Insights & Research
CA Ajmal Muhajir, M.Com, ACA
Head Consultant: Taxation & Assurance
Here are some key changes you must know in income tax rules that has come into effect from 1st April, 2020, as announced in the Union Budget 2020.
01. NRI status and taxability
02. Option to choose new tax slabs
03. Contribution to employer to an employee be taxed as perquisite
Contributions exceeding INR 7,50,000 made by employer to an employee’s account in a recognized provident fund, notified pension scheme or approved superannuation fund would be taxable perquisite in the hands of the employees. The annual accretions to such contributions exceeding INR 7,50,000 would also be considered as taxable perquisite.
04. Taxation of dividend from domestic companies and mutual funds
As per the existing provisions of the Income-tax, domestic companies that declare, distribute or pay dividend are required to pay a dividend distribution tax. Such dividend was exempt in the hands of the recipients up to INR 10,00,000. It is proposed to remove the dividend distribution tax payable by companies and tax the dividend from such companies and mutual funds in the hands of the recipients at the tax rates applicable to the respective recipients (i.e. applicable slab rates for individuals.)
05. TDS/TCS Rates
To increase liquidity in the hands of the common man and battle covid-induced financial distress, the government announced a reduction in the tax deducted at source (TDS) and tax collected at source (TCS) rates by 25 per cent on non-salaried payments.
06. New Tax Audit Limit
Tax audit threshold has been increased from Rs 1 crore to Rs 5 crore provided turnover/ gross receipts in cash does not exceed 5% during the previous year. Also, payment made in the previous year in cash does not exceed 5%. For such taxpayers, the due date for tax audit has been extended to the 31st of October from the 30th of September.
07. Startups – Changes
In the case of startups, employees possessing Employee Stock Option Plans (ESOPs) may defer paying taxes up to five years from the time of exercise, till the time they leave the startup, or until they sell their shares, whichever is earlier.
Eligible startups with a turnover of up to Rs 25 crore is permitted to deduct 100% of its profits for three continuous assessment years of seven years if the overall turnover is under Rs 25 crore. This limit is now increased to Rs 100 crore. Furthermore, the eligibility period to deduct is increased to 10 years from 7 years.
08. Other Changes
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