Just in the midst of this global pandemic, before adjourning the Indian parliament, they passed a Bill and the finance act 2020 and received its assent on March 27, 2020. The statute contains the number of provisions and changes relating to tax structure and which may also affect the business of the firm for the current year. The provisions of this act will be incorporated in the Income-tax Act, and this act shall come into force on April 1, 2020. Hundreds of amendments have been made either by way of changing the provision or repealing it and even adding new ones.
Some of the important changes that are included under the new tax regulations are as follows
Introduction of New Tax Slabs:
As it was announced in the budget 2020 new tax slabs have been introduced in this near year, the old tax slab will remain but, it’s up to the individual to choose one out of the two. Under this new tax slab which was earlier announced in the budget are as follows: No tax has to be paid for income that is up to RS. 2.5 lakhs, 5% of the income has to be paid as tax for income between RS.2.5 lakhs to 5 lakhs, 10 %,15%, 25%, 30% of the income must be paid as income tax respectively. The new tax slabs will be helpful for the young taxpayers and as well as for the senior citizens. It will also increase the flow of cash in various sectors.
Rules for the Nonresident Indians:
Earlier the rule was such that the persons of Indian origin who stay outside and if they complete 182 days of stay or more in India then they would be qualified to pay the tax in that year. However, these rules were abused and misused by the non-resident Indians and therefore, the changes were made, and the days were reduced to 120, and the minimum income was changed to Rs. 1.5 million per year.
Indian Citizens are not Taxable under the Jurisdiction of other Countries:
Recently, it is always noticed that individual try to amend or place their economic activities in order so that they are not liable to pay any tax in any other country during that particular year. Therefore, certain provisions have been amended so that the citizens of India will be liable to pay tax only in this country mainly due to the domicile, place of residency or any other category or reason. Thus, the new rule shall only apply if the income is more than 1.5 million Rupees with regards to the Indian citizens. (NRI’s).
Relief in Tax for the Startups:
The new startups in India have been enjoying full tax wavier on the profits which are earned by them for almost seven years. The new provisions in the tax law have increased the income bracket, and also tax waiver incases the profit exceeds. For the employees in the startups, the government has given some relief with respect to tax that has to be paid when an employee purchase shares.
Tax reliefs with respect to Mutual Funds:
The tax amount will have to be paid at the receivers’ end in the case of mutual funds, and it will be charged according to the amount received and the also with respect to the tax slab.
Completely abolishing the dividend distribution Tax:
Earlier the companies had to pay a 15% tax on the dividend while distributing it to the shareholders of the company. Thus, tax payment that was present earlier has been removed and has been laid at 10 %.
Amendment made in the section with respect to the deduction for Inter-corporate Dividend’s:
A new section has been added in the provisions a reduction in the dividend is seen that is it provides the companies with a deduction who receive the dividends from another company itself. A deduction is made equal to the amount of income that is received by other domestic companies. Therefore, this rate has been reduced under the current changes that have been made in the tax regulation.
Concession in tax bracket for individual or a Hindu Undivided Family:
The individuals now have an option to choose the current tax rates or the new one. Therefore, the tax concessions are optional, and the person may avail those only if they fulfil the conditions and upon the satisfaction of the same. Once the new tax payment option is taken into consideration fully, the person cannot return to the old tax structure for paying the requisite.
It is mainly that type of tax that is charged for the services provided in the digital sector. This kind of tax is now charged for the services which are available under the e-commerce sector and online sale of goods. The taxes shall be charged at the rate of 2 % who operates such online services.
Corporate Tax for certain Domestic Companies:
Under the new scheme, taxes have been reduced for certain domestic companies, for example, plant, machinery, tea, coffee, rubber etc. New tax rates have to be exercised on them.
Additional benefits for the Retired Individuals:
The employers contributing to the retirement, will not be taxable from now on, it will be treated as a prerequisite.
Corporate taxes for New Manufacturing Companies:
The new domestic manufacturing companies can pay low taxes if the conditions laid down by the government is fulfilled. The total income of the company will be calculated without counting the tax exemption that is granted under the new tax regulations.
Therefore, from the above provisions, it is seen that a number of tax reforms have been made by the government for reviving and improving the business in the country while providing them with benefits. Thus, it will be seen now that India will be enjoying a good venture in various sectors post-pandemic and therefore the government has also given certain relief in tax payment which was not there in the earlier structure.