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01 Feb 2020Posted By: Mudit Handa


Union Budget 2020: Direct Tax Proposals

The Union Budget 2020 was presented on 1st February 2020 in the parliament by the Honorable Finance Minister of India Smt. Nirmala Sitharaman.

This is a very tax-friendly budget that has surely given sunshine to 135 million taxpayers who were expecting a reduction in the income tax slab.

The government has proposed huge tax reliefs and brought a new Income tax slab, according to which income up to ₹5 lakhs shall be tax-free.

Let us understand in detail these new Direct Tax Proposals.

 

#1. The new Income tax slab

Taking into consideration those individuals who forgo their exemptions and deductions, the Finance Minister has now proposed the new tax regime for FY 2020-21. Under this new tax regime, new slab rates have been introduced. These are explained below- 

Income slabs (₹ lakh)

Tax rates(%)

0 - 2.5

Exempt 

2.5 - 5

5

5 - 7.5

10

7.5 - 10

15

10 - 12.5

20

12.5 - 15

25

Above 15

30

Note: The taxpayers falling below the income of ₹5 Lakh have the option to pay tax as per the previous year’s slab and avail the rebate u/s 87A, while income tax return filing.


#2. Simplification of the income tax system

The Government has further sought to simplify the income tax system in many ways. It has proposed the following measures for simplifying the taxation structure:

  • 70 Tax exemptions and deductions reduced. 

  • Dividend distribution tax abolished. Dividends will now be taxable in the hands of the taxpayer.

  • Minimum Alternative Tax (MAT) has been removed. 

  • The income tax audit limit is raised to ₹5 Crores for those businesses that run on 95% cashless mode. 

  • The corporate tax rate of 15% that was introduced in September 2019 to manufacturing companies, now also extended to power companies. 

  • Faceless appeals to be introduced for greater transparency and accountability. 


#3. Further tax reliefs

Apart from the measures discussed above, the government has provided some more relief measures for the general taxpayers:

  • The income of Foreign Sovereign Wealth Fund from their investments in India has been exempted for investments made till 2024 for a period of 3 years. 

  • Taxation over the employee stock ownership plans (ESOPs) is deferred to 5 years from the date of exercising of this option, sale of the shares or leaving the company, whichever of them is earlier. 

  • Tax holiday for startups extended to startups having turnover up to ₹100 Crores from the current limit of ₹25 Crores. 

  • The period for the above tax exemption is now extended to 10 years from the earlier 7 years. 

  • The tax rate for the cooperative societies to be reduced to 22%. However, a 10% surcharge will be there. 


#4. Vivaad se Vishwas scheme

The government has now introduced the “Vivaad se Vishwas” scheme. This will allow all taxpayers in the litigation at any level of appeal. Now onwards, if a taxpayer pays his disputed tax amount till March 31, 2020, he will get full relief from interest and penalty. 


#5. Tax reliefs for the Housing sector

The government has several Tax reliefs for the home-buyers. These are discussed below-

  • Now, an Additional Interest deduction of ₹1.5 lakhs is available to the buyers of affordable houses. This deduction is available for the home loans sanctioned up to 31st March 2021. Earlier this limit was 31st March 2020.

  • The tax holiday of developers of affordable housing is also extended by another one year up to 31st March 2021. 

  • However, there is a difference in value allowed up to 10% of stamp duty value while sale or purchase of an immovable property.

These are the important highlights of the Union Budget 2020.

Also, refer to the 

If you need any further guidance as regards the Income tax return filing procedure, please feel free to contact our business advisors at 8881-069-069.

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