Union Budget 2020-21

Tax Updates

2. Concessional Tax Rate for Electricity Generation
Companies

Section 115BAB:
New Manufacturing domestic companies set up on or after 01-
10-2019 , commencing manufacturing or production by 31-03-
2023, not availing any deductions, may opt to pay tax at a
concessional rate of 15%.
Amendment:
Benefit of this concessional rate of 15% to be extended to
business of generation of electricity, ie. For the purposes of this
section, manufacturing to include generation of electricity.
Applicability:
Will take effect from 1st April 2020.

51

Information technology and
telecommunication

Telecom Sector- An overview

All time high of the Telecom Industry, with 11,943 lakh
telephone connections as at September 2019.

Rapid expansion of Internet and broadband
with substantial reductions in price in the last
few years.

Increase in broadband connections by 10
times from 2014 - 2019, making India the
global leader in monthly data consumption.

Availability of Internet access to millions of
citizens over the country.

Domination of sector by private players, constituting
over 88.81% of the connections.

11,834 6,653 5,946
9,961

2,516 610

Budget Highlights

FTTH Connections through Bharath Net
Budget: Rs. 6,000 Crores

1,00,000 Health
Gram centres

Panchayats

Anganwadis

police Public wellness
stations Institutions centres

post government
offices schools

PDS
outlets

Budget Highlights

Establishment of center in
Institute of Excellence to
work on innovation in field
of Intellectual Property

Clusters to be set up
across different

technology sectors

For Designing, Fabrication and
further scaling up of Technology

Clusters

Criticality in Solution Initiate 2 National
mapping of Level Sciences

India’s Schemes to create
Genetic Comprehensive
Landscape data base

Early Life Support Ideation and
Funding Development of
early Start-ups P
Seed Fund r
To provide Rs. 8,000 o
Crore over a period p
o
of 5 years for s
National Mission on a
l
Quantum
Technologies and

Applications

Health Care

Budget Highlights

FIT India Movement against non-

communicable diseases.

Expansion of Mission Indradhanush to cover 12
diseases and 5 new vaccines.

Proceeds from taxes on medical devices to
support setting up of hospitals in PPP mode in

districts without any Ayushman empanelled
hospitals

Strengthening of “TB Harega Desh Jeetega”
campaign to end Turberculosis by 2025.

Budget Highlights

Expansion of the Jan Aushadhi Kendra
scheme to all districts offering 2000

medicines and 300 surgicals.

Using machine learning and AI to help
health authorities and the medical

fraternity in order to design Preventive
regime.

Approval of Rs. 3.6 lakh crores for Jal
Jeevan Mission, towards augmenting local

water sources, promotion of water
harvesting and de-salination.

Provision of Rs.69000 crores towards the
health sector which is inclusive Rs.6400

crores for PMJAY

Financial Services

61

Banking - Overview

In August 2019, the government announced
the major mergers of public sector banks which
included United Bank of India and Oriental
Bank of Commerce to be merged with Punjab
National Bank, Allahabad Bank will be
amalgamated with Indian Bank and Andhra
Bank and Corporation Bank will be
consolidated with Union Bank of India.

62

Banking - Growth

• Loan to deposit
ratio for banks
across sectors
has increased
over the years.

• Private & foreign
banks have
posted high
return on assets
than nationalized
& public banks.

• This has
prompted most
of the foreign
banks to start
their operations
in India.

63

Daily Liquidity
Management

Systemic liquidity in 2019-20 has been largely in surplus
since June 2019.
The increased spending by the government, net forex
purchases by the RBI and return of currency to the banking
system combined with the two OMO purchase auctions
amounting to Rs. 27,500cr conducted by the Reserve Bank
resulted in surplus liquidity in June.

64

Major Policy Changes –
Banking Regulation

Permitting One-time Restructuring of Existing
Loans to MSMEs Classified as ‘Standard’
without a Downgrade in the Asset
Classification

Bank Lending to Infrastructure Investment
Trusts (InvITs)

Resolution of Stressed Assets

Revised guidelines on compensation of
Whole Time Directors and Control Function
Staff for all Private Sector Banks to be
effective from April 01, 2020.

65

Major Policy Changes –
Non-banking Financial
Regulation /Supervision

Amendment to the RBI Act, 1934 to Strengthen the
Regulation and Supervision of the NBFC Sector
vesting additional powers with the Reserve Bank

Eligible NBFC-ND-SIs as Authorised Dealers
(ADs) - Category II

Liquidity Risk Framework for NBFCs

Review of Limits for NBFC-Micro Finance Institutions
(NBFC-MFIs)

66

Budget Highlights

The Deposit Insurance and Credit Guarantee
Corporation(DICGC) has been permitted to increase
Deposit Insurance Coverage for a depositor, from Rs.1
lakh to Rs. 5 Lakh.

The limit for NBFCs to be eligible for debt
recovery under the SARFAESI Act, 2002 to be
reduced from 500 cr to 100 cr or loan size from 1
cr to 50 lakhs

Specified categories of Government Securities
would be opened fully for non- resident
investors.

Limit for FPI in corporate bonds, will be increased from
9% to 15% of the outstanding stock of corporate
bonds.

67

Budget Highlights

To sell a part of government’s holding in LIC by
way of Initial Public Offer (IPO).

Rs.40,433 crores has been allocated for
the financial sector.

To sell the balance holding of
Government of India IDBI Bank to private,
retail and institutional investors through
the stock exchange.

Expansion of Debt-based Exchange Traded Fund
by introducing government securities.

68

Miscellaneous

69

Budget Highlights

About 150 higher educational institutions to start
apprenticeship embedded degree/diploma courses
by March 2021.

A National Police University and a National Forensic
Science University proposed in the domain of
policing science, forensic science, cyber-forensics.

Ind-SAT (Scholastic Aptitude Test) proposed to be
held in Asian & African countries under India’s “Study
in India” programme

To start a programme whereby urban local bodies
across the country would provide internship
opportunities to fresh engineers for a period up to 1
year

To start degree level full-fledged online education
programme which shall be offered by top 100 ranked
institutions in the National Institutional Ranking
Framework

To provide Rs. 99,300 crores towards education sector
in 2020-21 & Rs. 3,000 crores towards skill
development

Budget Highlights

Suitable technologies for cleaning of sewer systems
or septic tanks to be identified by Ministry of
Housing & Urban Affairs.

Rs. 85,000 crore proposed for 2020-21 towards the
welfare of Scheduled Castes and Other Backward
classes

Rs. 53,700 crore proposed for the year 2020-21
towards the welfare of Scheduled tribes

Five archaeological sites, Rakhigarhi (Haryana),
Hastinapur (Uttar Pradesh), Shivsagar (Assam),
Dholavira (Gujarat) and Adichanallur (Tamil Nadu)
to be developed as iconic sites with onsite
Museums

Indian Institute of Heritage and Conservation under
Ministry of Culture to be established

Rs 28,600 crore proposed to be provided for
programs that are specific to women.

Budget Highlights

Four museums from across the country to be taken
up for renovation and re-curation so that a world
class experience can be offered to visitors

Enhanced allocation of about 9,500 crore provided
for 2020-21 for senior citizens & Divyang

To provide Rs. 2,500 Crores towards promotion of
tourism for 2020-21

Rs. 4400 crore for 2020-21 for encouraging states
to formulate & implement plans for ensuring
cleaner air.

Companies Act amendments to be proposed for
correcting criminal liability for acts that are civil in
nature

To provide 3,150 crore for Ministry of Culture for
2020-21.

Budget Highlights

To evolve a robust mechanism for appointment
including direct recruitment to these bodies to attract
best talents and professional experts.

New National Policy to laydown a road-map towards
modernized data collection, integrated information
portal & timely dissemination of information

An amount of 30,757 crore to be provided for the FY
2020-21 & an amount of 5,958 crore to be provided
for the Union Territory of Ladakh

To set up a National Recruitment Agency (NRA) as
an independent & professional organisation for
conduct of computer-based online Test for
recruitment to NonGazetted posts

India to host G20 presidency in the year 2022 - the
year of 75th anniversary of independence of Indian
Nation. Allocation of Rs. 100 crore to begin the
preparations.

“Beti Bachao Beti Padhao” has yielded tremendous
results. Gross enrolment ratio of girls across all levels
of education is now higher than boys.

D. Direct tax
Amendments

74

1. Rates of Income Tax

75

Rates of tax
– Regular Scheme

Income Tax Rate

Individual less than 60 years, HUF, BOI, AOP, AJP

Up to 2,50,000 Nil

2,50,001 – 5,00,000 5%

Individual 60 to 80 years

Up to 3,00,000 Nil

3,00,001 – 5,00,000 5%

Individual - 80 years & above Nil
Up to 5,00,000
All Individuals, HUF, BOI, AOP, AJP 20%
5,00,001–10,00,000 30%
More than 10,00,000

76

Rates of tax

Rate of Surcharge for Individuals, HUF, BOI, AOP, AJP

Income Tax Rate
50 Lakh – 1 crore 10%
1 Crore – 2 Crore 15%
2 Crore – 5 Crore 25%
More than 5 Crore 37%

Co-operative Society

Income Tax Rate

Upto 10,000 10%

10,001 – 20,000 20%

More than 20,001 30%

• The Assessee option for Scheme u/s. 115BAD shall pay tax at
the rate of 22%

Firms and Local Authority

Income Tax Rate

Total income 30%

Surcharge at 12% if the total income exceeds Rs.1 crore

77

Rates of tax

Domestic Companies

Regular Provision Optional Scheme*

Turnover Tax Rate Turnover Tax Rate

< 400 crores in 25% Companies 15%
PY 2018-19 opting Sec –

115BAB

Others Companies 22%
30% opting Sec –

115BAA

Surcharge is 7% if income Surcharge is 10%
exceed 1 crore but not 10
crore and it is 12% if income

exceed 10 crore

*In case of Optional Scheme, certain deductions, exemptions
and MAT provisions do not apply.

Other than Domestic Companies

Income Tax Rate

Total income 40%

Surcharge at 2% if income exceed 1crore but not 10 crore

Surcharge at 5% if income exceed 10 crore

Rates of tax
- Individual and HUF

New sec. 115BAC w.e.f
AY 2021-22

Income Tax Rate*
Up to 2,50,000 Nil
2,50,001 – 5,00,000 5%
5,00,001 - 7,50,000 10%
7,50,001 – 10,00,000 15%
10,00,001 – 12,50,000 20%
12,50,001 – 15,00,000 25%
More than 15,00,000 30%

Will not attract provisions of
Alternative Minimum Tax.

*Conditions apply….

79

Incentive to Individual and
HUF – u/s. 115BAC

Such assessee cannot claim the following:

• LTC & HRA • Deductions for Donation or
• Personal Expense Expenditure u/.s
35(1)(ii)/(iia)/(iii) and sec
Allowance 35(2AA)
• Allowance to MP’s/MLA’s
• Exemption for SEZ • Deductions u/s 35AD or Sec
• Allowance for income of 35 CCC

Minor • Deduction of family pension
• Standard Deduction u/s 57(iia)
• Entertainment Allowance
• Entire chap-VI A deductions
except 80CCD & 80JJAA

• PT for salaried Employee • House Property interest

No set off of any loss or carried forward or depreciation from
any earlier AY, if such loss is attributable to any deductions
mentioned in above 14 points.
- No set off of any loss under the head Income from HP with

any other head of income.
- No exemption or deduction for allowances or perquisites,

by whatever name called under any other law for time
being in force.

80

Incentive to Individual and
HUF – u/s. 115BAC

Has income from Other Cases
PGBP

Once the Option exercised, it Has option to
shall be applicable for all Chose every year

subsequent years. This option The Option has to
can be withdrawn only once. be exercised in the
Such Option can be exercised ROI filed u/s. 139(1)
again only when Individual or
HUF ceases to has Business 81

Income

On or before the due
date for filing ROI u/s.
139(1). Commencing

from 1st April 2021

Incentive to Co-op Societies

Tax Rate @ 22% New sec. 115BAD
Surcharge @ 10% w.e.f AY 2021-22

No Deduction Precluded from Other
U/s. Conditions

• 10AA • Set-off and • Once exercised
• 32(1)(iia) Carry forward cannot be
• 32AD of Losses withdrawn
• 33AB
• 33ABA • Claiming of • ROI has to be
• 35AD Depreciation filed as per sec
• 35CCC u/s. 32 139(1)
• Other
• Loss &
deduction depreciation
under Chapter shall be
VI A deemed to
have been
given full effect

Provisions relating to Alternate Minimum tax shall not
apply

82

New Tax Regime:
To opt or not to?

83

No Dispute but Trust Scheme
– ‘Vivad se Vishwas’ Scheme

Only for taxpayers
who have cases
pending at any
appellate level!!

Key features:

• Pay only the amount of disputed taxes;
• Complete waiver of interest and penalty if

tax paid before 31.03.2020;
• Those who pays pay after 31.03.2020 will

have to some additional amount;

The scheme will be open till 30th June 2020.

Detailed scheme will be out soon..

84

2. Tax Incentives

85

Exemption to Abu Dhabi Investment
Authority and Sovereign Wealth Fund

Who can claim?

• a wholly owned subsidiary of ADIA being a
resident of the UAE and making investment,
directly or indirectly, out of the fund owned by
UAE Govt.; or

• a sovereign wealth fund which satisfies the
specified conditions.

What is exempt?

• Dividend, Interest or Long-term capital gain from
an investment made in India, whether Debt or
equity, in an entity carrying on the business of
infrastructure as defined in section 80IA(4).

Lock-in period?

• Investment to be made on or before 31.03.2024
and held for at least 3 yrs.

86

Extending time limit for
Affordable Houses

Section 80-EEA provides for additional deduction
of interest paid on housing loan with one of the
conditions being loan sanctioned before 31.03.20.

Benefit extended for loan sanctioned up to
31.03.21.

Section 80-IBA provides for tax holiday for
affordable housing projects with one of the
conditions being approval of project before
31.03.20.

Benefit extended for loan sanctioned up to
31.03.21.

87

Rationalization of provisions
for Start-ups

Existing Deduction of 100% of profits and gains
from eligible Business

Period: 3 consecutive AYs out of 7 years

Turnover limit: Up to Rs. 25 Crores.

Proposed

Period: 3 consecutive AYs out of 10 years

Turnover limit: Up to Rs. 100 Crores.
* Amendment applicable from 1st April 2020

88

Extension of period of
concessional rate
– 194LC & 194LD

Applicable to:
1.Specified persons or a Business Trust, on interest
paid to Non Residents.
2.Foreign Institutional Investors (FII) and Qualified
Foreign Investors (QFI).

Existing Proposed

1.TDS rate : 5% TDS Rate : 4%
(Applicable only for
2. Period of
concessional rate of 194LC)
TDS till 1st July 2020
Extended period of
concessional rate of
TDS to 1st July 2023

89

Relaxation to Offshore funds

Current

• Sec. 9A(3)(c) restricts aggregate participation
by resident in India to 5% of corpus fund.

• Sec. 9A(3)(j) mandates min. monthly average
of the corpus fund to be Rs. 100 Crs. in year of
incorporation or within 6 months, w.e.l.

Proposed

• While calculating % of fund contributed by
Indian residents during the first 3 yrs.,
contribution to the extent of Rs. 25 crs. Not be
considered.

• Min. Monthly average to be maintained only
after 12 months from the end of month of its
establishment or incorporation.

90

3. Removing difficulties faced
by tax payers

91

Transfer of land or
building - Sec. 43CA, 50C

& 56

Existing Proposed
Scheme w.e.f.

No adjustments of AY 2021-
sale consideration 2022
shall be made in case
where the variation No adjustments of
between sale value sale consideration
and stamp duty value shall be made in case
is <=5% of sale where the variation
consideration between sale value
and stamp duty value
is <=10% of sale
consideration

92

Taxation of ESOP in case
of Eligible start-ups

Taxed as perquisites
• Tax on Income from salary as perquisite u/s. 17(2)

Existing Scheme

Taxed at the time of exercising of option by the employee.

Proposed w.e.f. AY 20-21

Within 14 days of earliest of the below:
• After the expiry of 48 months from end of relevant

AY in which option was exercised; or
• From the date of sale of such specified security or

sweat equity share by the employee; or
• From the date on which the person ceases to be

employee of that company;
Rate of Tax – As per rates of FY in which the security or
share is allotted/transferred

93

Allowing carry forward of
losses/depreciation in
certain amalgamations

Set-off & Carry forward in case of amalgamation of

banking company or any other banking institutions:
• Accumulated Losses and
• Unabsorbed depreciation

Existing Proposed w.e.f. AY
Scheme 20-21

In case of amalgamation of:

Only in case of • banking company with any
amalgamation by
virtue of RBI’s other banking institution (or)
scheme of
reconstitution or • Corresponding new bank
amalgamation u/s.
45(7) of Banking with any other corresponding
Regulation Act, 1949.
new bank under a scheme

brought in by CG (or)

• Govt. co. with any other

Govt. co. under scheme of

CG according to the General

Insurance Business

(Nationalisation) Act, 1972

Option for not availing
deduction u/s. 35AD

Existing Proposed
w.e.f. AY
No option to opt 2020-21
out of S. 35AD for
claiming deductions Assessee has option
under other secs. to opt out of 35AD

for claiming
deductions under

other sec.

Definition of Business Trust

– S. 2(13A) Proposed

Existing

The units of the No mandatory
business trust has requirement to be
to be listed in the
Recognised Stock registered in
recognised stock
Exchange
exchange

Applicable from AY 2021-22

95

Exemption from filing ROI in
case of Non Residents

Existing Proposed
w.e.f AY 2020-21
Only certain Certain dividend and
dividend and Interest Income
Interest Income
Royalty or FTS

Total income consist only of the above
mentioned income
&

TDS on such income has been
deducted at the rates > rate u/s. 115A

Excluding Interest paid or
payable to PE of NR Bank

Sec. 94B limitation on interest expense shall not apply
interest paid by Associated Enterprise as per sec. 92A in
respect debt issued by a lender which is a PE of a Non
Resident, being engaged in the business of banking, in India.

96

4. Measures to provide tax
certainty

97

Attribution of profit to Permanent
Establishment

Before the After the
Amendment Amendment

Section Only determination Scope of “SAFE
92CB of ALP u/s. 92C or HARBOUR RULES” to
92CA was covered
be extended to
under “SAFE determination of
HARBOUR RULES” attributable profit u/s.

9(1)(i)

Section Only determination Scope of “ADVANCE
92CC of ALP u/s. 92C or PRICING
92CA was covered
under “ADVANCE AGREEMENT” to be
extended to
PRICING
AGREEMENT” determination of
attributable profit u/s.

9(1)(i)

98

Tax Certainty – S. 43B and S. 194J

Provision allowing deduction
for amount disallowed u/s 43B

is to be extended to all
Insurance companies on

“PAYMENT BASIS”.

In order to reduce the
litigation in TDS, rate on Fees
for Technical services (Other
than Professional services) u/s.
194J is to be reduced to 2%

from existing 10%

99

5. Widening and
Deepening of Tax Base

100