can be availed. Total deductions 150000 -- Net Total Income 600000 800000 Tax 32500 45000 REBATE 0 0 NET TAX 32500 45000 CESS 4% 1300 1800 NET TAX + CESS 33800 46800 Surcharge Rate for Individuals Changed in case having Income from Sale of Shares Currently, Surcharge Rate for Individuals is Income Upto Surcharge Rate Upto 50 Lacs 0% 50 lac- 1 Crore 10% 1 Crore -2 Crore 15% 2 Crore - 5 Crore 25% > 5 Crore 37% In current year,Surcharge Rate has been kept same But an exception has been provided for Income under Section 111A (Short Term Capital gain on sale of shares and Section 112A on long term capital gain on shares) Max Surcharge Rate on them cant be more than 12% Earlier Now Income Upto Surcharge Rate Income Upto Surcharge Rate for Non shares Income Surcharge Rate for Shares Income Upto 50 Lacs 0% Upto 50 Lacs 0% 0% 50 lac- 1 Crore 10% 50 lac- 1 Crore 10% 10% 1 Crore-2 Crore 15% 1 Crore-2 Crore 15% 15% 2 Crore- 5 Crore 25% 2 Crore- 5 Crore 25% 15% > 5 Crore 37% > 5 Crore 37% 15% New Section 194O on TDS Deducted by E commerce Operators Suppose a dealer sells his goods oline through E commerce operators like Flipkart Amazon Customer pays Flipkart/Amazon and Amazon pays to Dealer after deducting its charges Now Amazon will also deduct 1% TDS if amount paid is more than 5 lacs TDS Section Description Cutoff Rate Section 194O TDS on Payments by Ecommerce Operators to E Commerce Participants 500000 1% Earlier If No TDS Sales through Amazon Sale 100000 Customer Customer pays 100000 to amazon Amazon Amazon pays 80000 after deducting its commission Dealer Sales-100000 Commission-20000 Balance- 80000 Now If TDS Applicable Sales through Amazon Sale 100000 Customer Customer pays 100000 to amazon Amazon Amazon pays 79000 after deducting its commission & TDS Dealer Sales-100000 Commission-20000 TDS-1000 Balance- 79000 TDS if no Pan Number for Section 194O is 5% Earlier Now Normal Sections (194C/194J/194H) Normal Sections (194C/194J/194H) If No Pan Number If No Pan Number TDS Deducted @ 20% TDS Deducted @ 20% New Section 194O If No Pan No TDS Deducted @ 5% Due date for ITR and Audit report Made Different Earlier for those business whose accounts were required to be audited Due date for Audit and ITR was same (30 Sep extended to 31 Oct) Now due date for both have been made different Audit Report had to be filed one month before ITR Due date Earlier Now Due Date for Audit Business ITR 30 Sep 31 Oct ITR 30-Sep Tax Audit Report and ITR 30 Sep 31 Oct Tax Audit Report 31-Oct Now 2 Rates for TDS under Section 194J Earlier there was only 1 rate under Section 194J of 10% Now 2 TDS Rates were deducted under Section 194J 10% for Professional Services 2% for Other than Professional Services Earlier Now TDS Under Section 194J of TDS Under Section 194J of Professional 10% Professional 10% Technical Other than Professional 2% Royalty Non Compete Fees Turnover Limit for Section 44AD Earlier If turnover of a business uptp 2 crore it can opt for presumptive income scheme under 44AD He has to pay Tax @ 8% for Bank turnover and 6% for Cash Turnover Now In this scheme, turnover limit is increased to 5 Crore provided Total cash receipts are not more than 5% of total receipts and Total cash payments are not more than 5% of total payments Earlier Now If turnover upto 2 cr If turnover upto 2 cr 8%/6% is profit 8%/6% is profit (for Normal business) If turnover upto 5 cr 8%/6% is profit (for Non cash business) Max 5% cash transactions Who is required to Deduct TDS TDS is now to be deducted in case turnover > 1Crore in case of proprietorship business instead of 2 Crore earlier Earlier TDS was required to be deducted if deductor is • Company (Always) • Partnership (Always) • Proprietorship (If last year audit was compulsory) Audit was compulsory if turnover > 2crore in case of business and gross receipts > 50 lacs in case of professions ... Now TDS is required to be deducted if deductor is • Company (Always) • Partnership (Always) • Proprietorship (If last turnover was more than 1 Crore in case of business and 50 lacs in case of professionals) Dividend Distribution Tax Abolished If Companies wanted to distribute its profit (dividend) to it shareholders, it had to pay dividend distribution tax Rate of DDT was 15% + Surcharge + Cess = Effective 20.56% This was exempt in the hands of shareholder upto 1000000 Now DDT has been abolished and this dividend is taxable in hands of shareholder Earlier Now Companies paid DDT No DDT Shareholder Dividend Income Shareholder Dividend Income was exempt is taxable upto 10 lacs TDS Rate on Dividend Distribution was Companies have to now Deduct TDS on this dividend income under Section 194 if Dividend more than 2500 5000 Faceless Scrutiny and appeal in Income Tax Earlier Scrutiny of Income Tax Return was done online However for Appeal. We had to visit Income Tax Department and file appeal manually Now, even appeal is done online and no need to visit income Tax Department Earlier Now Scrutiny Online Scrutiny and Appeal both online Appeal Manual Instant Pan Card Generation from Aadhar Card Earlier,Pan Card is to be manually applied Various documents had to be submitted like Photograph, Address proof and age proof Whole procedure used to take at least 7 days Now, Pan Card is Instantly Generated from Adhar card and no more documents are required Earlier Now Pan Card Documents Required Pan Card Documents Required Address Proof Adhar Card (Instant Generation) Age Proof Photo New TCS Rates Introduced On Certain Transactions, Seller has to collect TCS (Tax Collected at Source) from the buyer like Sale of Scrap etc Following New Services have been added In TCS Chart in Section 206C Transaction TCS Rate Cutoff Remittance out of India by a Money changer 5% 7 lacs Sale of Overseas Tour package by Tour Operator 5% - Sale of Any Goods if turnover of Seller is more than 10 Crores 0.10% 50 Lacs

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.