Finance minister Nirmala Sitharaman presented Budget 2020 themed around Aspirational India, Economic Development for All and Caring Society. Budget 2020 has come up with a host of proposals on personal tax front including a new personal tax regime, deferment of stock awards taxation in certain cases, etc.
Personal income tax regime
The finance minister introduced an optional personal income tax regime with the intention to simplify income-tax filing and reduce the tax burden on individual taxpayers. Under the proposed new personal tax regime, an individual taxpayer can opt to forego defined exemptions and deductions and pay taxes at lower tax rates. The proposed tax slab structure provides lower tax rates for total income up to Rs 15 lakh.
FULL COVERAGE:Union Budget 2020
An individual can choose to be covered by the aforementioned proposed new personal income-tax regime by foregoing few deductions and exemptions such as leave travel concession, exemption for house rent, standard deduction for salaried employees, interest loss on housing property, deductions under section 80C, 80CCC, 80CCD, etc. Besides, this option to choose a simplified tax regime is applicable only for individuals not having a business income.
Residential status of individuals
Based on the physical stay pattern in India, the residential status of an individual is determined that in turn defines the scope of income taxable in India. Presently, an Indian citizen leaving India for the purpose of employment will be considered as resident only if he stays in India for at least 182 days in the tax year.
The Budget, however, proposes to reduce it to 120 days. Also, an Indian citizen will be considered as a resident of India if he is not a tax resident of any other jurisdiction.
Deferment of tax on stock options
In case of sweat equity (stock awards) issued by eligible start-up companies, it is proposed to defer salary tax deduction to the time of sale of shares or 48 months from the end of the relevant assessment year or to the time when the employee leaves the company.
The taxes have to be deducted/paid within 14 days from any of these events that occur the earliest. This aims at protecting individual taxpayers from immediate tax outflow at the time of exercise despite holding the shares.
Taxation of dividends
Budget 2020 proposes to remove the Dividend Distribution Tax (DDT) and hence individuals will have to pay taxes on the dividend income at applicable rates which are exempted presently.
Ease of appeals, tax administration and reporting
With the aim to simplify tax administration and promote faceless appellate proceedings, the current e-assessments have been extended to e-appeals. Also, a new scheme, 'Vivad Se Vishwas Scheme', has been proposed to be introduced wherein a taxpayer would get a complete waiver of interest and penalty provided he pays the amount of disputed taxes by March 31, 2020.
The scheme can be availed post-March 31, 2020 and up to June 30, 2020, as well by paying some additional amount.
The finance minister, with an intent of reducing the hassles and simplifying the current tax regime has proposed a few changes and has introduced a new regime. However, only time will tell how it is beneficial to a taxpayer.
(Sudhakar Sethuraman, Partner, Deloitte India; Mitesh Agrawal, Manager; Kavitha Jagadeesan, Manager; and Kajal Gupta, Assistant Manager, Deloitte Haskins & Sells LLP)