Indian Budget 2020 | Top 10 frequent questions

Budget 2020 has proposed a new and simplified personal income tax regime where the tax rates are reduced compared to the earlier years for those who forego deductions, and exemptions.

Taxpayers can follow either old regime with deductions or the new tax slabs without deductions. The tax slabs in the new regime are as follows

Yes, Rebate u/s 87A of Rs. 12500 is also applicable under New Regime if the Net taxable Income is less than Rs 5 Lakhs. If the Net income exceeds Rs 5 Lakhs, then the above tax slabs will be applicable

The Important observations on the new tax slabs are as follows

1. New Tax Regime is good if you want higher take home gross salary
2. If you have Higher deductions, you get Higher tax savings that might not be possible in the new tax regime
3. One needs to work with their employer to switch to new tax regime

The following are some of the new tax Deduction retained under new Tax regime

1. Gratuity received at the time of Retirement
2. Retrenchment Compensation received
3. Amount received on Voluntary Retirement
4. Commutation of Pension
5. Employer Contribution to PF
6. Withdrawal of NPS on Closure of Account or maturity
7. around 20 such deductions were retained; a comprehensive list is expected to be published by the CBDT.

A sample list of items that you use every day were listed below

 Expensive:

Footwear, Cooking Oils, Furniture, Cigarettes, Tobacco products, Medical Devices, Auto parts, CC TVs, Gold, Silver, Chemicals, most of the imported items

 Cheaper:

Books, News Papers, Sports equipment, Microphones, Solar Panels, Lightweight Coated Papers, Inputs and raw materials like fuse, Chemicals, Plastics, textiles

The threshold limit for Tax Audit has been increased to Rs. 5 Crores from current Rs. 1 Crore. This has been increased to reduce the compliance burden on small retailers, traders, shop keepers who comprise the MSME Sector

Condition: This increased limit will be applicable only to those business which carry out less than 5% Cash Transactions

Earlier, ESOPs were taxable as a perquisite in the year of exercise. The Finance Minister has proposed to ease the burden of taxation on the employees who received ESOPs by deferring the tax payment for five years or till they leave the company or when they sell their shares, whichever is earlier.

Ideally, it should be at the time of selling the shares as the price varies from time to time, for now, we have to live with the above law.

Yes, the e-Commerce Operators are required to deduct TDS @ 1% on the payments made to Suppliers selling through their platform.

TDS @ 1% is required to be deducted if the gross amount of sales or services exceeds Rs. 5 Lakhs in the last fiscal year.

Earlier the TDS rate on fees for Professional Services, and Technical Services was 10%. But from 01/04/2020, the new TDS rates are as follows

1. For Technical Services - 2%
2. For other than Technical Services -10%

Overall, the trend from the earlier budgets and this one is to have a low tax regime for corporate India to thrive. By some measure, India now has the lowest possible tax rate regime both in personal and corporate tax front.

1. New Corporate Tax Rate in manufacturing to 15%
2. Corporate tax for existing companies slashed to 22%
3. Tax on Co-Op societies to be reduced to 22% + surcharge
4. IT Act to be amended to allow nameless, faceless appeals. Now it applies to even IT disputes, except where it is a must
5. Companies are exempted from Minimum Alternate Tax (MAT) and Cooperative societies are exempted from Alternate Minimum Tax (AMT)