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Changes proposed in Income Tax by the Finance Bill 2020

changes-proposed-in-income-tax-by-the-finance-bill-2020

The changes proposed in the income tax law by the Finance Bill, 2020 relating to direct taxes are listed below. The provisions of Finance Bill, 2020 relating to direct taxes seek to amend the Income-tax Act, 1961. 

Once the bill is cleared by the Parliament and gets the assent of the President, the amendments will become a part of the existing income tax law and the Finance Bill, 2020 will become the Finance Act, 2020. 

Unless otherwise stated, the amendments in the Finance Act, 2020 will take effect from 1st April 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.

The provisions of Finance Bill, 2020 relating to direct taxes seek to amend the Income-tax Act, 1961 (hereafter referred to as ‘the Act’), to continue to provide momentum to the buoyancy in direct taxes through tax-incentives, reducing tax rates for co-operative society, individual and Hindu undivided family (HUF), deepening and widening of the tax base, removing difficulties faced by taxpayers, curbing tax abuse and enhancing the effectiveness, transparency, and accountability of the tax administration.

1. Optional New Simplified Income Tax Slab and Income Tax Rate for an Individual or HUF: There are no changes in Income Tax rates for any class of assessees for the assessment year 2021-22 as compared to the preceding assessment year 2020-21.

However, an optional new simplified Income Tax Slab and Income Tax Rate scheme for an Individual or HUF has been introduced. For this purpose, a new section 115BAC is proposed in respect of income tax slabs in respect of such individuals and HUFs who do not wish to claim specified deductions or exemptions.

The option is to be exercised for every year in case of individuals or HUFs who do not have business income but in case of having a business income, it is for a lifetime. However, it can be withdrawn once. Once withdrawn, he cannot re-enter into the new scheme.

The proposed Income Tax Slab Rates are given under:

Sl. No.
Total income
Rate of tax
1.
Upto Rs 2,50,000
Nil
2.
From Rs 2,50,001 to Rs 5,00,000
5 percent
3.
From Rs 5,00,001 to Rs 7,50,000
10 percent
4.
From Rs 7,50,001 to Rs 10,00,000
15 percent
5.
From Rs 10,00,001 to Rs 12,50,000
20 percent
6.
From Rs 12,50,001 to Rs 15,00,000
25 percent
7.
Above Rs 15,00,000
30 percent

It is further proposed that the provisions relating to AMT  and carry forward and set off of AMT credit under section 115JC shall not apply to such individual or HUF opting section 115BAC having a business income.

2. Optional New Simplified Income Tax Slab and Income Tax Rate for a resident co-operative society: From the assessment year 2021-22 (FY 2020-21), a resident co-operative society has an option to opt for taxation under the newly inserted section 115BAD of the Act.

A co-operative society resident in India shall have the option to pay tax at 22 percent for the assessment year 2021-22 onwards in respect of its total income.

Since section 115BAD is optional, the same needs to be exercised by the cooperative society. However, if it fails to satisfy the conditions in any previous year, the option shall become invalid and other provisions of the Act shall apply.

Under this option, a resident cooperative society has to pay income tax at a concessional rate of 22 percent on its income. A flat surcharge of 10 percent is proposed.

To avail the concessional rate of tax, such a society needs to compute its income without taking the following deductions.

1. Deduction under section 10AA
2. Deduction under clause (iia) of subsection (1) of section 32
3. Deduction under section 32AD
4. Deduction under section 33AB or section 33ABA
5. Deduction under sub-clause (ii) or (iia) or (iii) of subsection (1) or subsection (2AA) of section 35
6. Deduction under section 35AD or under section 35CCC
7. Deduction under different sections of Chapter VI-A

It is further proposed to amend section 115JC and 115JD so as to provide that the provisions relating to AMT and carry forward and set off of AMT credit shall not apply to cooperative society exercising the option under the new section 115BAD.

3. Increase in turnover limit for tax audit: Under section 44AB of the Act, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds one crore rupees in any previous year.

It is proposed to increase the threshold limit for a person carrying on business from one crore rupees to five crore rupees in cases where,-

(i) the aggregate of all receipts in cash during the previous year does not exceed five percent of such receipt; and

(ii) the aggregate of all payments in cash during the previous year does not exceed five percent of such payment.

Hence, the increased limit of turnover for tax audit shall apply only to a business entity and not to a professional. Such a business entity must receive at least 95 percent of its sales or turnover in digital mode and also make at least 95 percent of payments in digital mode.

4. Turnover limit for TDS by individuals and HUFs are incorporated in the TDS provisions: The amendment relating to extending threshold for getting books of accounts audited will have consequential effect on TDS  or TCS provisions contained in sections 194A, 194C, 194H, 194I, 194J, and 206C as these provisions fasten liability of TDS or TCS on certain categories of person if the gross receipt or turnover from the business or profession carried on by them exceed the monetary limit specified in clause (a) or clause (b) of section 44AB. 

Therefore, it is proposed to amend these sections so that reference to the monetary limit of Rs. 1 crore in case of the business, or Rs. 50 lakh in case of the profession, as the case may be, is included in the above-mentioned sections.

5. Due date for Tax Audit report prescribed: It is proposed to delink the filing of tax audit report along with the return of income and thus to prescribe for a separate due date for filing of a tax audit report.

For this purpose, clause (ii) to the Explanation of section 44AB is amended to provide that tax audit report shall be obtained and shall furnish the same one month prior to the due date for furnishing the return of income under sub-section (1) of section 139.

Similar amendments have been proposed in the provisions of section 10, section 10A, section 12A, section 32AB, section 33AB, section 33ABA, section 35D, section 35E, section 44AB, section 44DA, section 50B, section 80-IA, section 80-IB, section 80JJAA, section 92F, section 115JB, section 115JC and section 115VW of the Act.

The above provisions are amended to provide wherever any audit report is required to be obtained and furnished then the same shall be obtained and furnished one month prior to the due date for furnishing the return of income under sub-section (1) of section 139.

6. Amendment in due date for filing return of income: It is proposed to amend section 139(1) to extend the due date of 30th day of September by one month to 31st day of October. This shall take effect from AY 2020-21.

7. Distinction between working and non-working partners removed: It is proposed to extend the benefit of the extended due date of filing of return of income of a firm which is subject to compulsory tax audit under section 44AB to a non-working partner also. This shall take effect from AY 2020-21.

8. Amendment in the computation of fair market value to compute the cost of acquisition: For computing capital gains in respect of an asset acquired before 1st April 2001, the assessee has an option of to take the fair market value of the asset as on 1st April 2001 or the actual cost of the asset, whichever is higher, as cost of acquisition.

It is proposed to limit the fair market value in such cases to the extent of stamp duty value in case of a capital asset, being land or building or both. For this purpose, an amendment is carried out in section 55 of the Act.

The fair market value of such an asset on 1st April 2001 shall not exceed the stamp duty value of such an asset as on 1st April 2001 where such stamp duty value is available.

9. Dividend Distribution Tax (DDT) abolished: Section 115-O for dividend distribution tax (DDT) on dividends distributed by a domestic company is proposed to be abolished.

A similar amendment is proposed in section 115R to abolish the dividend distribution tax (DDT) on dividends distributed by specified companies and Mutual Funds.

Consequential amendments have been made in sections 10(23D), 10(23FC), 10 (23FD), 10 (34), 10(35), 57, 80M, 115A , 115AC, 115ACA , 115AD, 115BBDA , 115C, 115UA (3), 194K , 194LBA, 195, 196A and 196C.

10. Dividend income made taxable: Consequent to amendment in section 115-O and section 115R, it is proposed to amend clauses (34) and (35) of section 10 to remove the exemption provided on dividend income. With these amendments, dividend income from a domestic company and a mutual fund has become taxable in the hands of the recipient of such income.

11. TDS provisions on Dividend income: It is proposed to amend section 194 to include dividends for a tax deduction. At the same time the rate of TDS at 10 percent. is proposed to be prescribed and the threshold is proposed to be increased from Rs 2,500 to Rs 5,000 for the dividend paid.

Further, at present, the mode of payment is given as “an account payee cheque or warrant”. It is proposed to change this to any mode.

12. Deduction on other expenses restricted for earning dividend income: It is proposed to amend section 57 to provide that no deduction shall be allowed from the dividend income, or income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or income in respect of units from a specified company defined in the Explanation to clause (35) of section 10, other than deduction on account of interest expense, and in any previous year such deduction shall not exceed 20 percent of the dividend income, or income in respect of such units, included in the total income for that year, without deduction under section 57.

13. 194A and co-operative society-Scope enlarged: The interest income paid by a co-operative society to its members or any other co-operative society is not subject to TDS under section 194A(3)(v). A co-operative society does not include a co-operative bank.

Similarly, there is no TDS on interest on deposits held with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank.section 194A(3)(viia).

It is proposed to provide that if a co-operative society as referred in section 194A(3)(v) or section 194A(3)(viia) has a turnover of more than Rs. 50 crore, then such a co-operative society shall be liable to deduct TDS on interest paid.

However, no such TDS shall be made from the interest payment, in aggregate, does not exceed Rs. 50,000 to a senior citizen and Rs. 40,000 in any other case.

14. Modification of the definition of “work” in section 194C: It is proposed to amend section 194 C by adding to the existing meaning of “work”, the words “manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person being associate of such customer”. The word associate will have the same meaning as in section 40A(2)(b).

15. TDS for fees for technical services reduced under section 194J: It is proposed to reduce rate for TDS in section 194J in case of fees for technical services (other than professional services) to 2 percent from existing 10 percent. The TDS rate in other cases under section 194J would remain the same at ten percent.

16. New TDS on the income from mutual fund units: It is proposed to insert a new section 194K to provide that any person responsible for paying to a resident any income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or units from the administrator of the specified undertaking or units from the specified company shall at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax thereon at the rate of 10 percent. 

It is also provided for the threshold limit of Rs 5,000/- so that income below this amount does not suffer tax deduction.

17. Widening the scope of TDS on E-commerce transactions: In order to widen and deepen the tax net by bringing participants of e-commerce within the tax net, it is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of 1 percent with the following key points:

• The TDS is to be paid by e-commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform;

• E-commerce operator is required to deduct tax at the time of credit of the amount of sale or service or both to the account of e-commerce participant or at the time of payment thereof to such participant by any mode, whichever is earlier.

• The tax at 1 percent is required to be deducted on the gross amount of such sales or service or both. 

• Any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant shall be deemed to be amount credited or paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sales or services for the purpose of deduction of income-tax.

• The sum credited or paid to an e-commerce participant (being an individual or HUF) by the e-commerce operator shall not be subjected to provision of this section, if the gross amount of sales or services or both of such individual or HUF, through e-commerce operator, during the previous year does not exceed Rs. 5 Lakh and such an e-commerce participant has furnished his Permanent Account Number (PAN) or Aadhaar number to the e-commerce operator.

• A transaction in respect of which tax has been deducted by the e-commerce operator under this section or which is not liable to deduction under the exemption discussed in the previous bullet, there shall not be a further liability on that transaction for TDS under any other provision of Chapter XVII-B of the Act. This is to provide clarity so that the same transaction is not subjected to TDS more than once.

However, it has been clarified that this exemption will not apply to any amount received or receivable by an e-commerce operator for hosting advertisements or providing any other services which are not in connection with the sale of goods or services referred to in sub-section (1) of the proposed section.

• Consequential amendments are being proposed in section 197 (for lower TDS), in section 204 (to define person responsible for paying any sum) and in section 206AA (to provide for tax deduction at 5 percent in non-PAN/ Aadhaar cases).

18. Widening the scope of section 206C: 

(1) It is proposed to amend section 206C to levy TCS on overseas remittance and for sale of an overseas tour package as given below-

(i) An authorized dealer receiving an amount or an aggregate of amounts of Rs. 7 lakh or more in a financial year for remittance out of India under the LRS of RBI shall be liable to collect TCS, if he receives a sum in excess of said amount from a buyer being a person remitting such amount out of India, at the rate of 5 percent. In non-PAN/non-Aadhaar cases the rate shall be 10 percent.

(ii) A seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such a package, shall be liable to collect TCS at the rate of 5 percent. In non-PAN/ Aadhaar cases the rate shall be 10 percent.

The above TCS provision shall not apply if the buyer is,-

(a) liable to deduct tax at source under any other provision of the Act and he has deducted such amount.

(b) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.

(2) It is further proposed to amend section 206C to levy TCS on sale of goods in excess of the specified limit, as under:

A seller of goods is liable to collect TCS at a rate of 0.1 percent on the consideration received from a buyer in a previous year in excess of fifty lakh rupees. In non-PAN/non-Aadhaar cases the rate of TCS shall be 1 percent.

(i) Only those seller whose total sales, gross receipts or turnover from the business carried on by it exceed Rs. 10 crore during the financial year immediately preceding the financial year, shall be liable to collect such TCS.

(ii) Central Government may notify persons, subject to conditions contained in such notification, who shall not be liable to collect such TCS.

(iii) No TCS is to be collected from the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to conditions as prescribed in such notification.

(iv) No such TCS is to be collected, if the seller is liable to collect TCS under other provision of section 206C or the buyer is liable to deduct TDS under any provision of the Act and has deducted such amount.

19. Employer's contribution to EPF or NPS or Superannuation fund is taxable as 'Salary': It is proposed to provide a combined upper limit of Rs. 7,50,000 in respect of employer's contribution in a year to NPS, superannuation fund and recognized provident fund and any excess contribution is proposed to be taxable.

It is further proposed that any annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme may be treated as perquisite to the extent it relates to the employer’s contribution which is included in total income.

20. Modification of concessional tax schemes for domestic companies under section 115BAA and 115BAB: Section 115BAA and section 115BAB is introduced and enshrined in the Act by the Taxation Laws (Amendment) Act, 2019 to provide for concessional rate of income-tax of 22 percent and 15 percent respectively for a domestic company if they forego the prescribed deductions. This concessional rates of tax were made applicable from AY 2020-21 itself.

Some of the deductions prohibited are deductions under any provisions of Chapter VI-A under the heading “C. Deduction in respect of certain incomes” other than the provisions of section 80JJAA.  

It is now proposed to amend the provisions of section 115BAA and section 115BAB not to allow deduction under any provisions of Chapter VI-A other than section 80JJAA or section 80M, in case of domestic companies opting for taxation under these sections.

Please note that this amendment is applicable from AY 2020-21 itself even though the amendment is carried on through Finance Bill, 2020.

21. Electricity Generation Companies are made eligible for concessional corporate tax rate: Section 115BAB has been amended to extend the benefit of concessional rate of income tax to electricity generation companies by including it in the definition of manufacture or production.

Please note that this amendment is applicable from AY 2020-21 itself even though the amendment is carried on through Finance Bill, 2020.

22. Exemption in respect of certain income of wholly-owned subsidiary of Abu Dhabi Investment Authority (ADIA) and Sovereign Wealth Fund: In order to promote investment of sovereign wealth fund, including the wholly-owned subsidiary of Abu Dhabi Investment Authority (ADIA), it is proposed to insert a new clause (23FE) in section 10 so as to provide exemption to any income of a specified person in the nature of dividend, interest or long-term capital gains arising from an investment made by it in India, whether in the form of debt or equity, in a company or enterprise carrying on the business of developing, or operating and maintaining, or developing, operating or maintaining any infrastructure facility as defined in Explanation to clause (i) of sub-section (4) of section 80-IA of the Act or such other business as may be notified by the Central Government in this behalf. 

In order to be eligible for the exemption, the investment is required to be made on or before 31st March 2024 and is required to be held for at least three years.

23. Conditions of start-ups relaxed: In order to further rationalize the provisions relating to start-ups, it is proposed to amend section 80-IAC of the Act so as to provide that- 
(i)  the deduction under the said section 80-IAC shall be available to an eligible start-up for a period of 3 consecutive assessment years out of 10 years beginning from the year in which it is incorporated; (extended from 7 years to 10 years)
(ii)  the deduction under the said section shall be available to an eligible start-up if the total turnover of its business does not exceed Rs. 100 crore in any of the previous years beginning from the year in which it is incorporated. (increased from Rs. 25 crore to Rs. 100 crore.)

24. Extending the time limit for approval of affordable housing project: In order to incentivize building affordable housing to boost the supply of such houses, the period of approval of the project by the competent authority is proposed to be extended to 31st March 2021 from 31st March 2020 under section 80-IBA.

25. Extending the time limit for sanctioning of loan for affordable housing for availing deduction under section 80EEA of the Act: Section 80EEA was introduced by the preceding Finance (No. 2) Act, 2019 to provide for additional deduction up to Rs. 1,50,000 in respect of interest paid on housing loan taken from any financial institution for the acquisition of an affordable residential house property. however, to avail the deduction the loan must be sanctioned between the period from 1st April 2019 to 31st March 2020.

In order to continue promoting the purchase of affordable housing, the period of sanctioning of loan by the financial institution is proposed to be extended to 31st March 2021.

26. Extension of the period of concessional rate of withholding tax and also to provide for the concessional rate to bonds listed in stock exchanges in IFSC: Section 194LC of the Act provides for concessional rate of TDS of 5 percent on interest paid to non-residents on certain forms of borrowings. This concessional rate of TDS of 5 percent is applicable till 30.06.2020.

The period of concessional rate of TDS of 5 percent has now been extended to 30.06.2023.

It is further provided that interest payable to a non-resident, in respect of monies borrowed in foreign currency from a source outside India, by way of issue of any long term bond or rupee-denominated bond (RDB) on or after 1st April 2020 but before 1st July 2023 and which is listed only on a recognized stock exchange located in any IFSC, the rate of TDS shall be 4 percent.

27. Increase in variation limit between consideration and stamp duty value: In the case of section 43CA, section 50C and section 56(2)(x), it is provided that if the actual sales consideration received on the transfer of land or building or both is less than the stamp duty valuation, then the stamp duty value shall be deemed to be the consideration for such transfer and the profit or capital gains or income, as the case may be, shall be computed accordingly.

However, relief is provided in a case where the difference between the actual sales consideration received and the stamp duty valuation does not exceed 5 percent.

Now, the said safe harbor limit of 5 percent has been increased to 10 percent for all the above-mentioned sections.

However, the monetary difference of Rs. 50,000 between the actual sales consideration received and the stamp duty valuation for section 56(2)(x) is kept unchanged.

28. Providing an option to the assessee for not availing deduction under section 35AD: Section 35AD of the Act provides for 100 percent deduction on capital expenditure (other than expenditure on land, goodwill and financial assets) incurred by the assessee on certain specified businesses.
Further, section 35AD(4) provides that deduction is not allowed under any other section in respect of the said expenditure.

Due to this, a legal interpretation can be made that a domestic company opting for concessional tax rate under section 115BAA or section 115BAB of the Act, which does not claim deduction under section 35AD, would also be denied normal depreciation under section 32 due to operation of sub-section (4) of section 35AD.

Therefore, it is proposed to amend sub-section (1) of section 35AD to make the deduction thereunder optional. It is further proposed to amend sub-section (4) of section 35AD to provide that no deduction will be allowed in respect of expenditure incurred under sub-section (1) in any other section in any previous year or under this section in any other previous year if the deduction has been claimed by the assessee and allowed to him under this section.

29. Exempting non-resident from filing of Income-tax return in certain conditions: Section 115A of the Act provides for the determination of tax for a non-resident whose total income consists of:
(a) certain dividend or interest income;
(b) royalty or fees for technical services (FTS) received from the Government or Indian concern in pursuance of an agreement made after 31st March 1976, and which is not effectively connected with a PE, if any, of the non-resident in India.

While the current provisions of section 115A of the Act provide relief to non-residents from filing of return of income where the non-resident is not liable to pay tax other than the TDS which has been deducted on the dividend or interest income, the same relief has not been extended to non-residents whose total income consists only of the income by way of royalty or FTS of the nature as mentioned above.

Therefore, it is proposed to amend section 115A of the Act in order to provide that a non-resident, shall not be required to file a return of income under sub-section (1) of section 139 of the Act if, -
(i) his or its total income consists of only dividend or interest income as referred to in clause (a) of sub-section (1) of said section, or royalty or FTS income of the nature specified in clause (b) of sub-section (1) of section 115A; and 
(ii)  the TDS on such income has been deducted under the provisions of Chapter XVII-B of the Act at the rates which are not lower than the prescribed rates under sub-section (1) of section 115A. 

This amendment will take effect from 1st April 2020 and will, accordingly, apply in relation to the assessment year  2020-21 and subsequent assessment years.

30. Deferring TDS or tax payment in respect of income from Employee Stock Option Plan (ESOP): It is proposed to amend section 17 wherein presently employees of startups are taxed for ESOPs in the nature of perquisites in two stages-
(i) at the time of exercising their rights; and
(ii) at the time of sale of such shares.

In case of eligible startups, the tax shall now be deducted/paid within 14 days of the earliest of the following:
(i) after the expiry of 48 months from the end of the assessment year in which it is allotted; or
(ii) date of sale of such ESOP; or
(iii) employee ceases to be employed.

Consequential amendments have been carried out in section 191 (for the assessee to pay the tax directly in case of no TDS) and in section 156 (for notice of demand) and in section 140A (for calculating self-assessment).

31. Carry forward of losses or depreciation allowed in case of mergers: Section 72AA of the Act provides for carry-forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of banking company with any other banking institution under a scheme.

It is proposed to extend the benefit of this section to amalgamated public sector banks and public sector General Insurance Companies.

This amendment will take effect from the assessment year 2020-21.

32. Modification of the definition of “business trust”: Section 2(13A) defines a “business trust”. The present definition only covers business trust whose units are listed on a recognized stock exchange.

It is proposed to do away with the requirement of listing of the units of business trust on a recognized stock exchange.

33. Amendments to Safe Harbour Rules and Advance Pricing AgreementsIt is proposed to amend sections 92CB and section 92CC to include attribution of profits to a permanent establishment of a non-resident as provided under section 9(1)(1) also under safe harbor rules and advance pricing agreements.

34. Deduction for amount earlier disallowed under section 43B for insurance companies: It is proposed that any sum payable by an insurance company which is added back under section 43B shall be allowed as a deduction in the previous year in which such sum is actually paid in computing the income.

This amendment will take effect from the assessment year 2020-21.

35. Modification of e-assessment scheme: Section 143(3A) provides that the Central Government may make notify a scheme for the purposes of making an assessment of total income or loss of the assessee under section 143(3).

It is proposed to include the best judgment assessment under section 144 within the ambit of the e-assessment scheme.

36. Amendment in Dispute Resolution Panel (DRP): It is proposed that the provisions of section 144C of the Act may be suitably amended to:-
(A) include cases, where the AO proposes to make any variation which is prejudicial to the interest of the assessee, within the ambit of section 144C;
(B) expand the scope of the said section by defining eligible assessee as a non-resident not being a company, or a foreign company.

This amendment will take effect from 1st April 2020. 

Thus, if the AO proposes to make any variation after this date, in case of an eligible assessee, which is prejudicial to the interest of the assessee, the above provision shall be applicable.

37. Provision for e-appeal and e-penalty: The appeals before the CIT(A) shall be disposed in a faceless manner in line with faceless e-assessment. For this purpose, the Central Government will notify an e-appeal scheme for the disposal of appeals. For this purpose, it is proposed to insert a new sub-section (6A) in section 250.

A similar amendment is proposed in section 274 to insert a new sub-section (2A) to provide for the e-penalty scheme to be notified by the Central Government.

38. Providing check on survey operations under section 133A of the Act: Itis proposed to amend the proviso to section 133A(6) to provide that no income-tax authority below the rank of Commissioner or Director, shall conduct any survey under the said section without prior approval of the Commissioner or the Director, as the case may be.

39. Pre-deposit of demand amount for further stay by ITAT: The second proviso to section 254(2A) is proposed to be amended to provide that no extension of stay shall be granted by ITAT, where such appeal is not so disposed of which the said period of stay as specified in the order of stay. However, on an application made by the assessee, a further stay can be granted, if the delay in not disposing of the appeal is not attributable to the assessee and the assessee has deposited not less than 20 percent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof. The total stay granted by ITAT cannot exceed 365 days.

40. Insertion of the Taxpayer’s Charter in the Act: It is proposed to insert a new section 119A in the Act to empower the Board to adopt and declare a Taxpayer’s Charter and issue such orders, instructions, directions or guidelines to other income-tax authorities as it may deem fit for the administration of Charter.

41. Modification of residency provisions: It is proposed to amend section 6 as under:

(i) In explanation (1), clause (b) the presence in India is reduced to 120 days from existing 182 days;

(ii) A new clause (1A) is inserted to include a person who is citizen of India to be deemed to be resident in India if he is not liable to tax in any country by reason of his domicile or residence or any other criteria of similar nature;

(iii) Clause (6) is amended to the extent that for an individual or a manager of a HUF, the requirement to be non-resident is now 7 out of 10 years instead of 9 out of 10 years earlier.

42. Penalty for fake invoice: It is proposed to insert a new section 271 AAD to levy penalty equal to the aggregate amount of false entries or omitted entry in a case where it is found that a person has made a false entry or omitted to make any genuine entry to evade tax liability. The penalty shall be equal to total false or omitted entries. A similar penalty shall also be levied on the person providing such false entry.

For this purpose, a false entry includes use or intention to use-
(i) forged or falsified documents such as a false invoice; or
(ii) invoices for without actual supply or receipt of such goods or services or both; or
(iii) invoices to or from non-exist persons.

43. Amendment related to Charitable Trusts: Presently, once a Trust is given registration under section 12AA or under section 10(23C), the same remain valid in perpetuity unless specifically withdrawn.

It is proposed to provide that the approval of registration should be for a limited period of five years. Further, deduction under section 80G or 80GGA to a donor shall be allowed only if a statement is furnished by the donee who shall be required to furnish a statement in respect of donations received and in the event of failure to do so, fee and penalty shall be levied.

44. Cash donation limited under section 80GGA: It is proposed to amend section  80GGA to provide for disallowance of deduction if the donation is made in cash in excess of Rs. 2,000. Presently, the limit is Rs. 10,000.

45. Scope of Form 26AS widened: It is proposed to amend the provisions related to Form 26AS as follows-
1. Form 26AS will be replaced by a new form to be notified later.
2. Section 203AA is proposed to be deleted.
3. A new section 285BB is proposed to be introduced.

These amendments shall take effect from 1st June 2020.

These amendments have been made in order to prefill the returns of the taxpayers as announced in the Union Budget 2019.

46. Cost of units of a segregated scheme of a mutual fund: It is proposed to amend section 2(42A) to include the period for which the original unit or units in the main portfolio were held.

This amendment shall take effect from AY 2020-21.

47. Amendment in section 140 and section 288: It is proposed to amend clause (c) and (cd) of section 140 of the Act so as to enable any other person, as may be prescribed by the Board to verify the return of income in the cases of a company and a limited liability partnership.

It is proposed to amend sub-section (2) of section 288 to enable any other person, as may be prescribed by the Board, to appear as an authorized representative.

The above amendments in the provisions of Act relating to verification of the return of income and appearance of authorized representative have been done to enable Insolvency Professional or the Administrator to verify the return of income and to appear as authorized representative in the case of application for insolvency resolution process has been admitted by the Adjudicating Authority (AA) under the Insolvency and Bankruptcy Code, 2016 (IBC).

These amendments will take effect from 1st April, 2020.

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