SME Times News Bureau | 23 Mar, 2020
In a big relief to the Non-Resident Indian community, the government has
decided to restrict taxation only to the income generated by them from
businesses in India, leaving their global income out of any levy. Moreover, taxes
would need to be paid only on income of above Rs 15 lakhs.
The changes formed part of the amendments in the Finance Bill, 2020 proposed by
Finance Minister in Parliament. The Lok Sabha passed the Finance Bill on Monday
by voice vote without discussion.
Among the other changes introduced by Sitharaman in the Finance Bill includes a
clarification that shareholders will have no tax liability if the company
issuing the dividend has paid the DDT before April 1 but the shareholder
received the dividend afterwards.
The budget proposal for taxing dividends in the hands of shareholders by
abolishing the dividend distribution tax (DDT) has, however, been retained.
Further, the TDS rate on payment of dividend to non-resident and foreign
company has been prescribed at 20 per cent. The Finance Bill earlier had 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 per cent. The TDS rate of 10 per cent on
dividend for resident is already prescribed in the Finance Bill.
Proposal to levy (tax collected at source) TCS on sale of goods is 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 has
been provided. But this provision along with TCS on foreign remittance will be
applicable from October 1, 2020.
Moreover, the provision for tax to be deducted @2 per cent on withdrawal of
cash from Bank, Co-opt Bank and Post Officer exceeding Rs. 1 crore in aggregate
during the year has been amended. Now, in case of a person who has not filed
the returns for preceding 3 years then tax will be deducted @2 per cent on
withdrawal exceeding Rs 20 lakhs and @ 5 per cent on withdrawal exceeding Rs 1
crore. This provision will be applicable from July 1, 2020.
Government's budget proposal on NRIs had dented sentiments as this community is
seen as a big investor in the development of the country. The budget not only
changed the qualification criteria of NRIs mandating them a higher number of
days stay overseas but also introduced a provision that would have made them
liable for tax in India on their incomes generated outside the country.
In the Union Budget 2020-2021, the government proposed to spend Rs 30,42,230
crore in the next financial year, 12.7 per cent higher than the revised
estimate of 2019-20. By passing the Bill, these financial proposals have been
given effect.
The government has assumed a nominal Gross Domestic Product (GDP) growth rate
of 10 per cent in 2020-21, versus the nominal growth estimate at 12 per cent
for 2019-20. It expects that receipts will increase by 16.3 per cent to Rs
22,45,893 crore, owing to higher estimated revenue from divestment.