While the finance minister Nirmala Sitharaman has extended various deadlines related to tax from 31st March to 30th June. The Finance Bill 2020 got implemented from 1st April along with it the various amendments proposed in the Union budget. The Finance bill has been passed by Lok Sabha by voice vote without any debate, amid disturbance in the House with opposition parties seeking a fiscal incentive package in the Cpvid-19 outbreak. The Finance bill has been passed with many different amendments impacting individual taxation which include relaxation in residency provision and modification to the various TDS sections, etc. The amendment to the residency provision provides that a non resident Indians or person of Indian origin rarely visits India shall not be considered as a resident of India if their stay in India doesn’t exceed 120 days and provided their income doesn’t exceed 15 Lakhs in India. It is emphasized that such income must be derived from a profession or business set up in India and should not be originated from foreign source. The amendment has fixed the threshold at 15 Lakh for non resident Indians who do not pay any tax and have income arising within India too. It means income up to 15 Lakh and not paying tax in a foreign will not be necessary to pay tax in India. This will benefit the people working in West Asia. TDS for withdrawal from banks has been made tough to provide that if any person hasn’t filed a tax return for the last three years, TDS shall be deducted at the rate of 2 percent if the withdrawal is more than Rs 20 Lakh annually. In case the withdrawal exceeds Rs 1 Crore, TDS shall be applied at the rate of 5 percent. In the present Finance Bill 2020 the proposal made to finish the dividend distribution tax (DDT) on dividend has had the impact of making it taxable in the hand of the shareholders. Further now it has been provided that the TDS rate on dividend income to non resident Indians including companies other than domestic companies is 20 percent. Also the surcharge in case of dividend income has been limited to 15 percent.
Other amendments
Additional, other than professional services the reduced rate of 2 percent on technical services has been extended to cover royalty. However, the royalty which is in the nature of consideration for sale, exhibition of cinematographic films shall be covered under the reduced rate. In all other cases which are covered under section 194J a rate of 10 percent shall be applicable. The provisions of Section 194K have been made limited after these amendments. This section also excludes from its ambit any payments received from mutual fund, administrator of the specified undertaking that make the income in the nature of capital gains. The provisions of Section 194LBA has also been amended by the government and excluded from its limit any dividend income paid by a business trust to unit holders in respect of income referred to in Sec 10(23FC(b) i.e. dividend received or receivable by Special Purpose Vehicle (SPV) if the (Special Purpose Vehicle) SPV referred to in the said clause has not exercised the option u/s 115BAA i.e. doesn’t opt for the reduced tax rate of 22 percent. Therefore, the dividend will impact in the hands of the unit holders of such a business trust.
Moreover, an amendment also has been made to section 115BAC and this amendment has the impact of excluding businessmen as well as professionals to exercise the new personal tax rule for HUF’s & individuals. This section clearly states that HUFs or individuals shall not be entitled for the concessional rate i.e. optional personal tax regime unless the option is exercised in the prescribed manner or in the form. The inconsistency of denying this benefit only provided to businessmen and not to professionals.