RECENT CHANGES MADE IN DIRECT TAX
Keeping in the view of difficulties faced by taxpayers, corporates and reduce the burden, the Government has introduced various relief measures during the pandemic situation from an Income Tax perspective.
The following is the list of recent changes in Direct Tax:
1. Reduced MAT rates:
MAT rate for the previous year (i.e F.Y 2019-2020) relevant to the assessment year commencing on 1st April 2020 is reduced from 18.5% to 15%.
2. Reduction in Corporate taxes:
Insertion of section 115BAA is to reduce the corporate tax rate for all the domestic companies. It provides a concessional tax regime of 22% for all existing domestic companies from FY 2019-20 if they do not avail of any specified exemption or incentive. Such companies will also be exempted from payment of Minimum Alternate Tax (MAT).
3. Exemption from income-tax to individuals earning income up to Rs.5lakh
The Finance Act, 2019 exempted an individual taxpayer with taxable income up to Rs.5 lakh by providing a 100% tax rebate. This was done to provide complete relief from payment of income-tax to individuals earning taxable income up to Rs.5 lakh
4. Extension of Due Dates:
The returns of income which are required to be filed by 31.07.2020 and 31.10.2020 can be filed up to 30.11.2020. Consequently, the date for the furnishing tax audit report has also been extended to 31.10.2020. In order to provide relief to small and middle-class taxpayers, the date for payment of self-assessment tax in the case of a taxpayer whose self-assessment tax liability is up to Rs.1 lakh has also been extended to 30.11.2020.
5. An incentive for new manufacturing domestic companies) in the Income-tax Act,1961
New provisions were inserted in the Income Tax Act,1961 w.e.f FY 19-20 which allows any new domestic company incorporated on or after 01.10.2019 making fresh investment in manufacturing, an option to pay income-tax at the rate of 15%. This benefit is available to companies that do not avail of any exemption/incentive and commences their production on or before 31.03.2023. The effective tax rate for these companies is 17.01% inclusive of surcharge & cess. Also, such companies are not be required to pay MAT.
6.Reduction in rates of TDS/TCS:
The government announced various relief measures on 13 May 2020. One of these was a reduction in the tax deducted at source (TDS) and tax collected at source (TCS) rates by 25% on non-salaried payments.
7. Extension of Time limit in Capital Tax Savings Instruments:
The date for making investment/ construction/ purchase for claiming rollover benefit/ deduction in respect of capital gains under sections 54 to 54GB has also been further extended to 30.09.2020. Similar benefit extended for compliance of section 10AA of the Income-tax Act,1961
8. Abolition of Dividend Distribution Tax:
To provide relief to a large class of investors in whose case dividend income is taxable at the rate lower than the rate of DDT, the Finance Act, 2020 removed the Dividend Distribution Tax under which the companies are not required to pay DDT with effect from 01.04.2020. The dividend income shall be taxed only in the hands of the recipients at their applicable rate.
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