Key amendments applicable from 1st April 2020
As per Finance Act 2020, certain changes are applicable from 1st April 2020. Here is a look at the new tax rules:
– TDS on fee for professional or technical service (Section 194J): From 1st April 2020, the rate of TDS has been reduced from 10% to 2% on
a) Fees for technical services
b) Royalty in consideration for sales, distribution or exhibition of cinematographic films
However, TDS on fee for professional service continues to be 10%, which is same as under existing regime.
The expression “professional services” has been defined to mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising (i.e., models, artists, photographers providing services to an advertising agency) or such other profession as is notified by the Board for the purposes of section 44AA (i.e., authorised representative, film artist or company secretary or information technology) or of this section.
– TDS on payment of dividend (Section 194 and 195): From 1st April 2020, an Indian company declaring a dividend for more than Rs 5,000 shall deduct TDS at
a) 10% in case of resident individual
b) 20% in case of non-resident or foreign company. The provision of DTAA shall be applicable if beneficial to the assesse.
– TDS on Cash Withdrawals (Section 194N): From 1st July 2020, the banks or post offices will deduct TDS on cash withdrawals exceeding Rs 20 Lakh, if the person withdrawing cash has not filed hi Income Tax Return for 3 previous years in which cash is withdrawn. TDS to be deducted at:
a) 2% on withdrawals exceeding Rs 20 lakh
b) 5% on withdrawals exceeding Rs 1 crore
For persons who have filed ITR for last 3 years, TDS deduction rate remains same as2% on withdrawals exceeding Rs 1 crore
– TDS on payment by E-Commerce Operator to E-Commerce Participant (Section 194O): From 1st October 2020, e-commerce operators need to deduct TDS at 1% on the amount payable to the e-commerce participant.
However, e-commerce operators need not deduct TDS on payment to individual or HUF, if the aggregate payment exceeds Rs 5 Lakh and PAN has been furnished to the e-commerce operator.
Check all TDS Rates for FY 2020-21.
From 1st April 2020,
– A citizen of India or a person of Indian origin having total income (other than foreign sources) exceeds Rs 15 Lakh, he shall be a resident of India, if his stay in India is more than 120 days or more.
– A citizen of India or a person of Indian origin having total income (other than foreign sources) exceeds Rs 15 Lakh, and he is not liable to pay tax in any other country, he shall be deemed to be resident of India and his income will be taxable in India.
How to determine the residential status of an individual?
From 1st April 2020, equalisation levy will be charged at:
a) 6% on the sum received or receivable by a non-resident for the online advertisement service rendered. Obligation to deduct equalization levy lies on payer.
b) 2% on the sum received or receivable by an e-commerce operator from e-commerce supply of goods or services made or provided or facilitated to:
1. A person resident in India, or
2. A person who buys such goods or services or both using IP address located in India, or
3. A non resident person in the following circumstances:
i) Sale of advertisement that targets a customer who is resident in India or a customer, who accesses
the advertisement through IP address located in India
ii) Sale of data collected from an Indian resident or from a person using IP address located in India.
Obligation to deduct equalization levy lies on e-commerce operator and not on a payer.
From 1st October 2020
– TCS on purchase of foreign tour package: From 01.10.2020, TCS shall be collected at 5% by a seller of an overseas tour package on the receipt of any amount from a buyer of such package.
– TCS on sale of goods: From 01.10.2020, TCS at 0.1% shall be collected by a seller on the aggregate sales consideration for goods exceeding Rs 50 lakh during the previous year.
– TCS on foreign remittance: From 01.10.2020, an authorized dealer shall deduct TCS at 5% on remittance exceeding Rs 7 lakh by a person during the financial year.
From 1st April 2020, TDS on ESOP payments of a startup have been deferred.
Employees will be taxed on exercising ESOPs only during the following events:
– After expiry of 5 years from the end of the financial year in which shares are allotted
– From the date of the sale of such specified security or sweat equity share by the employee
– From the date on which employee ceases to be the employee of the person.
Such tax has to be deposited within 14 days of any of the above-mentioned event.