Budget Highlights 2020-21 - Direct Taxes

  • New and simplified personal income tax regime proposed wherein tax rates are as follows:
Taxable Income (in Rs.) Existing Tax Rates New Tax Rates
0 - 2,50,000 Exempt Exempt
2,50,000 – 5,00,000 5% 5%
5,00,000 – 7,50,000 20% 10%
7,50,000 – 10,00,000 20% 15%
10,00,000 – 12,50,000 30% 20%
12,50,000 – 15,00,000 30% 25%
Above 15,00,000 30% 30%
  • Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime.
  • New tax regime to be optional - an individual may continue to pay tax as per the old regime and avail deductions and exemptions.
  • New Tax rate of 15% u/s 115BAB extended to new domestic electricity generation companies.
  • Finance Minister has proposed to remove DDT and adopt the classical system of dividend taxation, under which the companies would not be required to pay DDT. The dividend shall be taxed only in the hands of the recipients at their applicable rate.
  • Start-ups with turnover up to Rs.100 crore to enjoy a 100% deduction for 3 consecutive assessment years out of 10 years.
  • Turnover threshold for tax audit increased to Rs. 5 crores from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.
  • Parity brought between cooperatives and corporate sector by giving an option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions.
  • Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).
  • 100% tax exemption to the interest, dividend, and capital gains income on the investment made in infrastructure and priority sectors before 31st March 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments.
  • Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March 2021.
  • “Vivad Se Vishwas‟ scheme, with a deadline of 30th June 2020, to reduce litigations indirect taxes. Waiver of interest and penalty - only disputed taxes to be paid for payments till 31st March 2020.
  • Faceless appeals to be enabled by amending the Income Tax Act.
  • Unique registration number (URN) to be issued to all new and existing charity institutions.
  • Pre-filling in return through the information of donations furnished by the donee.