Amidst the COVID-19 outbreak and lockdown in the country, the Finance Bill 2020 ( Bill) introduced vide Union Budget 2020-21 was passed by both Houses of Parliament, with certain amendments. Watch the quick guide on the amendments to the Bill. Read this blog to fully understand finance bill 2020
AMENDMENTS IN FINANCE BILL, 2020
There have been notable changes in 2020 about different acts, rules and regulations. Similarly, there have been amendments in finance bill 2020, which are necessary to discuss.
Before that, let us first know what the finance act all about is?
What is Finance Act?
A finance act is fiscal legislation regulated by the parliament, destined to affect the central government’s proposals. It contains provisions related to income taxes, customs etc.
The Lok Sabha (the lower house of India’s bicameral legislature) passed the finance bill on 23rd march 2020, including some of the amendments in the finance bill, which will be discussed in this article. The Rajya Sabha (upper house) also further passed the finance bill 2020.
It recognized its assent on the bill on 27th March 2020, with that the amendments in finance bill provisions took effect on 1st April 2020.
Finance Bill Amendments
Finance bill amendments in 2020 have vitally focused on the tax residency rules for the NR’s and emphasized the corporate tax regime.
The amendments in the finance bill are thereby discussed below-
- Insertion of Sec 6 (1) (a)
There have been some amendments to clause 1 (a) of section 6, which have put a threshold limit for further deciding the status of RNOR.
Only in those cases where the total income of visiting individuals during the financial year from sources other than foreign sources exceeds INR 15 lakhs.
‘Income from other sources” means income from foreign activities, which means income accruing outside India
- Reduction in period for RNOR (Resident but Not Ordinarily Resident)
There have been two categories listed for RNOR purposes:-
- Indian citizens/ persons of Indian origin who meet the threshold and have been in India for more than 120 days but less than 182 days i.e.
- Indian citizens mentioned in Explanation 1 (A) to section 6 (1).
- Amendment of Sec 115 A
This is one of the vital amendments from the amendment in finance bill 2020, which emphasizes the exemption for furnishing the tax returns for those deriving their income from foreign by way of FTS.
- Changes to the corporate tax regime
- Tax on income of domestic companies
The government has proposed amendments in Section 115 BAA, which focuses on the inter-corporate dividends to the domestic Companies opting to pay tax @ 22%, without claiming any deductions as per this section.
- Tax on income of new manufacturing domestic companies
This amendment has been made in Sec 115 BAB, which emphasis inter-corporate dividends to the domestic Companies opting to pay tax @ 15%, without claiming any deductions as per this section.
- Insertion of Sec 194 N
Sec 194 N was also in talks during the amendments in financial bill 2020; let us first have a quick check about the section and then the amendments.
Sec 194 N is all about the withdrawals about some limited amount such as it is applicable for withdrawals exceeding 1 Crore in a financial year.
The amendment says that the people withdrawing money over Rs 20 lakh are liable to 2 % as TDS.
The vision behind introducing Sec 194 N was to discourage cash transactions and promote digital transactions.
Apart from the above amendments in the finance bill, 2020, much importance has also been given to some “Enhancements in the Scope of Equalization Levy”, which are-
- Receipts from the online sale of goods owned by the e-commerce operator
- Receipts from the online provision of services provided by the e-commerce operator
III. Provided by person resident of India, Non-resident and person using IP address located in India
The amendments in the finance bill, 2020, can be thus said as a great effort by the government to put things in line on the relation between tax regime and threshold limited as levied by the government. Visit LawWiser to know more
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