10 Tax Saving Tips for Startups and Business OwnersApril 24, 2019
The Union Budget for FY 2019-20 was announced on July 5, 2019. Here is a list of top 39 changes in the income tax and GST laws which will have a significant impact on your life.
Changes Proposed in the Income Tax Laws
- Reduced corporate tax rate: The companies with a turnover of up to Rs 400 Crore shall be taxed at a reduced rate of 25%.
- Additional deduction for home buyers: Additional deduction of Rs 1.5 Lakh u/s 80EEA on interest paid for a home loan if the residential house property’s stamp duty value does not exceed Rs 45 Lakh.
- Additional deduction for buyers of electric vehicles: Deduction of Rs 1.5 Lakh u/s 80EEB on interest paid for loan taken to buy an electric vehicle.
- Revised rates of surcharge: The new rate of surcharge for Individual, HUF, AOP, BOI and AJP shall be 10% (for income of Rs 50 lakhs to Rs. 1 crore), 15% (for income of Rs 1 Crore to Rs 2 Crore), 25% (for income of Rs 2 Crore to Rs 5 Crore) and 37% (for income exceeding Rs 5 Crore).
- Amendment in section 9: Any sum of money paid, or any property situated in India transferred, on or after July 5, 2019, by a person resident in India to a person outside India shall be deemed to accrue or arise in India under section 9.
- Mandatory filing of ITR in certain cases of financial transactions: As an individual, it will be mandatory for you to file income tax return u/s 139 if you deposit Rs 1 Crore or more in a current account, or incur expenditure of Rs 2 Lakh or more on foreign travel, or incurred expenditure of Rs 1 Lakh or more on electricity consumption.
- Aadhaar and PAN interchangeable while filing ITR: You will be able to file Income-tax return using Aadhaar Number if you haven’t been allotted PAN. If you have linked your Aadhaar number with PAN, you may also furnish your Aadhaar number in place of PAN in the Income-tax return.
- Aadhaar mandatory for PAN’s validity: PAN allotted to you will be deemed invalid, if you failed to intimate the Aadhaar to the income tax department.
- New TDS on cash withdrawal: A new Section 194N has been inserted to require deduction of tax at source at the rate of 2% if the aggregate of cash withdrawn during the financial year from any account maintained with a banking company or cooperative bank or post office exceeds Rs 1 crore.
- Sunset date for the transfer of residential house property extended: The sunset date for the transfer of residential house property, for claiming an exemption under section 54GB in respect of investment made in eligible start-ups, has been extended from 31st March, 2019 to 31st March, 2021. Further, the conditions of minimum shareholding or voting rights has been relaxed from 50% to 25%.
- Electronic filing for applications u/s 195(2) and 195(7) enabled: The application under section 195(2) and 195(7) for lower or nil deduction of tax from the sum paid or payable to non-residents person can be filed electronically.
- New section for TDS deduction on sum paid to contractor or professional: A new section 194M has been inserted to require any individual or HUF (who is not required to deduct tax under section 194C or 194J) to deduct tax at source from the sum paid to a contractor or professional if aggregate payment during the year exceeds Rs 50 lakh. The tax can be deposited under this provision without any requirement to obtain TAN.
- Section 194-IA for TDS on sale of property amended: As per section 194-IA, a buyer is required to deduct tax at source from the consideration paid to buy immovable property. An explanation has been inserted that ‘consideration for immovable property’ shall include all charges paid towards club membership fee, car parking fee, electricity and water facility fees, maintenance fee, or any other charges of similar nature, which are incidental to the transfer of the immovable property.
- Section 276CC for failure to file return amended: In case of failure to file an income tax return, the prosecution proceedings are initiated under Section 276CC if the tax payable by the assessee is Rs 3,000 or more. This threshold limit has been increased to Rs 10,000.
- TDS rate u/s 194DA revised: The tax shall be deductible under Section 194DA at the rate of 5% only on the income component of life insurance pay-out. The existing rate of TDS was 1% on the gross amount.
- Scope of relief u/s 89 expanded: Relief under section 89 shall be considered while computing the tax liability under section 140A, section 143, section 234A, section 234B, and section 234C.
- No charges on electronic payments in certain cases: Every person, carrying on business, shall provide a facility for accepting payment through electronic modes if his turnover or gross receipts exceeds Rs 50 crores. No bank or system provider shall impose any charge upon anyone, either directly or indirectly, for using the electronic modes of payment.
- NPS tax benefits increased: You shall be allowed to withdraw 60% of total amount from NPS as tax-free.
- Benefits of section 201(1) extended: A deductor shall not be deemed to be an assessee in default even if he fails to deduct tax from sum paid to a non-resident, if such non-resident discloses such income in his return of income and pays tax due on such income and a certificate from a Chartered Accountant is furnished to this effect.
- Section 80CCD amended: Deduction of up to 10% of salary is allowed under section 80CCD in respect of contribution made by an employer to NPS. The limit has been proposed to be increased to 14% of salary in case of Central Government’s employees.
- Section 12AA amended: Section 12AA has been amended to provide that at the time of granting of registration to a trust or institution the CIT or CIT shall also satisfy himself that the applicant trust or institution also satisfy the requirements of any other law which is material for the purpose of achieving its objects.
- CIT can cancel trust’s registration: The CIT or CIT has been empowered to cancel the registration u/s 12AA, if after granting registration it has been noticed that the trust or institution has violated requirements of any other law which was material for the purpose of achieving its objects.
- Section 115A to cover listed companies as well: Section 115QA which requires payment tax on distributed income in case of buy-back of shares has proposed to be extended to listed companies as well.
- Mandatory filing of ITR when income is below tax exemption limit before claiming capital gains exemption: ITR filing is mandatory, if total income of assessee before claiming the benefit of capital gain exemption under sections 54, 54B, 54EC, 54F, 54G, 54GA and 54GB, doesn’t exceed the maximum amount not chargeable to tax.
- No scrutiny for angel tax: No scrutiny to check the valuation for ‘Angel Tax’ if start-ups and investors file a declaration
Changes Proposed in the Goods and Services Tax and Other Indirect Tax Laws
- GST on electric vehicles is proposed to be reduced from 12% to 5%.
- Import of defence equipment to be exempted from Basic Custom Duty
- Taxpayers with an annual turnover of less than Rs 5 Crore will have to file only quarterly GST returns
- Increase Special Additional Excise duty and Road and Infrastructure Cess each by one rupee a litre on petrol and diesel.
- Custom duty on Gold and precious metal increased from 10% to 12.5%.
- Customs duty is exempted on certain parts of electric vehicles.
- A Proviso has been inserted to clarify that interest for late payment of tax shall be levied only on that portion of the tax which has been paid by debiting the electronic cash ledger. However, where returns are filed subsequent to initiation of any proceedings under the GST Act, the interest shall be levied on the gross tax liability.
- Every registered person shall authenticate, or furnish proof of possession of Aadhaar number. If an Aadhaar number is not assigned to the registered person, such person shall be offered an alternate and viable means of identification. In case of failure to undergo authentication or furnish proof of possession of Aadhaar number or furnish alternate and viable means of identification, registration allotted to such person shall be deemed to be invalid.
- Now a registered person can transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger to the electronic cash ledger for Integrated Tax, Central Tax, State Tax, Union Territory Tax or Cess through a new form PMT-09 subject to the conditions and restrictions prescribed under GST Act. Such transfer shall be deemed to be a refund from the electronic cash ledger.
- The Central Government has been authorized to pay the amount of refund towards State taxes to the taxpayers.
- The Government shall constitute an Authority ‘National Appellate Authority for Advance Ruling (NAAAR)’ for hearing appeals. It shall pass an order within 90 days from the date of filing of the appeal.
- The value of exempt supply of services provided by way of extending deposits, loans or advances (where consideration is received in form of interest or discount) shall not be considered for determining turnover under Composition Scheme.
- Simplified return forms to be implemented soon. Composition registered dealers are required to pay tax quarterly and file return on annual basis.
- 2% leverage in the rate of interest on fresh or incremental loan for GST registered MSMEs.
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