The Lok Sabha on Monday passed the Finance Bill, 2020, with amendments, by voice vote. After that, the bill was presented in the Rajya Sabha, which returned the same without consideration. This effectively means that the Bill has been cleared by the Parliament.
Both the houses adjourned sine die after the passing of the Bill.
The Bill was passed without any discussion after the leaders of parties decided so, in light of the urgent need to adjourn the house due to impending threat of COVID-19 pandemic.
The Bill, moved by Finance Minister Nirmala Sitharaman will give effect to the financial proposals made by the Central Government in Union Budget 2020, for the financial year 2020-21. These include enforcement of revised personal income tax rates for those who do not avail of any tax incentives.
@nsitharaman says presently Income Tax Act is 'Riddled' with various exemptions. Impossible for tax payers to file return without professional assistance.Proposes bring a new 'simplified' personal income tax regime.#Budget2020— Live Law (@LiveLawIndia) February 1, 2020
@nsitharaman says presently Income Tax Act is 'Riddled' with various exemptions. Impossible for tax payers to file return without professional assistance.Proposes bring a new 'simplified' personal income tax regime.#Budget2020
The Bill also expands the benefit of the reduced corporate tax rate of 15%, as offered to new domestic manufacturing companies, to the domestic companies engaged in power generation.
Inter alia, the Bill changes the definition of 'Resident', as stipulated under the Income Tax Act. Presently, a person is considered a resident of India, i.e. their global income is taxable in India, if they are in India for more than 182 days. This has been reduced to 120 days. The amended Bill now provides that the lower 120 day rule will not apply if the Indian-sourced income of such persons is less than ₹15 lakh in the relevant financial year
This amendment to Section 6 of the Income Tax Act had led to concerns that it will adversely affect the earnings of genuine NRIs.
After these proposals on NRI tax created a controversy, the Finance Ministry had issued a clarification on February 2 that the new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries.
"In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession", the Ministry said.
Though one opposition member insisted on discussion on these proposals on Monday, Speaker Om Birla went ahead with the voice-vote, after the Minister informed that government had held a discussion with all party leaders to pass the bill without discussion.
RSP's NK Premchandran objects; says we are being asked to clear a Bill which makes 41 amendments to the IT Act, 1961, without any discussion (due to #CoronavirusOutbreakindia )#LokSabha #finance #incometax— Live Law (@LiveLawIndia) March 23, 2020
RSP's NK Premchandran objects; says we are being asked to clear a Bill which makes 41 amendments to the IT Act, 1961, without any discussion (due to #CoronavirusOutbreakindia )#LokSabha #finance #incometax
Other salient features of the Bill include:
Dividend Distribution Tax
The Bill removes the liability of companies to pay a tax of 15% on dividends distributed by it to its shareholders. The same will now be taxable in the hands of the recipient, under the dividend income head.
TDS on e-commerce transactions
TDS of 1% will be levied on e-commerce transactions.
Currently, an exemption is provided on profits or gains arising out of building affordable houses if the project was approved by March 31, 2020. Further, an additional tax deduction of up to Rs 1,50,000 is provided on interest paid on loans for self-occupied house owners if the loan was sanctioned by March 31, 2020. The deadline in both cases has been extended to March 31, 2021.
Excise & Customs
The Central excise duty imposed on tobacco products has been increased. For instance, duty levied on chewing tobacco has been increased from 10% to 25% per kg.
Customs duty on items such as tableware and kitchenware, footwear, fans, and toys have also been increased.
A health cess will be levied (in addition to customs duty) on import of certain medical devices, such as X-ray machines. This cess may be utilized for the financing of health infrastructure and services.
Obligations on charities
Charitable organisations get an exemption from taxation under Section 12AA, and donations to them get exemptions under Sections 10(23C), 35, and 80G. From now, the approvals under these sections will be valid for a maximum of five years. Any entity having these approvals has to get them re-issued.
Indian Stamp Act, 1899
Stamp duty will not be charged in the case of transactions in stock exchanges and depositories established in international financial centers set up under the Special Economic Zones Act, 2005.
Sovereign wealth funds
Income arising out of investments made by notified sovereign wealth funds in certain infrastructure facilities will be given 100% tax exemption if the investment is made before March 31, 2024, with a minimum lock-in period of three years.
Dividend Distribution Tax (DDT), which is currently taxed at 15% rate+surcharge, will now not be paid by the Company.— Live Law (@LiveLawIndia) February 1, 2020
Dividend Distribution Tax (DDT), which is currently taxed at 15% rate+surcharge, will now not be paid by the Company.
Removal of tax exemptions on certain allowances
The Bill also removes exemptions on certain facilities granted to current and former members of the Union Public Service Commission and the Election Commission, such as rent-free residence, conveyance allowance, and medical facilities.
All in all, the Bill proposes 41 amendments to the Income Tax Act. It also proposes some non-tax amendments to the Prohibition of Benami Property Transactions Act, 1988.
Since the parties had decided not to discuss the Bill, it was directly put to vote. However, the voting was interrupted several times with RSP's NK Premchandran objecting to pass an important Bill in such hurry and other members demanding the government to introduce 'Financial Packages' in wake of the medical and economic crisis created by the outbreak of COVID-19 pandemic.
Later this evening, the (money) Bill was also returned by the Rajya Sabha after a clause by clause consideration, though still without any discussion.
Notably, this is not the first time that the Finance Bill has been passed without any discussion. Even during 2018 Budget Session of the 16th Lok Sabha, the Finance Bill was passed without any discussion under the watch of then Speaker Sumitra Mahajan, amidst intense protests from the members of the Opposition, demining a No-Confidence Motion against the ruling dispensation, a participatory policy making platform Maadhyam reported.
[With Inputs From PRS Legislative]
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