BUDGET 2020 - CORPORATE TAX

Corporate Tax

·         Dividend Distribution Tax being abolished wef 1.4.2020.

·         Benefit of section 80M will be available to a company in respect of dividend income received by it during the previous year and distributed by it, one month before the due date of filing return.

·         No deduction of expenditure against dividend income will be allowed under section 57 except interest which will not exceed 20% of dividend income.  

·         Dividend Income is now Taxable, Once Dividend is taxable, disallowance under section 14A become infructuous.   

·         Since Dividend is taxable now, require to reconsider again  for corporate which is more beneficial , 30% or 20%. Further ,   there will be TDS on dividend Income .  

·         Section 35AD deduction now made optional.   

·         Power Generation included as eligible for lower corporate tax rate of 15% under section 115BAB.

·         Time limit for approval of affordable housing project for availing deduction under section 80-IBA. The period of approval of the project by the competent authority is proposed to be extended to 31-03-2021. Earlier, the project was required to be approved by the competent authority during the period from 01-06-2016 to 31-03-2020.

·         Companies opting for new tax regime under new section 115BAA and 115BAB can claim only deduction under section 80JJA and 80M from chapter VIA.

BUDGET 2020- PERSONAL TAX

Personal Tax

·         Now there are two options available to individual tax payer . The first option is to continue with old rate with all tax exemptions and another one with new tax rate slab without any tax exemptions. 

Ø  Old Scheme.

Income Slabs (Rs.)		Individuals (< 60 years)		Senior Citizens (60 years to 80 years)		Super Senior Citizens (> 80 years)
Upto 2,50,000		-		-		-
2,50,001 To 300,000	5%				-		-
301,000 to 5,00,000		5%		5%		-
5,00,001 to 10,00,000		20%		20%		20%
More than 10,00,000		30%		30%		30%

 

·          

·         Rebate of Rs. 12,500  if taxable Income less than Rs. 500,000/-. Thus there is no tax payable for Income less than  Rs. 5 Lakhs and if Income exceeds Rs. 500,000 then compute tax as per captioned slab.

·         All other regular exemptions and deductions are available.  

Ø  New Scheme

·         A new Section 115BAC has been proposed to be inserted to provide an alternative to Individuals and HUFs to pay tax at lower rates. Option under this scheme can be exercised by every individual or the HUF. However, an individual and HUF having business income, the option once exercised for a previous year shall be valid for that previous year and for all subsequent years. (it means for other there is option to swap in next subsequent years)The income under this scheme shall be computed without claiming any deduction under Chapter VI-A (except Sections 80CCD or 80JJAA) or Section 24 or exemptions.  Further, similar table applicable for senior citizen.

Total Income	Tax Rate
Upto 2,50,000	-
250,001 to 500,000	5%
500,000 to 750,000	10%
750,001 to 10,0000	15%
10,00,001 to 12,50,000	20%
12,50,001 to 15,00,000	25%
15,00,001 & above	30%

 

·         As mentioned above, taxpayer cannot claim any exemption or deduction if they opt for the new scheme.    The few exemptions which are not available is given below.

Ø  Deduction under chapter VIA which include 80 C and 80D. (other than 80CCD(2) and 80JJA)

Ø  HRA under section 10(13A)

Ø  Allowance under section 10(14). (Conveyance allowance allowed)

Ø  LTA under section 10(5)

Ø  Interest on house property u/s 24(i)

Ø  Rebate under section 87A.

Ø  Standard deduction of 50K.

Ø  Food Coupon.

·         No Change in Surcharge and cess.

·         Section 80EEA was introduced vide Finance (No. 2) Act 2019 to provide a deduction for the interest on loan taken to buy an affordable residential house property. One of the conditions to claim this deduction is that loan should be sanctioned by the financial institution during the period from 01-04-2019 to 31-03-2020. The period of sanctioning of loan by the financial institution is proposed to be extended to 31-03-2021.

·         Dividend Income is taxable.

·         Overall ceiling of exemption in respect of employers contribution to PF, Superannuation fund and National Pension Scheme restricted time Rs 7.50 lakhs.  Thus there is double taxation of same income as the time of withdrawal.

NON RESIDENT

·         All Indian Citizens to be deemed Resident of India, if they are not resident of any other country. Accordingly if any Indian is holding Indian passport ,he needs to establish Residential status of other country if he claims to be a non resident. Such Indian Citizen shall be required to pay tax on global income.

·          Further for the purpose of determining residential status, the number of days for stay in India will be 120 days as against 182 days. 

·         For Resident but not ordinary resident -- test will be of non resident in 7 out of 10 preceding years as against present condition of 9 out of 10 preceding years.

History of E Way

Introduction

It is said that the month of ‘January’ is named after the Roman God of Beginnings, Janus. Janus is usually depicted with two faces, one on each side of the head. One may wonder whether the positioning of the heads is meant to signify a glance at both the past and the future at the same time. Whether or not the God signifies so, no doubt that the beginning of a new calendar year is an important time to reflect on the past, learn from the rights and wrongs and commit to change in the year to come. For businesses, tax consultants and other stakeholders who have had around three years to settle down in the Goods and Services Tax (GST) regime, it is a time to provide constructive feedback to the Government so that changes, if any, can be brought about through the Annual Financial Statement, also popularly referred to as ‘the Union Budget of India’.

Operation Clean Money Assessments- Postscript

(Perspective on : Its Various aspects e.g infirmities in revenue’s approach ; unexplained income charge , section 115BBE applicability , penal provisions of section 270A & 271AAC & its stay of demand etc)

Blocking GST Credit - is Legal or Illegal.

The concept of self-assessment in tax administration was introduced in India with an expectation to usher in a new era of trust-based partnership with the assessees leading to greater facilitation of compliant assessees.

“Circular Trading”, “Fake Bill issue”, “enhanced bill” unfortunately are methods of tax evasion not new in India. Under GST bogus invoices are raised without any actual supply of goods or services or both in several stages culminating finally in no supply or part supply. In some cases materials are sold in cash to the unorganised or those who do not avail ITC [ Residential Housing or Hotel Industry] and the bill without supply is given to the tax evaders who wish to claim credit[ Commercial construction or hotels availing ITC. At times in Circular / fake bill trading, the goods manufactured/ imported without paying due taxes are supplied to the customer and a fake invoice is provided to cover the same quantity. Based on such bogus invoices, the registered persons who were recipients were claiming ITC.    

Questionable Policies of Government.

The Ministry of Finance has multiple objectives.  One of these objectives is to simplify the compliance process for the taxpayer. While ostensibly attempting to do so, policymakers sometimes at times end up achieving the contrary and add to the complexities that already burden the hapless taxpayer.  A case in point are the new rules aimed to curb tax evasion.  These guidelines have only resulted in creating further hardship for all taxpayers of the country.   

Understanding Composite Supply

 

Under GST law, the concept of “composite supply” is still an area of interpretation even though the government has issued clarifications and FAQs as unique underlying facts of each case needs to be examined. One such scenario relates to the Reagent Rental Contract (“RRC”) which is commonly entered into by the medical device companies with hospitals, laboratories etc.

GST Liability on Volume Discount

Introduction :-             Discount is one kind of incentive being offered by the seller to the buyer through reduction in the usual price of goods to enhance volume of business and generate profit. Tax liability has to be discharged by the seller by deducting the amount of discount from the total price of goods. There are various kinds of discounts provided by the seller to the buyer as incentive to meet his business target. There are certain discounts are pre- sale discounts and some discounts are post-sale discounts. The pre-sale discount are predetermined and disclose to the customer beforehand of sales but post sale-discounts are related to quantity discounts, year-end discounts, cash discounts and prompt payment discounts.

Woes of EOUs with regard to DTA clearances after implantation of GST

In the pre-GST era, an EOU was required to pay the excise duty on the higher side in respect of the goods cleared in DTA for the reason that the EOU has availed the benefit of exemption from custom duty on the inputs imported by it. Normally, there was no difficulty in calculating the excise duty payable on the goods removed in DTA in terms of Notification No. 23/2003-CE dated 31.03.2003 because the excise duty was payable on the transaction value of the goods cleared in DTA at the rate applicable on the date of clearance. There was no question of interest as well for such clearances of goods in DTA in the pre-GST era.

Impact of GST on Real Estate

The Real Estate industry is one of the largest sectors in the country and is a major contributor in the growth of Indian economy. This industry is one of the rapidly growing sectors in India since the factors such as accelerated urbanization, migration, increasing population, emerging nuclear families have increased the requirement of residential houses. Due to such increasing demand of  residential houses, demand of commercial places such as offices, malls, factories have also increased. Moreover, after the introduction of “Housing for all” and other similar schemes by the Govt., the real estate sector is expected to grow multifold.

  Further, as far as indirect taxes are concerned, prior to 01.07.2017, the builders/contractors were required to comply with the provisions of Finance Act, 1994 (i.e. Service Tax) and relevant VAT Acts while providing the construction services. However, w.e.f. 01.07.2017, such taxes have been substituted with one single tax namely GST wherein

Presumptive taxation / estimation of profit by applying rate :- separate addition

:- whether each entry need to explain :- creditors part of business income :- creditor representing other then business income

Once under special provision of section 44AD, exemption from maintenance of books of account has been provided and presumptive tax at rate of 8 per cent of gross receipt itself is basis for determining taxable income, assessee is not under any obligation to explain individual entry of cash deposit in bank unless such entry has no nexus with gross receipts.

CIT v. Surinder Pal Anand [2010] 192 TAXMAN 264 (PUNJ. & HAR.)

All about GST E Invoice

What is GST E-Invoice System?

GST e-invoice is the introduction of the digital invoice for goods and services provided by the business firm generated at the government GST portal. The concept of GST e-invoice generation system has been taken into consideration for the reduction in GST evasion.

The GST officers have come to a conclusion by providing the businesses with a system through which it will become mandatory for them to generate ‘e-invoice’ for every sale on the government GST portal. This system will only be applicable to those whose turnover threshold is above the determined limit i.e. the government will set a threshold limit for them.

An official said that the businesses that will fall under a certain threshold will be given a unique number whenever an e-invoice will be generated. The businesses can match this number with the invoices which are written in the sales return and paid taxes for verification.

Applicability of GST E-Invoice System

Bangalore Tribunal denies capital gains exemption on share buyback from 99.99% paren

• Conditions under section 47(iv) not legally impossible to satisfy under Indian company law
• For the purposes of section 46A, there is no requirement to demonstrate that there had been a transfer of a capital asset
• Parent – subsidiary exemption under section 47 (iv) not applicable where capital gains are chargeable to income-tax under a special charging provision

TP adjustment in case of 100 % incentive business

In Doshi Accounting Services vs. DCIT, the Special Bench of the ITAT has held that the transfer pricing provisions are applicable even to a case in which the income of the assessee is eligible for 100% tax exemption and is not chargeable to tax in India.

FAQs: Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019

Objectives: One time measure for liquidation of past disputes of Central Excise and Service Tax and To provide an opportunity of voluntary disclosure to non-compliant taxpayers.

Government prescribes mandatory electronic modes of receiving payments for large businesses

This Tax Alert explains Notification No. 105/2019 (Notification) and Circular No. 32/2019 (Circular) both dated 30 December 2019 issued by the Government of India (GOI), through the Central Board of Direct Taxes^[1] (CBDT) prescribing electronic modes of payment under the newly inserted Section (S.) 269SU of the Income Tax Act (ITA), which came into effect from 1 November 2019^[2].  ^.

The Notification notifies three electronic modes of payments viz. 

(i) Debit Card powered by RuPay^[3] 

(ii) Unified Payments Interface (UPI) (BHIM^[4] -UPI) and 

(iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code) 

as mandatory modes of electronic payments with effect from 1 January 2020 for every person carrying on business if his total sales, turnover or gross receipts in business (turnover) exceeds INR500m during the immediately preceding tax year (specified person). These modes are in addition to any other electronic modes being provided by such person.

The Circular clarifies that, from 1 January 2020, the specified person must provide the facilities for accepting payment through the above referred prescribed electronic modes. Further, in view of a new provision in the Payment and Settlement Systems Act, 2007 (PSSA), any charge including the Merchant Discount Rate (MDR) shall not be applicable on or after 1 January 2020 on payment made through above referred prescribed electronic modes.

The Circular also clarifies that a penalty of INR5,000 per day is applicable in case of failure by specified person to comply with S.269SU. However, in order to allow sufficient time to the specified person to install and operationalize the facility for accepting payments through prescribed electronic modes, no penalty shall be levied if the specified person installs and operationalizes the facilities on or before 31 January 2020. However, if the specified person fails to do so, he shall be liable to pay a penalty of INR5,000 per day from 1 February 2020 for such failure. 

 

CBIC notifies the rule which restricts credit for discharging tax liability or claiming refund under GST

Central Board of Indirect Taxes and Customs (CBIC) has issued notifications giving effect to the recommendations made by the Goods and Services Tax (GST) Council in the 38th meeting (refer to EY Tax Alert dated 19 December 2019).

The key changes are:

• With effect from 1 January 2020, the eligibility of input tax credit (ITC) in respect of invoices or debit notes not reflecting in Form GSTR-2A shall be restricted to 10% of the matched credit.

• With effect from 11 January 2020, e-way bill shall be blocked if the taxpayer does not file Form GSTR-1 for two tax periods. 

• Rule 86A has been inserted in Central Goods and Services Tax Rules, 2017, empowering the Commissioner to disallow taxpayer to debit its electronic credit ledger for discharging tax liability or for claiming refund in certain cases.

In order to promote filing of Form GSTR-1, the government has kept the window open until 10 January 2020 by waiving late fee and imposing e-way bill restriction from such date. Taxpayers should make use of this opportunity for filing pending returns and ensure compliance to mitigate unwarranted litigations.

Vide the new rule on credit restriction, the government aims to check the menace of fake invoices. The businesses may need to exercise diligence by assessing the compliance status of their vendors and rationalizing the internal processes.