Context:The provisions of the Finance Act are taking effect on 1 April.These are expected to bring drastic change in India’s tax regime.
- Changes introduced covers many stakeholders, including non-resident Indians (NRIs), company shareholders, digital firms and individual income taxpayers.
About the key changes introduced
If they have over ₹15 lakh income from Indian sources they will be deemed as Indian residents for the purpose of taxation if they had spent 120 days in India in the previous year.Earlier this limit was 182 days.
Relief provided:Only the Indian sourced income of NRIs will be taxed in India in such cases and not their global income.
Taxation of dividends in the hands of shareholders, in contradiction to the earlier system of levying a dividend distribution tax (DDT) on the company.
Relief provided: There will be no tax liability on the dividend income received by a shareholder after 1 April, if it was distributed by the company before 1 April and DDT had been paid by the company on it.
Individual income taxpayers
New personal income tax slabs:The following new tax slabs for individuals who do not opt for tax incentives, becomes applicable for the income earned from 1 April.
Relief provided:Taxpayers can either opt for the new slab system or continue in the old system.
Equalization levy would be applicable to all digital businesses earning more than ₹2 crore of revenue from India or using Indian data.
Equalization levy was earlier applicable only to online advertising and related services and on all types of e-commerce transactions in India as well as those transactions which use Indian data.
- Extension of deadlines for various compliance requirements under direct and indirect taxes including the due date for filing tax returns for FY19.
- Waiver of late fee, interest and penalty for various defaults under the Income Tax Act have been also applied
About Equalisation Levy
- It was introduced in India with the intention of taxing the digital transactions i.e. the income accruing to foreign e-commerce companies from India.
- It is aimed at taxing (B2B)business to business transactions.
- The basic motive behind Equalisation Levy is to prevent the technology companies from shifting profits offshore to tax havens.
- It is levied at 6% on payments made to offshore platforms hosting online advertisements, it will be taxed only at 2% on e-commerce transactions.
About Dividend Distribution tax:
- It is a tax levied on dividends that a company pays to its shareholders out of its profits.
- Dividend constitutes income in the hands of the shareholders which ideally should be subject to income tax.
- Application: The Dividend Distribution Tax, or DDT is taxable at source, and is deducted at the time of the company distributing dividends.