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23-03-2020
Approval of the Finance Bill, 2020 - Amendments affecting Non Residents Indian are being withdrawn. Efforts of all concerned to persuade the Government to not to amend the law on this issue succeeds.
The Lok Sabha today is approving the Finance Bill, 2020. While moving the Bill for consideration and approval, the Finance Minister normally moves amendment to the Bill introduced on the Budget day in the light of feedback received and the issues arising thereon.
This time there were 5 major changes proposed in the Finance Bill, 2020:
1. Option of new tax rate structure with no exemptions and deduction.
2. Abolition of Dividend Distribution Tax and taxation of Dividend in the hands of shareholders
3. Taxation of non-residents: reduced period of 120 days, deemed resident status for stateless Indian Citizen, and extending period of resident but not ordinary resident to 7 out of 10 preceding years instead of 9 out of 10 preceding years.
4. Renewal of registration of charitable trust and institution every 5 years.
5. Widening the scope of TDS and TCS provision including applicability of TCS on sale of goods.
A. Considering the fact that the proposed amendment on the status of non-resident was going to affect all non-residents, such proposal is being withdrawn by the FM today while moving the bill for consideration and approval. The objective of such amendment as was stated in the press note issued by CBDT after the budget was to tax that income of business or profession which accrues or arises from the business controlled in or a profession set up in India. Accordingly, the scope of amendment has been restricted to only Indian non-residents which have income from Business controlled in or from a profession set up in India and that too when such income exceeds beyond a threshold say Rs. 15 lakhs. Even in such cases, it will only be this income earned from business controlled in or a profession set up in India that will be taxable in India and not the entire global income as was proposed in the Finance Bill. Thus, such Indian non residents who are not paying tax in any country by reason of domicile/ residence or any other criteria, such Indian non-resident will be deemed to be resident but not ordinary resident. Consequently, there will be no liability to pay tax on foreign income. The liability to pay tax on such deemed resident will be only in respect of business controlled in India or profession set up in India and that too when such income exceeds the threshold of say Rs. 15 lakhs.
B. The FM has not proposed any change in her original proposal of new optional reduced tax rates without claiming any exemption or deduction.
C. Further, there is no change on abolition of DDT and taxing dividend income in the hands of shareholders. Dividend income will be taxable in the hands of shareholders. However, it has been clarified that in respect of transition which is effective from 1st April, 2020, there will be no tax liability in respect of Dividend Income received by a shareholder after 1st April, 2020, in case such dividend has been distributed by the company before 1st April, 2020 and DDT has been paid by the company while distributing such dividend.
D. Further, the TDS rate on payment of dividend to non-resident and foreign company has been prescribed at 20%. The Finance Bill presently has not provided any specific rate of TDS in respect of payment of dividend to non-residents and foreign companies with the result such dividend would have fallen in residual clause of 40%. The TDS rate of 10% on dividend for resident is already prescribed in the Finance Bill.
E. Proposal to levy TCS on sale of goods to continue despite huge paperwork and compliance obligations. However, exemption of such TCS in respect of Export Sales and also to sellers in respect of Import being provided. However this provision along with TCS on foreign remittance will be applicable from 1st October, 2020.
F. The provision for Tax to be deducted @2% on withdrawal of cash from Bank, Co-opt Bank and Post Officer exceeding Rs. 1 crore in aggregate during the year being amended. Now, in case of a person who has not filed the returns for preceding 3 years then tax will be deducted @ 2% on withdrawal exceeding Rs 20 lakhs and @ 5% on withdrawal exceeding Rs 1.00 crore. This provision will be applicable from1st July, 2020.
G. No TDS on Growth oriented Units on redemption.
H. New TCS provision to be effective from 1st October, 2020 as against proposed earlier from 1.4.2020
I. Scope of equalization levy of 6% introduced by Finance Act, 2016 in respect of payment to a non resident service provider exceeding RS 1 lac for online advertisements or digital advertising space or facilities is likely to be expanded to include payment for services for e commerce trade and services. |
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