Key changes made in Income tax Act,1961 and Finance Act, 2019 vide Taxation Law ( Amendment ) Ordinance, 2019

Key changes made in Income tax Act,1961 and Finance Act, 2019 vide Taxation Law ( Amendment ) Ordinance, 2019

September 24, 2019 Fiscal, Industries, states 0

Ministry of Law and Justice has issued a Taxation Law (Amendment) Ordinance, 2019 dated 20th September, 2019 to amend the Income Tax Act, 1961 and Finance (No. 2) Act, 2019.

Key points of amendments are:

 

  1. Income Tax Act, 1961:

  1. Marginal heading for Section 115BA of the Income Tax Act, 1961 has been substituted to “Tax on income of certain domestic manufacturing companies” instead of “ Tax on income of certain domestic companies” w.e.f 1st April, 2020. Also after Section 115BA of the said Act, Section 115BAA (i.e. Tax on income of certain domestic companies) and Section 115BAB (i.e. Tax on income of certain new domestic manufacturing companies) has been inserted.

  1. Section 115BAA, has been inserted to provide option to domestic companies to pay tax at the rate of 22% subject to the fulfillment of the following conditions-

a. Total income of the company is computed-

  • without claiming any deduction under Section10AA,32(1)(iia),32AD,33AB,33ABA,35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB), 35AD, 35CCC, 35CCD, under any provisions of chapter VI-A under the heading “C.-Deductions in respect of certain incomes” i.e. Section 80H to 80TT not being Section- 80JJAA of the said Act;
  • without adjusting brought forward loss from any earlier year if such loss pertains to any deduction under the aforesaid Sections mentioned in clause i above;
  •  without claiming any additional depreciation in respect of plant and machinery acquired and installed after March 31, 2005 and the depreciation should be computed in the manner as may be  prescribed.

b. Aforesaid brought forward losses shall be deemed to have been already given full effect and shall not be allowed to be carried forward.

c.  The option has to be exercised on or before the due date for furnishing the returns of income under Section 139(1) of the said Act. Once the company has exercised the option for any previous  year, it cannot be subsequently withdrawn for the same or any other previous year.

  1. Section 115BAB, has been inserted to provide option to new domestic manufacturing companies to pay tax at the rate of 15% subject the fulfillment of the following conditions-

a.    The company has been set-up and registered on or after 1st day of October, 2019 and has commenced manufacturing on or before 31st day of March, 2023 and –

  • has not been formed by splitting up, or the re construction, of a business already in existence;
  • does not use any plant or machinery previously used for any purpose;
  • does not use any building previously used as hotel or a convention center, as the case may be.

b. The company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of such article or thing manufactured or produced by it;

 c. Total income of the company is computed-

  • without claiming any deduction under Section10AA,32(1)(iia),32AD,33AB,33ABA,35(1)(ii)/(iia)/(iii)/35(2AA)/(2AB), 35AD, 35CCC, 35CCD, under any provisions of chapter VI-A  under the heading “C.-Deductions in respect of certain incomes” i.e. Section 80H to 80TT not being Section- 80JJAA of the said Act;
  • without adjusting brought forward loss from any earlier year if such loss pertains to any deduction under the aforesaid Sections mentioned in clause i above;
  • iii. without claiming any additional depreciation in respect of plant and machinery acquired and installed after March 31, 2005 and the depreciation should be computed in the manner as may be prescribed.

 d.Aforesaid brought forward losses shall be deemed to have been already given full effect and shall not be allowed to be carried forward;

 e. Where course of business between company opting for to pay tax under this Section and any other person are so arranged that it produces to the company more than the ordinary profits, the Assessing Officer can re-compute the profit which may be reasonably deemed to have been derived therefrom and the profit from such transaction shall be determined having regard to arm’s length price if such transaction is covered under the ambit of ‘Specified Domestic Transaction’ as defined under Section 92BA of the said Act;

f. The option has to be exercised on or before the due date for furnishing the returns of income under Section 139(1) of the said Act. Once the company has exercised the option for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.

  1. Section 115JB of the said Act, 1961 has been amended so as to reduce the rate of Minimum Alternate Tax (MAT) from 18.5% to 15% w.e.f 1st April, 2020. Also, MAT shall not apply to  domestic companies who exercise the option to pay tax at the rate specified in Section 115 BAA or 115BAB.
  1. 5.  Section 115 QA of the said Act, 1961 has been amended to give effect that tax shall not be charged on the buy-back of shares by the listed companies in respect of which public announcement of buy-back has been made before 5th day of July 2019 in accordance with the provisions of Securities and Exchange Board of India(Buy- back of Securities) Regulation , 2018.
  2. B. Finance (No. 2) Act, 2019

iv)  1.   Sub-section (9) of Section 2 of the Finance(No.2) Act 2019 has been amended w.e.f 1st April, 2019 in order to provide that after clause (a) of the third proviso of the said Act,  the following new clause – (aa) shall be deemed to be inserted to provide that the rate of advance tax in the case of every association persons  or  body of individuals, whether incorporated or not, having income under section 115AD of the Income-tax Act, 1961 shall be increased by way of surcharge and will be as follows –

v)

vi)        (i)  at the rate of 10 % of such “advance tax”, where the total income exceeds fifty lakh rupees, but does not exceed one crore rupees

        (ii)  at the rate of 15 % of such “advance tax”, where the total income exceeds one crore rupees but does not exceed two crore rupees

        (iii) at the rate of 25 % of such “advance tax”, where the total income [excluding the income of the nature referred to in clause (b) of sub-section (1) of section 115AD

              of the Income Tax Act ] exceeds two crore rupees but does not exceed five crore rupees;.

        (iv) at the rate of 37% of such “advance tax”, where the total income [excluding the income of the nature referred to in clause (b) of sub-section (1) of section 115AD

              of the Income Tax Act ] exceeds five crore rupees;

        (v) at the rate of  15% of such “advance tax”, where the total income [including the income of the nature referred to in clause (b) of sub- section (1) of section 115AD of

             the Income tax Act ]  exceeds two crore rupees but is not covered in sub-clauses (iii) and (iv) above.

  1.  Part 2 of the First Schedule of the Finance(No 2) Act, 2019 has been amended under the head “Surcharge on Income Tax” w.e.f 1st April, 2019and are as follows –

a.  The increased surcharge for the purpose of tax deduction at source where the aggregate of income is including the income under the provisions of section 111A (short term capital gains covered here) and section 112A (long term capital gains covered here) of the Income-tax Act,1961 in case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to sub-clause (vii) of clause (31) of section 2 of the Income-tax Act,1961 being a non-resident, shall be calculated –

i)    At the rate of 10% for the purpose of  such tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds fifty lakh rupees but does not exceed one crore Rupees

ii)   At the rate of 15% of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees but does not exceed

two crore Rupees

b. The increased surcharge for the purpose of tax deduction at source where the aggregate of income is excluding the income under the provisions of section 111A and section 112A of the Income-tax Act, 1961 in case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, being a non-resident shall be calculated –

i)   At the rate of 25% of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds two crores but does not exceed five crore rupees

ii)   At the rate of 37% of such tax, where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds five crores.

c. A new clause shall be inserted below sub clause IV,  where the aggregate of income which is including the income under the provisions of section 111A and section 112A of the Income-tax Act, 1961 then for calculation of surcharge for the purpose of tax deduction at source in case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, being a non-resident shall be charged at the rate of fifteen per cent. of such tax, where the income or aggregate of such incomes paid or likely to be paid and subject to the deduction is exceeding two crore rupees.

  1.  PART III, in Paragraph A, under the sub-heading “Surcharge on income-tax” of the First Schedule of the Finance(No 2) Act, 2019 has been amended w.e.f 1st April, 2019 and areas follows –

a. The total income in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act ,1961 which is including the income under the provisions of section 111A and section 112A of the Income tax Act,1961 then the surcharge will be calculated in respect of –

i)    Having the total income exceeding fifty lakh rupees but does not exceed one crore Rupees at the rate of 10% of such income tax.

ii)   Having the total income exceeding one crore rupees but does not exceed two crore rupees at the rate of 15% of such income tax.

b. The total income in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act ,1961 which is excluding the income under the provisions of section 111A and section 112A of the Income tax Act,1961 then the surcharge will be calculated in respect of –

i)    Having the total income exceeding two crore rupees but does not exceeding five crore rupees at the rate of 25% of such income tax.

ii)   Having the total income exceeding one crore rupees but does not exceed two crore rupees at the rate of 37% of such income tax.

c. A new clause shall be inserted where having a total income in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act ,1961 which is including the income under the provisions of section 111A and section 112A of the Income tax Act,1961 and is exceeding two crore rupees then the surcharge shall be applicable at the rate of 15% of income tax.

Source: E-Gazette

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