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The Union Budget 2020 was presented by Finance Minister Nirmala Sitharaman who provided numerous benefits across sectors in order to boost the economy. There were various amendments made in various sectors to boost the income of the common people and enhance their purchasing power. The budget also aimed to empower the marginalized sections of the society and increase the capacity building across the sectors. 

In this article we will understand in detail the various benefits offered by the government under various sectors:

Union Budget 2020

Income Tax

The government has proposed a new income tax regime under Section 115BAC that comprises a significant change in the tax slabs rates. It provides the benefit of lower rates to the taxpayers provided certain conditions are fulfilled. If the taxpayer chooses to opt for the new scheme, they can pay taxes at lower rates offered by the government. However, this option once opted, cannot be changed in a financial year by the taxpayer.

Under section 194J the tax rate on fees for technical services has been reduced to 2% from 10%. Now the tax will be deducted @2% instead of earlier 10%.

The threshold limit of tax audit has been increased from Rs. 1 crore to Rs. 5 crore. This is in the case of a person carrying on business provided where the aggregate of all amounts received during the year including for sales, turnover or gross receipts has note exceeded 5% of the said amount and the aggregate of all payments made including the amount incurred for expenditure, in cash, does not exceed 5% of the said payment.

The time limit has been extended by 1 year under section 80EEA for sanctioning of loan for affordable housing. As a result, the deduction of Rs. 1,50,000 which is allowed as per the said section can now be taken into consideration up to 31-03-2021.

Dividend distribution tax, which was earlier levied on the dividends paid by the company to its shareholders has been discontinued. Instead, the recipients of the dividend will have to pay tax at their applicable rate applicable to them.

An option has been provided to the employee’s of an eligible startup to not pay tax in the year of exercising the option.

The TDS on the perquisite stands deferred to the earlier of the below events:

  1. Expiry of 5 years from the date of the allotment.
  2. Date of sale of the ESOP by the employee.
  3. Date of termination of employment.

Other updates related to TDS under each Section

Section 80-IAC provides that an eligible business can claim a deduction of 100% of the profits and gains derived an eligible start-up. The deduction can be claimed for a consecutive period of 10 assessment year as compared to earlier 7. Furthermore, the overall turnover limit has been increased from Rs. 25 crore to Rs. 10 crore.

Section 194 provides for TDS in respect of any dividend or before making any distribution or payment to the shareholders @10%. The threshold limit has been increased from Rs. 2,500 to Rs. 5,000.

Section 194K. In the case of dividends distributed by a Mutual Fund company in respect of units of a mutual fund. Tax is required to be deducted from the income @10%.

Section 194-O. An e-commerce operator is required to deduct tax at source for facilitating any sale of goods or providing services through an e-commerce operator. The applicable TDS is @1% provided the gross amount of sale of goods or services exceeds Rs. 5,00,000.

Section 206AA: In case of non-furnishing of PAN for the purpose of section 194 O, tax rate has been reduced from 20% to 5%.

In order to curb defaults, a new section 234G has been introduced which relates to the payment of fee of Rs 200 per day in the case of a default in furnishing statement or certificate under section 35 by a company, university, research association etc.

Section 43CA of the income tax act provides that where the consideration declared to be received as a result of the transfer of land or building or both, is less than the assessable value adopted by the stamp valuation authority, the value so adopted for the shall be deemed to be the full value of consideration. It also provides that where the assessable value does not exceed 105% of the consideration received, the consideration so received shall be deemed to be the full value of the consideration for the computation of capital gain. This limit has been increased to 110%.

As per the provisions of Section 50C of the income tax act provides that where the consideration declared to be received as a result of the transfer of land or building or both, is less than the assessable value adopted by the stamp valuation authority, the value so adopted for the shall be deemed to be the full value of consideration. It also provides that where the assessable value does not exceed 105% of the consideration received, the consideration so received shall be deemed to be the full value of the consideration for the computation of capital gain. This limit has been increased to 110%

Indirect Taxation (GST, Customs)

  • In a case wherein a person is benefited out of a fake ITC on the basis of a fake invoice shall be liable for a penalty of 100% of the tax involved.
  • Composition scheme is restricted to taxpayers making the inter-state supply of service, supplies not leviable to GST, and supplies through e-commerce operators where TCS is deductible.
  • For the purpose of availing the input tax credit, the date of the standalone debit note will be considered and will not be linked to the original date of the invoice.
  • For better management of compliance, in the case of a distinct person, a new provision has been created that allows the cancellation of voluntary registration.
  • The powers of additional commissioner and the commissioner have been extended to condole the delay in applying for revocation of cancellation for a period of 30 days.
  • The refund of tax which is due to the taxpayer on account of the inverted duty structure for tobacco products has been barred with retrospective effect w.e.f. 1st July 2017.

Other related updates

  • Ladakh has been included in the definition of Union Territory. J&K will have its appellate tribunal.
  • In the case of a person who is fraudulently availing of ITC without an eligible invoice, the law has been amended to extend the imprisonment to both the person who has committed the fraud and the person retaining the benefits of the fraud. This was previously restricted only to the person who had committed the fraud.
  • A retrospective GST exemption has been provided for the supply of fishmeal from 1st July 2017 to 30th September 2019.
  • In the case of a special audit,  the Board’s approval will not be required for the Order relating to the determination of expenses.
  • The time limit to return the inputs and capital goods from the job worker has been extended with the addition of a new provision.
  • In the case of specific supplies of services, for the issuance of invoices, separate powers have been provided.
  • In Schedule II to the CGST Act, the entry relating to the ‘Transfer of business assets’ will now exclude transactions done without consideration from it.

MSMEs

  • Various steps proposed by the government for the MSME’s including amendment made to the Factor Regulation Act, 2011.
  • In order to provide an economic boost to the MSME sector, amendments are to be made which will enable the NBFC’s to extend invoice financing to MSME’s.
  • Debt for the MSME enterprises by the banks guaranteed by the Credit Guarantee Trust. This debt will be considered as quasi-equity.
  • Introduction of the app-based financing loans for the MSMEs. The app will look after cash flow requirements of the MSMEs based on the invoice financing loans.

Public sector banks (PSBs):

  • In order to improve the financial health of the scheduled commercial banks, a robust mechanism will be kept in place to ensure the depositors money is kept safe.

Agriculture

  • In order to boost the agriculture sector along with providing financial benefits to our farmers, the government aims to double farmers’ income by 2022.
  • The government aims to provide help to more than 15 lakh farmers solarise their grid-connected pump sets.
  • The GOI has announced the “KisanRail” and “KrishiUdaan” for seamless transport of perishable farm goods from one place to another.
  • The government aims to increase the coverage of artificial insemination to 70%.
  • In order to boost the exports, the government is expecting to raise the fishery exports to Rs 1 lakh crore by 2024-25.

Education

  • In order to improve the skilled sector, more than 150 higher educational institutions will start apprenticeship embedded courses.
  • People looking for employment abroad can now improve their skills through a special bridge course.
  • The government has decided to allocated Rs 99,300 crore for the educational sector in 2020-21 along with the separate fund of Rs. 3,000 crore for skill development.

Financial sector

  • The government has decided that the Deposit Insurance Coverage is to be increased from Rs 1 lakh to Rs 5 lakh per depositor.
  • The Eligibility limit for NBFCs for debt recovery under SARFAESI Act is proposed to be reduced to an asset size of Rs 100 crore or loan size of Rs 50 lakh.
  • It has been decided by the government to separate the NPS Trust for government employees from PFRDA.
  • The government has made a proposal to sell the balance holding of the government in IDBI Bank.
  • There have been more than 20,000 impanelled hospitals under PM Jan Arogya Yojana
Published on November 17, 2020