Budget 2020-21 + FINANCE BILL, 2020

Rates for deduction of income-tax at source from “Salaries”, computation of “advance tax” and charging of income-tax in special cases during the FY 2020-21.

The rates for deduction of income-tax at source from “Salaries” during the FY 2020-21 and also for computation of “advance tax” payable during the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging income-tax during the FY 2020-21 on current incomes in cases where accelerated assessments have to be made, for instance, provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc. New provisions are inserted for tax rates in respect of individual or HUF (section 115BAC of the Act) and resident co-operative societies (section 115 BAD of the Act) with an option to these taxpayers. The salient features of the rates specified in the said Part III are indicated in the following paragraphs4

A. Individual, HUF, association of persons, body of individuals, artificial juridical person.

Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:-

(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or HUF or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act (not being a case to which any other Paragraph of Part III applies) are as under:-

Upto ₹ 2,50,000	Nil.
₹ 2,50,001 to ₹ 5,00,000	5 per cent.
₹ 5,00,001 to ₹ 10,00,000	20 per cent.
Above ₹ 10,00,000	30 per cent.

(ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,-

Upto ₹ 3,00,000	Nil.
₹ 3,00,001 to ₹ 5,00,000	5 per cent.
₹ 5,00,001 to ₹ 10,00,000	20 per cent.
Above ₹ 10,00,000	30 per cent.

(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year,-

Upto ₹ 5,00,000	Nil.
₹ 5,00,001 to ₹ 10,00,000	20 per cent.
Above ₹ 10,00,000	30 per cent.

The amount of income-tax computed in accordance with the preceding provisions of this Paragraph (including capital gains under section 111A, 112 and 112A) as well as income tax computed under section 115BAC, shall be increased by a surcharge at the rate of,-

(a) having a total income (including the income under the provisions of section 111A and 112A of the Act) exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten per cent. of such income-tax;

(b) having a total income (including the income under the provisions of section 111A and 112A of the Act) exceeding one crore rupees, at the rate of fifteen per cent. of such income-tax;

(c) having a total income (excluding the income under the provisions of section 111A and 112A of the Act) exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent. of such income-tax;

(d) having a total income (excluding the income under the provisions of section 111A and 112A of the Act) exceeding five crore rupees, at the rate of thirty-seven per cent. of such income-tax;

(e) having a total income (including income under the provisions of section 111A and section 112A of the Act) exceeding two crore rupees, but is not covered under clauses (c) and (d), shall be applicable at the rate of fifteen per cent. of such income-tax:

Provided that in case where the total income includes any income chargeable under section 111A and section 112A of the Act, the rate of surcharge on the amount of Income-tax computed in respect of that part of income shall not exceed fifteen per cent..

Marginal relief is provided in cases of surcharge.

From the assessment year 2021-22 (FY 2020-21), individual and HUF tax payers have an option to opt for taxation under the newly inserted section 115BAC of the Act and the resident co-operative society has an option to opt for taxation under the newly inserted section 115BAD of the Act. This is discussed later.

B. Co-operative Societies

In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates will continue to be the same as those specified for FY 2019-20. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a co-operative society having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

From the assessment year 2021-22, resident co-operative societies have an option to opt for taxation under newly inserted section 115BAD of the Act. This is discussed later.

C. Firms

In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill.

This rate will continue to be the same as that specified for FY 2019-20. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a firm having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

D. Local authorities

The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for the FY 2019-20. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a local authority having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

E. Companies

The rates of income-tax in the case of companies have been specified in Paragraph E of Part III of the First Schedule to the Bill. In case of domestic company, the rate of income-tax shall be twenty five per cent. of the total income, if the total turnover or gross receipts of the previous year 2018-19 does not exceed four hundred crore rupees and in all other cases the rate of Income-tax shall be thirty per cent. of the total income. However, domestic companies also have an option to opt for taxation under section 115BAA or section 115BAB of the Act on fulfilment of conditions contained therein. The tax rate is 15 per cent. in section 115BAB and 22 per cent. in section 115BAA. Surcharge is 10 per cent. in both cases.

In the case of company other than domestic company, the rates of tax are the same as those specified for the FY 2019-20.

Surcharge at the rate of seven per cent. shall continue to be levied in case of a domestic company (except those opting for taxation under section 115BAA and section 115BAB of the Act), if the total income of the domestic company exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of twelve per cent shall continue to be levied, if the total income of the domestic company (except those opting for taxation under section 115BAA and section 115BAB of the Act) exceeds ten crore rupees.

In case of companies other than domestic companies, the existing surcharge of two per cent shall continue to be levied, if the total income exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of five per cent shall continue to be levied, if the total income of the company other than domestic company exceeds ten crore rupees.

Marginal relief is provided in surcharge in all cases.

In other cases [including sub-section (2A) of section 92CE, sections 115-O, 115QA, 115R, 115TA or 115TD], the surcharge shall be levied at the rate of twelve per cent..

For FY 2020-21, additional surcharge called the “Health and Education Cess on income-tax” shall be levied at the rate of four per cent on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such cess.

[Clause 2 & the First Schedule]

 

 

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Budget 2020-21 + FINANCE BILL, 2020

Tax rate structure and withholding: optional new regimes affect salary TDS, advance tax and surcharge treatment. Part III of the First Schedule prescribes slab-based TDS rates on salaries, advance tax computation rules and surcharge bands with marginal relief for individuals, HUFs, co-operative societies, firms, local authorities and companies; it retains distinct corporate rates tied to turnover, applies a health and education cess, and creates elective alternate tax regimes including optional taxation under section 115BAC for individuals/HUFs and section 115BAD for resident co-operative societies, which affect rate computation and surcharge treatment.