In last one year, government announces various measures to increase liquidity in the hands of individuals and corporate and defeat corona virus to reduce financial distress. The various measures announced by government in Direct Tax are as follows:
- Introduction of section 115BAA:
During last one year, a new section 115BAA has been inserted in the Income Tax Act, 1961. According to this section domestic companies have been provided an option to pay tax at a rate of 22% plus sc of 10% and cess of 4% provided that companies have to fulfil certain conditions specified. The domestic companies also not required to pay tax under MAT if it opts for section 115BAA. - Introduction of section 115BAB:
The Taxation Laws (Amendment) Ordinance, 2019 passes on 20 September 2019 has inserted section 115BAB. This incentive is provided to new manufacturing domestic companies w.e.f financial year 19-20. This section states that any new manufacturing domestic companies incorporated on or after 01.10.2019 have been provided an option to pay income tax at the rate of 15%. The effective rate for these companies is 17.01% inclusive of surcharge and cess. The domestic companies also not required to pay tax under MAT. - Reduction in MAT rate:
The government announces reduction in MAT rate to increase liquidity in the hands of individual and corporate.
The MAT rate has been reduced from 18.5% to 15% to provide the benefit to the company assessee which continues to avail exemption and pay tax under MAT. - Exemption from income tax to individuals earning upto Rs 5 lakh:
The Finance Act, 2019 provided an exemption to individual taxpayer whose taxable income is up to 5lakh by providing 100% tax rebate.
The main motto behind this is to provide complete tax relief to the individuals earning income up to ₹ 5lakh. - Abolition of Dividend Distribution Tax(DDT):
The Finance Act, 2020 removed the Dividend Distribution Tax(DDT) under which the companies are not required to pay Dividend Distribution Tax with effect from 01.04.2020, however the dividend is taxable under the hands of the recipient at their applicable rate.
The main motto behind this is to increase the attractiveness of Equity Market and to provide benefit to the large number of investors in whose case dividend income is taxable at the rate lower than the rate of DDT. - Expansion of scope of TDS/TCS and reduction in TDS rates:
There are some new transactions inserted under the scope of tax deducted at source and tax collected at source. These transactions include huge cash withdrawal, foreign remittance, purchase of luxury car, e-commerce participants, sale of goods, acquisition of immovable property, etc. - Extension of Due Dates:
In order to help the individuals and corporate, government decided that 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. The date for furnishing tax audit report has also been extended to 31.10.2020. The date for payment of self- assessment tax in case of taxpayer whose self- assessment tax liability is up to ₹1lakh has also been extended to 30.11.2020. - Extension of time limit in Capital tax savings Instruments:
The date for making investment/construction/purchase for claiming roll over benefit/deduction in respect of capital gains under sections 54 to 54GB has also been further extended to 30.09.2020.
