In this blog post, we will discuss the important highlights of the union budget presented in 2020. We will mainly focus on Income tax and GST section of the budget.
FM Smt. Nirmala Sitharaman presented the first full-fledged union budget for FY 2020-21 / Finance Bill 2020 on 1st Feb 2020.
Highlights of the Union Budget
The new rates benefit taxpayers who do not avail the existing deductions and exemptions under the current tax structure. The Pensioners, job starters, entrepreneurs are few who will gain from the new income tax structure.
Income Tax Rates
Now, let us take a look into the new income tax rates for individuals who opt out all exemptions and deductions.
| Income Tax slab rate | new structure | old structure |
|---|---|---|
| Up to 2.5 lakh | Nil | Nil |
| 2.5 lakh – 5 lakhs | 5% | 5% |
| 5 lakh – 7.5 lakh | 10 % | 20% |
| 7.5 lakh – 10 lakh | 15% | 20% |
| 10 lakh – 12.5 lakh | 20 % | 30 % |
| 12.5 lakhs – 15 lakhs | 25 % | 30 % |
| 15 lakh and above | 30% | 30% |
The new tax rates are not available for individuals if they do not opt-out the following:
- Leave Travel Concession
- House Rent Allowance
- Standard Deduction for Salary
- Deduction for Entertainment Allowance
- Employment/Professional Tax
- Home Loan Interest under section 24 in respect of self-occupied / vacant property
- Any deduction under Chapter VI-A
- Free food, beverage and vouchers
However, deduction on employer contribution on account of the employee in the notified pension scheme and for new employment can be claimed.
Thus for persons with an annual income of above Rs. 10 lakh new tax rate change will save up to Rs. 1,820 to Rs. 20,300 a year.
Note: So, an individual earning Rs 15 lakh per anum not availing any deductions will pay 1.95 lakh instead of 2.73 lakh as tax. The people who are earning up to 5 lakh per anum will pay no tax.
Corporate Tax Rates
Let’s take a look at the new corporate tax rate for companies as per the Union Budget for AY 2020-21:
| Income of the Company | Tax Rate for AY 2020-21 |
|---|---|
| Total income less than 1 Cr (for a domestic company) | 30%* / 22% **/ 15%*** |
| Total income more than 1 Cr and less than 10 Cr (for a domestic company) | 30%*+ surcharge of 7% |
| Total income more than 10 Cr (for a domestic company) | 30%* + surcharge of 12% |
| Total income less than 1 Cr (for a foreign company) | 40% |
| Total income more than 1 Cr and less than 10 Cr (for a foreign company) | 40% + 2% |
| Total income more than 10 Cr (for a foreign company) | 40% +5% |
Note: Cess of 4% will be levied over and above the above taxes.
*Reduced rate of 25% shall be applicable where total turnover/receipts in the last P.Y. does not exceed Rs 400 Cr.
**Further reduced tax rate of 22% plus 10% surcharge applicable for companies opting for section 115BAA.
*** Further reduced tax rate of 15% plus 10% surcharge applicable for manufacturing and power generating companies opting for section 115BAB.
Firms
When the net income exceeds Rs 1 Cr, a flat tax rate of 30%, a surcharge of 12%, as well as cess of 4%, is applicable.
Cooperative Societies
| Particular | Rate of Tax |
|---|---|
| Total income less than 10,001. | 10% |
| Total income more than 10,000 but less than 20,001. | 1,000 + 20% of total income in excess of Rs.10,000. |
| Total income more than 20,000. | 3,000 + 30% of the total income above Rs. 20,000. |
Note:
- When the net income exceeds Rs.1 Cr then a surcharge of 12% and cess of 4% is levied.
- If you opt for section 115BAD then Concessional tax rates of 22% are applicable.
Start-up Companies
The startups provide its employees with ESOPs (employee stock ownership plan) currently taxed as perquisites.
- For startups, the turnover limit is increased to 100 cr from 25 cr.
- The startups can claim the deduction up to 10 years.
- The threshold limit for Tax audit turnover is also increased to 5 cr from 1 cr.
- Cooperatives are taxed 30% and they can also choose for 22% tax with 10%surcharge and 4% cess with no exemptions.
- PAN is allotted based on Aadhar as there is no need to fill forms.
GST
GST reforms will including a simplified return-filling form. So, the refund is simplified and fully automated.
- 20% reduction in turn around time for trucks.
- The benefit to MSMEs through the enhanced threshold and composition limits.
- 4% of the monthly savings are spent on an average household.
- 60 lakh new taxpayers and 105 cr E-way bills are generated in the last 2 years.
With that, we have come to the end of this post. Share your views in the comment section below.
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