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Important Notifications for Individuals & HUF
Budget 2020
(Applicable from 1.04.2020)

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Important Notifications For Individuals & HUF Budget 2020 CA Mangal

1. For “Analysis of Tax Slab Rates” old regime & under new optional tax regime (Section 115BAC), please check our previous blog dated 5th February 2020 or Click here

2. New tax regime allows deduction of interest paid on home loan on rental property:

 

For F.Y 2020-21, while most of the deductions are not available in the new optional tax regime, deduction on interest paid on home loan for rental property can still be claimed.
However, the interest paid on housing loan is not available for deduction for self-occupied houses. But interest paid on housing loan taken for a rented out property can be claimed as deduction under section 24(b) even in the new tax regime. Below is the procedure to be followed to claim deduction under section 24(b):-

Particulars

Amount

Gross annual value (let out property)

XXXX

Less:- Municipal taxes paid during the year

(XXXX)

Net Annual Value (NAV)

XXXX

Less:- Deduction under section 24

XXXX

  • Deduction under section 24(a) @ 30% of NAV (Standard
    Deduction)
  • Deduction under section 24(b) on
    account of interest on borrowed capital for rented out
    house property

(XXXX)

(XXXX)

Income from house property

XXXX

If the final value arrived after deducting standard deduction and interest paid on home loan is negative, it is considered as a loss under the head income from house property. This loss cannot be set-off against any other head of income such as salary, interest income and capital gains etc.

Under the old tax regime, set-off of losses from house property is allowed for up to Rs 2 lakh. But in the new tax regime, this benefit is not available.

3. Employer’s contribution in Recognized Provident Fund (RPF), Superannuation Fund (SAF) & National Pension Scheme(NPS) over and above Rs. 750,000 to be taxed as perquisite:

Under existing provisions, employer’s contribution up to the following limits is exempt:

Contribution to Recognized Provident Fund (RPF) : Up to 12% of salary

–Contribution to Superannuation Fund (SAF) : Up to INR 150,000

–Contribution to National Pension Scheme (NPS) : Up to 10% / 14% of salary in case ofnon-government / government employees.

From 1.04.2020 an overall cap of Rs. 750,000 has been introduced. Employer’s contribution over and above this limit to be taxed as perquisite.

Annual accretion from such funds as Interest, dividend, etc. on employer’s contribution which is in excess of Rs. 750,000 would also be taxed as perquisite.

 

4. Increase in Turnover Threshold Limit for Tax Audits u/s 44AB: 

Increase in the turnover threshold limit for the Tax Audits u/s 44AB from 1.04.2020 for the persons carrying on business to Rs. 5 crore from the existing Rs.1 crore, in all those cases where the aggregate annual cash receipts and cash payments do not exceed 5% of their total receipts and payments respectively.

Persons carrying on profession the existing threshold limit of Rs 50 lakhs for the tax audits will be continued, No change in the same.

5. Increase in safe harbour limit of 5 %to 10 % (Real estate circle rate limit):

Under existing provisions if the consideration value of a property is less than the circle rate and the difference of the same is more than 5% then the difference is counted as income both in the hands of the purchaser and seller. From 1.04.2020 in order to minimize hardship in real estate transaction and provide relief to the sector the limit has been increased from 5% to 10%.

 

6. Amendments relating to TDS:

 

1) Section 194K (TDS on income from mutual funds) : This new section provides that TDS at 10% shall be deducted by a person responsible for paying to a resident any income by any mode in respect of units of a Mutual Fund or units from the administrator of the specified undertaking or units from the specified company at the time of payment if the amount exceeds Rs 5,000/-.

2) Section 194C(TDS on Payment to Contractor):Under existing provisions individual or a Hindu undivided family or an association of persons or a body of individuals required to deduct the TDS if they are liable to audit of accounts under section 44AB.

But from 1.04.2020 individual or a Hindu undivided family or an association of persons or a body of individuals has total sales, gross receipts or turnover from business or profession carried on by him exceeding Rs. 1 crore in case of business or Rs. 50 lakhs in case of profession, are required to deduct TDS u/s 194C.

Similar change for requirement for TDS applicability has been made in Sections 194A (TDS on Interest other than interest on Securities),194H(TDS on commission & Brokerage),194I(TDS on Rent), 194J(Fees for Professional & Technical Services) and 206C(Tax Collection at Source) too.

Also definition of “Work” is amended, nowin a contract manufacturing the raw material provided by the assessee or its associate shall fall within the purview of the ‘work’ under section 194C. (Effective from 01.04.2020)

3) Section 194J (Fees for Professional & Technical Services) is being amended to provide two rates of TDS in order to reduce litigations. TDS in case of fees for technical services (other than professional services) to 2 % from existing 10%.The TDS rate in other cases under section 194J would remain same at 10%. (Effective from 01.04.2020).

7. Removal of Dividend Distribution Tax: 

Under existing provisions, dividend is being taxed in the hands of company distributing such dividend u/s 115O. But from 1.04.2020 dividend earned will be taxed in the hands of recipient shareholders as per applicable slab rates. The existing provision of dividend distribution tax @ 15% to be deducted by companies & dividend earned exempt in the hands of
shareholder has been abolished.

8. Restrictions on the Powers of Income Tax Appellate Tribunal (ITAT) to Grant Stay of Demand:

Under existing provision ITAT washaving full power to grant stay of income tax demand, even an absolute stay of demand, in deserving cases without any restriction.

But from 1.04.2020as per the proposed amendment assessee has to deposit at least 20% of the outstanding demand for even making his/her application for stay of demand being admitted and entertained by the ITAT.

As per the amendment which has been proposed in the Finance Bill 2020, although not referred to in the Budget Speech is the amendment in the provision to section 254(2A) ofthe Act to provide that ITAT may grant stay subject to the condition that the assessee deposits not less than 20% of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof.

9. Faceless ‘e-Appeals’ and ‘e-Penalty’:

A taxpayer can file appeal before Commissioner (Appeals)through his registered account on the e-filing portal. But the process that follows after filing of appeal is neither electronic nor faceless. In order to ensure that the reforms initiated by the Department to eliminate human interface from the system reach the next level, it is important that an e-appeal scheme be launched on the lines of e-assessment scheme.

Accordingly, it is proposed to insert sub-section (6A) in section 250 of the Act to:-

  • Empower Central Government to notify an e-appeal scheme for disposal of appeal pending with Commissioner (Appeals).
  • Eliminate the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible.
  • Optimize utilization of the resources through economies of scale and functional specialization.
  • Introduce an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).

Central Government shall issue directions under the Scheme by way of notification in an official gazette. Such directions shall be issued on or before 31 March 2022.

This amendment will take effect from 1st April, 2020.

10. Tax at 5% on Foreign Tour Packages, Remittances Abroad:

From 1st April 2020 new provisions to collect TCS (Tax collected at source) have been proposed. As per the Budget proposals, it is proposed to amend section 206C to levy TCS on overseas remittance and for sale of overseas tour package.TCS will be collected @ 5% (10% if Pan/Aadhar not available) on:

  • Remittances abroad for an amount exceeding Rs 7 Lakh in a financial year under Liberalised Remittance Scheme (LRS) of RBI
  • Overseas tour packages through a tour operator.

The above TCS provision shall not apply if the buyer is:-

1. Liable to deduct tax at source under any other provision of the Act and he has deducted such amount.

2. The Central Government, a State Government, an embassy, a High commission, legation, commission, consulate, the trade representation of a foreign State, a local authority (Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board) as defined in Explanation to clause (20) of section 10 or any other person notified by the Central
Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.

11. Section 55: Ascertaining cost of acquisition in case of Land & Building:

The Section provides that for the purpose of ascertaining cost of acquisition in case of capital asset being land or building or both which was acquired before 1.04.2001. The cost of acquisition is taken to be the higher of Fair Market Value as on 1.04.2001 or Actual Cost of Acquisition. From 1.04.2020, such Fair Market Value of capital asset shall not exceed
Stamp Duty Value as on 1.04.2001.

12. Proposed ‘No Dispute But Trust Scheme’:

The Budget has proposed the so called ‘Vivad se Viswas Scheme’ alternatively ‘No Dispute But Trust Scheme’. As per the said proposal, the taxpayer will be required only to pay the disputed tax involved/locked in the litigation and will gain complete waiver of interest and penalty but the disputed tax should be discharged by 31st March,2020.

The scheme shall remain open till 30 June 2020, but the amnesty will only be partially available for payments made after 31 March 2020.

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