Tax proposals in the Finance Bill
- Change in income tax rates: The income tax rates have been changed.
Dividend Distribution Tax
- Currently, companies have to pay a tax of 15% on dividends distributed by it to shareholders.
- This has been removed and the dividend income will now be taxable in the hands of the
Limit on deductions for social security contributions
- Currently, there is no combined limit for the purpose of deductions on the amount of contribution made by an employer towards a recognised provident fund, an approved superannuation fund and the National Pension Scheme.
- A combined ceiling of Rs 7.5 lakh is being introduced on deductions which may be claimed towards such contributions.
Residence in India
- The Income Tax Act, 1961 specifies various conditions for determining the resident status of an Indian citizen or a person of Indian origin. A person will be considered a resident, i.e. their global income is taxable in India, if they are in India for more than 182 days.
- This has been reduced to 120 days.
- In addition, any Indian citizen who is not liable to tax in any other country or territory by reason of domicile or residence shall be deemed to be a resident of India.
TDS on e-commerce transactions
- TDS of 1% will be levied on e-commerce
- Currently, an exemption is provided on profits or gains arising out of building affordable houses if the project was approved by March 31, 2020.
- Further, an additional tax deduction of up to Rs 1,50,000 is provided on interest paid on loans for self-occupied house owners if the loan was sanctioned by March 31, 2020. The deadline in both cases has been extended to March 31, 2021
Tax changes for start-ups
- Start-ups are allowed to get a full tax waiver on profits for any three consecutive years out of their first seven years, if they are incorporated between April 1, 2016 and March 31, 2021, and their turnover does not exceed Rs 25 crore.
- The waiver has been extended to start-ups for any three years out of their first ten years.
- In addition, the turnover threshold has been increased from Rs 25 crore to Rs 100 crore.
- The rate of central excise duty on certain tobacco products such as cigarettes, chewing tobacco, and tobacco extracts has been
- For example, the rate of duty on chewing tobacco has been increased from 10% to 25% per kg.
- Further, crude petroleum has been included at a rate of duty of Rs 50 per tonne.
- Customs duty has been raised on some items such as tableware and kitchenware, footwear, fans, and toys.
Health cess on customs
- A health cess will be levied (in addition to customs duty) on certain medical devices, such as X-ray machines, imported into India.
- This cess may be utilised for the financing of health infrastructure and services.
The Prohibition of Benami Property Transactions Act, 1988
- The Act constitutes an adjudicating authority on issues
- related to benami properties. The qualifications for the chairperson and members of the authority are that they must have been: (i) a member of the Indian Revenue Service as Commissioner of Income-tax or equivalent, or (ii) a member of the Indian Legal Service as Joint Secretary or equivalent.
- The Bill states that an individual qualified for the position of District Judge may also be the chairperson or a member of the authority.
Removal of tax exemptions on certain allowances
- Certain exemptions on facilities to current and former members of the Union Public Service Commission and the Election Commission such as rent-free residence, conveyance allowance, and medical facilities are exempt from tax.
- This exemption has been removed.
- The Banking Regulation Act, 1949 will be amended for better governance of cooperative banks.
- The limit for NBFCs to be eligible for debt recovery under the SARFAESI Act, 2002 will be reduced. The asset size will be reduced from Rs 500 crore to Rs 100 crore, and loan size will be reduced from one crore rupees to Rs 50 lakh.
- The Deposit Insurance and Credit Guarantee Corporation has been permitted to increase deposit insurance coverage for a depositor, which will now be one lakh to five lakh rupees, per depositor.
- The Factor Regulation Act, 2011 will be amended to enable NBFCs to extend invoice financing to MSMEs.
- The PFRDA Act will be amended to separate NPS trust for government employees for
- The government will sell a part of its holding in LIC through an Initial Public Offer.
- The government also plans to sell the balance of its holding in IDBI Bank.