Saturday, August 1, 2020

Summary of Important Changes in Income Tax

Here's a summary of a few important changes in Income Tax that are applicable in the current year.

S.No. Head Details of Change Period
1 Depreciation on Motor Cars Motor cars acquired between 23-Aug-2019 and 31-Mar-2020 and put to use before 01-Apr-20 would be depreciated @30% p.a. for Income Tax purposes. However, those used for business of running them on hire to be depreciated @45% p.a. This increase is due to one time additional depreciation offered. Only for AY 2020-21
2 Tax Audit Turnover Threshold Tax Audit turnover threshold u/s 44AB increased to Rs. 5 crore from Rs. 1 crore only for businesses that have cash receipts or payments less than 5% of total sales or expenses, respectively. w.e.f. AY 2020-21
3 Due Date of Filing ITR for Audit Cases The due date for filing of Tax Audit Report (TAR) for audit cases is 30-Sep. The ITR for such cases is to be filed by 31-Oct. w.e.f. AY 2020-21
(Note though that the one time extension given for AY 2020-21 to 30-Nov is only due to the pandemic)
4 Self Occupied House Property A person can claim 2 house properties as self-occupied instead of only 1 as was allowed earlier, thus avoiding deemed rent on the second such property. w.e.f. AY 2020-21
5 Capital Gain on Property Older than 01.04.2001 For indexation of acquisition cost, the FMV as on 01-Apr-2001 will be capped at the stamp duty value as on that date, wherever available. Thus, FMV, if greater than stamp duty value, would not be considered for indexation. w.e.f. AY 2020-21
6 LTCG Exemption on Sale of House Property To save LTCG on sale of house property, investment u/s 54 can be made in 2 residential house properties. This option can be exercised only once in the lifetime, and the LTCG should not exceed Rs. 2 crores. w.e.f. AY 2020-21
7 Dividends Dividends are now taxable in the hands of shareholders w.e.f. AY 2021-22
8 TDS on Dividends TDS @10% will be deducted if an investor receives dividend above Rs. 5000 w.e.f. AY 2021-22
(All TDS rates to be 75% of declared rates only till 31-Mar-21 due to the pandemic)
9 Rebate on income up to Rs. 5 lakh The rebate from tax u/s 87A for income up to Rs. 5 lakh has been extended to Rs. 12500 instead of the earlier Rs. 2500 w.e.f. AY 2020-21
10 New Tax Regime & Old Tax Regime New tax slabs have been announced under a New Tax Regime, which can be opted for if the assessee does not claim any other deductions. For people taking deductions of HRA, 80C, 80D, etc., the old tax slab may be beneficial subject to comparative computation of tax under both regimes. w.e.f. AY 2021-22
11 PF, NPS Taxable if in excess of 7.5 Lakhs If the employer contributes to the retirement funds such as NPS + EPF + any super anuation fund in excess of Rs. 7.5 lakhs for an employee, such amount in excess will be taxable as perquisite in hands of the employee w.e.f. AY 2021-22
12 Standard Deduction Standard Deduction from Salary is increased to Rs. 50000 from Rs. 40000 w.e.f. AY 2020-21
13 TDS on Cash Withdrawal TDS @2% will be deducted by the bankers in case cash withdrawal in a year from all accounts exceeds Rs. 1 crore. The threshold is Rs. 20 lakhs if ITR not filed in previous 3 years. w.e.f. AY 2021-22
14 TCS on Sales above Rs. 50 Lakh For a person with annual turnover above Rs. 10 crore, on sale of above Rs. 50 lakh in a year to a single buyer, TCS of 0.1% on sale value is to be collected from such buyer. This does not apply to export sales. Further, TCS is @1% in case of no PAN. w.e.f. 01-Oct-2020
15 Mandatory ITR Filing ITR Filing is mandatory even if total income is less than Rs. 2.5 Lakhs, but if the person has had foreign travel costing above Rs. 2 lakh during the year or has had electricity bill of over Rs. 1 lakh in the year. w.e.f. AY 2020-21
16 Reduced Corporate Tax Rates For corporate assessees, the tax rate has been reduced to 22% + surcharge + cess in case no deductions or MAT credit or additional depreciation is claimed u/s 115BAA w.e.f. AY 2020-21
Similarly, the tax rate is reduced to 15% + surcharge + cess for a new manufacturing company that also meets the requirements as set out u/s 115BAB
17 MAT Rate The rate of Minimum Alternate Tax (MAT) has been reduced to 15% from 18.5% w.e.f. AY 2020-21