In Tax Union Budget Detailed Analysis One Noexp

Union Budget 2020
Detailed analysis
February 2020
Economic Direct Indirect Regulatory Policy Glossary
Indicators Tax Taxes Landscape Updates
03 12 62 82 93 97
Economic
Indicators
• Economic growth projected at 5
percent in FY 2020
• Macroeconomic fundamentals in focus
• Further rate cuts expected to be on

hold
• The FM unveils Bahi-Khata
Economic Indicators | Direct Tax | Indirect Taxes | Regulatory Landscape | Policy Updates | Glossary 3
Economic growth projected at 5 percent in FY 2020
Weak demand driving slowdown
The Union Budget 2020-21 has been core sectors, including auto, real
presented amid an economic estate, and manufacturing.
slowdown, coupled with rising food
inflation. Economic activity has been India continues to face global
losing momentum for the past five headwinds due to policy
quarters, with questions on whether uncertainties, falling growth and
the current economic headwinds have trade volumes, and technological
bottomed out or will stay longer. changes across the world.
Geopolitical tensions leading to oil
Three of the four growth engines— price fluctuations may add to
private consumption, private economic woes.
investment, and exports—have
slowed down significantly. Leading economic indicators suggest
Government expenditure growth has the economic slowdown may be
been doing the heavy lifting over the tapering with green shoots visible in a
past few quarters as private demand few quarters of the economy. The
has taken a breather. Several cyclical Economic Survey 2020 expects
and structural factors, such as low growth to rebound in H2 of FY2021
rural wages and tightening lending and annual growth to be in the range
conditions, have weakened growth. of 6-6.5 percent.
This slowdown has affected several
Economic growth projected at 5 percent in FY 2020
Weak demand driving slowdown
Growth in domestic demand (in real values)

% YoY % YoY
25 9
8
20
7
15 6
5
10
4
5 3
2
0
1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-5 0
FY 2017 FY 2018 FY 2019 FY 2020 FY 2020
(F)
Private consumption Government consumption Total fixed investment

Exports, goods & services GDP, RHS
Source: CMIE, RBI
Macroeconomic fundamentals in focus
Fiscal space, inflation, and currency valuation causing concerns
The fiscal deficit crossed 114.8 Domestic prices are further Government security yield rates
percent of the annual budget target influenced by rising global food have come down markedly to 6.6
in the first eight months, indicating prices. The Thalinomics analysis in percent in January 2020 from its peak
stress on government finances. The the Economic Survey suggests that (above 8 percent) in September
fiscal deficit for FY 2020 was revised food prices have come down since 2018. However, yield rates have seen
to 3.8 percent of the GDP, up from early 2000, boosting consumer an uptick in the past two months over
the earlier budget target of 3.3 affordability. concerns regarding the economic
percent. The government used the slowdown. This may raise financing
escape clause provided under the The exchange rate touched 72 costs for private-sector borrowers.
FRBM Act to allow the relaxation of rupees per dollar twice in early Sectors with high capital market
target. The FY 2021 fiscal deficit January. While factors such as borrowing, such as power and
target is pegged at 3.5 percent of slowing economic growth and a rising telecom, may get affected.
GDP. fiscal deficit weigh on sentiments, the
recent geopolitical tensions and their The current account deficit
Consumer price inflation averaged possible impact on oil prices and the narrowed to 1.5 percent of GDP in H1
4.1 percent in 2019-20 (April to economy may have added to its FY 2020 from 2.1 percent in H1 FY
December) and stood at 7.3 percent vulnerability. 2019, due to a contraction in the
in December, primarily because of merchandise trade deficit. It fell to
rising food prices, although core 0.9 percent in December 2019.
prices remained below 4 percent. However, CAD may come under
Source: CMIE, RBI, Economic Survey 2020, Union Budget 2020.
Macroeconomic fundamentals in focus
Fiscal space, inflation, and currency valuation causing concerns
pressure if oil prices increase as India FDI inflows remained strong with a NPAs have declined for the first time
is a net oil importer. Every US$10 a net inflow of US$24.4 billion in 10 years and one of the reasons
barrel rise in crude oil prices is investments during April-November cited has been quick resolutions
estimated to expand CAD by 0.4 2019. FPI flows were vulnerable, but under the IBC Act. After rising to 11.2
percent of GDP. their share in total investment percent of the gross advances, the
declined by 6 percent since 2015. ratio fell to 9.1 percent in September
The industrial production index in This bodes well for the economy 2019. The economic survey
November suggests a rebound in the because direct investments are more suggested maintaining a health score
industry sector with manufacturing stable and help create real assets on for NBFCs that can provide an early-
registering solid growth. On the use- a long-term basis. The trend may warning signal of impending liquidity
based front, the consumer durables continue as India embarks on an problems.
and capital goods indices, which are ambitious infrastructure project to
often tracked to gauge medium-term spur economic growth.
growth and the strength of consumer
demand, improved on a month-on-
month basis.
Source: CMIE, RBI, Economic Survey 2020, Union Budget 2020.
Further rate cuts expected to be on hold
Further rate cut dependent on the RBI’s inflation expectation
The RBI cut rates for five consecutive The MPC kept the key policy rate With credit growth failing to pick up,
times by 135 basis points in 2019, unchanged at 5.1 percent with an there is demand from the industry to
bringing the rates to their lowest accommodative stance in its keep the monetary policy
since 2010. In addition, the RBI has December meeting, citing concerns accommodative. However, any further
maintained its accommodative over rising prices. This suggests that rate cuts will be contingent on the
monetary policy stance and signaled the current decision was taken rise in prices and inflation
that the stance would remain keeping in mind the objective of expectations.
unchanged “as long as it is necessary keeping prices within the target range
to revive growth.” even though investment and credit
growth have declined.
The RBI has taken steps to improve
cash flow to shadow lenders. These However, the fall in repo rates has
steps include allowing banks to lend not translated into cuts in lending
more, providing partial credit rates. Banks’ margins remain
guarantees and easing banks’ stressed, which together with high
mandatory liquidity ratios. The RBI is NPAs, have led to reluctance among
also closely monitoring the top banks to reduce lending rates further.
NBFCs, which contribute about 20
percent of the total credit, to improve
liquidity and credit growth in the
economy.
Further rate cuts expected to be on hold
Further rate cut dependent on the RBI’s inflation expectation
Apart from the near-term growth- Policy rates

inflation dynamics, a lot will also % %
depend on what measures the 9.0 8.0
government might take to boost the
7.0
economy in the upcoming budget, 8.0
and how these measures will
6.0
translate into the fiscal situation in 7.0
the economy. As the market is now 5.0
expecting a much-delayed easing, the
6.0
growth-inflation dynamics will keep 4.0
the MPC on its toes.
5.0
3.0
4.0 2.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Repo rate Reverse repo rate
Source: CMIE, RBI.
The FM unveils Bahi-Khata
Budget 2020 focuses on some key sectors
Fiscal expansion can be beneficial if it • Providing farmers insurance (a Education and skill development
enhances capital formation. To this total of 6.11 crore farmers insured • Emphasis on improving skill-sets;
end, the Budget 2020 has announced under Fasal Bima) a total of INR 3,000 crore to be
significant outlays in key sectors, • Incentivising farmers to go solar given for skill development
such as agriculture, industry, • Making agriculture credit worth • The FM allocated INR 99,300 crore
infrastructure, education, and skill INR 15 lakh crore available for education
development.
Digitisation Industry and infrastructure
The following provides snapshot of • INR 6,000 crore will be allocated
some of the key announcements: • Proposed allocation of INR 27,300
for the BharatNet programme in crore for industry and commerce in
2020-21 to further enhance FY21
Agriculture broadband connectivity in rural − 6500 projects under National
FM lists 16 action points to boost areas. The FTTH connection Infrastructure Pipeline to
agriculture infrastructure and through BharatNet will link encompass
income 100,000 gram panchayats this − A total of 9,000 km of economic
• Allocating INR 2.83 lakh crore for year. corridor to set up and a total of
agriculture and allied activities for 12 lots of highway bundles to be
FY 2021 monetised by 2024
The FM unveils Bahi-Khata
Budget 2020 focuses on some key sectors
− Allocation of INR 1.7 lakh crore Start-ups MSMEs

for transport infrastructure in FM says entrepreneurship has • The government has asked the RBI
FY 2021 always been the "strength of to consider extending the
− Five new smart cities to be India" restructuring scheme for MSMEs by
developed • A proposal of deferment of tax another year until 31 March 2021.
− 100 more airports to be payment by employees on ESOPs • National Logistics Policy will be
developed by 2025 to make from start-ups by five years launched soon to make MSMEs
travel easier and support the • The turnover limit raised from more competitive.
UDAAN scheme existing INR 25 crore to INR 100 • Amendments will be made to
− 150 trains to run under the PPP crore for an eligible start-up to enable NBFCs to extend invoice
mode avail a deduction of 100 percent of financing to MSMEs.
its profits for three consecutive • A scheme announced to provide
The Budget 2020 had some assessment years from a total of subordinate debt to entrepreneurs
significant announcements, especially seven years of MSMEs; the debt will be
for MSMEs and start-ups. • The government to create a single provided by banks as quasi equity
investment cell to expedite the and would be fully guaranteed
grant of licences and promote through credit guarantee trust for
entrepreneurship medium and small entrepreneurs.
Source: The Union Budget 2020
Direct Tax
• Individual taxation
• Corporate taxation
• Non-resident taxation
• Capital gain
• Procedural
• Transfer pricing
Note: Unless otherwise specified, income tax proposals will be effective from AY 2021-22.
Individual taxation
Simplified tax regime - Option to the tax payer [Section 115BAC]
• An individual/HUF tax payer can • If the taxpayer has opted for this − Interest paid on housing loan on
opt for simplified regime with lower simplified tax regime, such self-occupied house property
tax rates. The new tax slab rates taxpayer will not be eligible for − Standard deductions for family
under this simplified regime are as certain deductions / exemptions pension under section 57(iia)
follows: such as: − Set-off of loss from house
− Chapter VIA (other than property with any other heads of
Income slabs (in INR) Rate of Tax employers’ contribution to NPS income
(percent) under section 80CCD(2) and − Certain eligible deduction
deduction for employment of against business income
Up to 250,000 NIL new employees under section
250,000 to 500,000 5 80JJAA) • Such taxpayer will also not be
− Section 10 such as LTA, HRA, subject to alternative minimum
500,000 to 750,000 10 income of minor child, and tax.
certain exemptions provided
750,000 to 1,000,000 15
under section 10(14), etc.
1,000,000 to 1,250,000 20 − Standard deduction,
professional tax
1250000 to 1,500,000 25
Above 1,500,000 30
Individual taxation
Change in residency rules [Section 6]
• Currently, an Indian citizen/person • Likewise for qualifying to be a ‘Not

of Indian origin is considered to be Ordinarily Resident’, the assessee
resident in India if: needs to be a non-resident in India
− He has been in India for an in 7 out of 10 previous years as
overall period 365 days or more against the dual conditions earlier
within four years preceding that namely -
year; and − He has been a non-resident in
− He is in India for overall period India in nine out of ten previous
of 182 days or more in that year year, or
− He has been in India for 729
This provision is now tightened by days or less in seven previous
reducing the Indian citizen / person years
of Indian origin’s stay in India to an • Indian citizens not liable to tax in
overall period of 120 days or more any other jurisdiction (by reason of
(instead of 182 days). his domicile or residence) shall be
deemed to be resident in India.
Individual taxation
Employer contributions to retirals Proposed Amendment Tax Relief for affordable housing
in excess of specified limits now It is proposed to introduce an [Section 80EEA]
liable to tax [Section 17(2)] aggregate monetary limit of INR Home buyers (not owning any other
Currently, employer contribution to 750,000 in respect of employer property at the time of sanction of
following retirals are liable to tax only contribution to above schemes. Any loan) can claim deduction for interest
if: contribution in excess of such on home loan up to INR 150,000
• Provident Fund contribution is in monetary limit would be taxable as subject to fulfilment of prescribed
excess of 12 percent of the salary perquisite. conditions.
• NPS contribution is in excess of 14
percent of salary for the Central Further the annual accretion on these This deduction is now extended for
Government employees and 10 contributions (in excess of monetary one year in the case of loans
percent of salary in any other case limits) will be treated as a perquisite. sanctioned up to 31 March 2021.
• Superannuation Fund contribution
is in excess of INR 150,000
Also, employee is not taxable on

accruals on such contributions.
Individual taxation
Deferment of tax on stock Appropriate changes are proposed to allowances/perquisites by virtue of

benefits of start-ups [Section facilitate payment of taxes by the section 10(45) of the Act. These
191/192] employee through self-assessment in tax exemptions are now proposed
Currently, specified security and cases where there is no tax to be withdrawn.
sweat equity shares are taxable as withholding or a demand is raised. • For this purpose, amendments are
perquisite at the time of exercise. also being made to the relevant
Withdrawal of exemption on Acts (which govern the services of
To ease the tax burden of employees certain perquisites or allowances these officials) besides the Income
of ‘eligible start-ups’, it is proposed to to members of UPSC and Election tax Act.
defer the taxation of this perquisite to Commission [Section 10(45)/
the earlier of the three events section 8 of the Election
namely: Commission Act]
• Expiry of 48 months from end of • Currently, the Chairman and
the relevant assessment year or members of Union Public Service
• Sale of shares by employee or Commission (UPSC), Chief Election
• An employee’s resignation Commissioner and Election
Commissioner are eligible for tax
exemption on certain
Corporate taxation
Carry forward of business losses and unabsorbed depreciation
Extending the benefit of carry • It is proposed to also extend this

forward of business losses and benefit to the following:
unabsorbed depreciation to the − Amalgamation of nationalised
amalgamation of nationalised banks with each other
public sector banks and general − Amalgamation of nationalised
insurance companies general insurance companies
• Currently (under section 72AA of with each other
the Act), business losses and
unabsorbed depreciation of an
amalgamating banking company is
allowed to be carried forward to
the amalgamated banking
company/banking
institution/nationalised bank, etc.
Corporate taxation
Corporate tax rate card
Types of companies Income up to INR10 million Above INR10 million up to INR100 Above INR100 million
million
Surcharge rate Effective tax rate Surcharge rate Effective tax rate Surcharge rate Effective tax rate
Domestic - turnover not exceeding INR 4,000 Nil 26.00% 7% 27.82% 12% 29.12%
million in FY 2018-19 (Nil) (26.00%) (7%) (27.82%) (12%) (29.12%)
(claiming exemption/ incentives)
All domestic companies not claiming tax 10% 25.17% 10% 25.17% 10% 25.17%
exemption/incentives* (10%) (25.17%) (10%) (25.17%) (10%) (25.17%)
New domestic manufacturing (set up and Nil 26.00% 7% 27.82% 12% 29.12%
registered on or after 1 March 2016)** (Nil) (26.00%) (7%) (27.82%) (12%) (29.12%)
New domestic manufacturing (set up and 10% 17.16% 10% 17.16% 10% 17.16%
registered on or after 1 October 2019)*** (10%) (17.16%) (10%) (17.16%) (10%) (17.16%)
Other domestic Nil 31.20% 7% 33.38% 12% 34.94%
(Nil) (31.20%) (7%) (33.38%) (12%) (34.94%)
Foreign Nil 41.60% 2% 42.43% 5% 43.68%
(Nil) (41.60%) (2%) (42.43%) (5%) (43.68%)
*Compliant with prescribed conditions under section 115BAA;

**Compliant with prescribed conditions under section 115BA
***Compliant with prescribed conditions under section 115BAB
Note:
• Health and education cess of 4 percent has been considered for determining the tax rates mentioned above.
• Figures in bracket represent existing tax rates.
Corporate taxation
Tax rate card – Co-operative societies
There is no change in the tax slabs and tax rates for co-operative societies. The tax rates are mentioned below:
Income slabs (in INR) Rate of tax (%)

Up to 10,000 10
10,000 to 20,000 20
Above 20,000 30
*Surcharge at the rate of 10 percent shall be applicable where total income exceeds INR 10 million. Health and education cess of 4 percent shall also be applicable on
the amount including surcharge.
An optional regime for taxation has been introduced vide section 115BAD; this has been subsequently discussed
Corporate taxation
DDT abolished
DDT abolished and taxability of • Section 80M has been introduced • Currently, section 115BBDA taxes
dividend income shifted to the to remove the cascading effect of dividend income in excess of INR 1
hands of recipient taxes on inter-corporate dividend. million in the hands of specified
• Under the existing provisions of The section will allow set off only shareholders at a rate of 10
sections 115-O and 115R of the for dividend distributed by the percent. This provision will apply
Act, a company/mutual fund is company up to one month before only to dividends declared,
required to pay DDT on the income the due date of filing of return. distributed or paid by a domestic
distributed to shareholders/unit • Section 57 has been amended to company on or before 31 March
holders. provide that other than deduction 2020.
• It is proposed to abolish DDT on for interest expenses, no other • Consequential amendments are
dividends declared, distributed, or deduction shall be allowed from made for withholding tax on
paid on or after 1 April 2020. dividend income or income in distribution of such dividends and
Dividend is now proposed to be respect of units of mutual fund. in other related provisions.
taxed in the hands of the recipient Also, the deduction shall not
of income, i.e.. shareholders/unit exceed 20 percent of the dividend
holders. income.
Corporate taxation
Expenditure on scientific research
Expenditure on scientific research • Subject to above-mentioned entity − furnishes to the donor, a

• Section 35 provides for deduction submitting the intimation within certificate specifying the amount
of expenditures on scientific the prescribed time limit, its of donation in such manner,
research, including any sums paid approval shall be deemed to be containing such particulars and
to an approved research valid for another five years within such time from the date
association, university, college, • It is also proposed that approvals of receipt of sum, as may be
another institution, or a company. granted in future shall, at any one prescribed.
• Under the current provisions, even time, have effect for such years, • These amendments are proposed
if the approval granted to any of not exceeding five assessment to be applicable from 1 June 2020.
the entities (mentioned above, years as may be specified in the
excluding a company) is notification.
• It is also proposed that the entities
withdrawn, the taxpayer is still
mentioned above shall:
allowed a deduction under section
− prepare and deliver statements
35 if payment to the entity has
to the income tax authority; and
been made before the withdrawal
of such approval. A similar
provision is now being made in
case of withdrawal of approval
granted to a company
Corporate taxation
Option for not availing deduction for specified businesses
Providing an option of not • At present, an assessee does not

availing deduction under section have any option to forego claiming
35AD this incentive.
• Section 35AD of the Act provides • It is proposed to amend the
for a 100 percent deduction of provision to make the deduction
capital expenditure (other than optional and the limitation of no
expenditure of land, goodwill, and deduction under any other
financial assets) incurred in certain provision shall only apply if the
specified businesses. assessee has exercised the option
• This deduction is allowable during to avail the deduction under this
the previous year in which such section.
• This amendment will apply from AY
expenditure has been incurred.
2020-21
Further, in respect of this
expenditure incurred by the
assessee for specified business, no
deduction is allowed under any
other provision.
Corporate taxation
Taxation of real estate transactions
Enhanced safe harbour limit for • The deeming provisions to

deemed taxation substitute actual consideration with
• Under the current regime, for stamp duty valuation are not
computing the income arising from applicable, if the difference
transfer of land or building or both between actual sale consideration
under the head business or and stamp duty valuation does not
profession, capital gains and exceed a safe harbour of 5
income from other sources, the percent.
consideration for such transfer is • It is now proposed to expand the
deemed to be the value adopted harbour of 5 percent to 10 percent
for stamp duty purposes, if the by amending the provisions of
sale consideration is less than the Section 43CA, Section 50C and
stamp duty valuation. Section 56(2)(x).
Corporate taxation
Tax holiday for start-ups
Rationalisation of tax holiday • Considering that start-ups may not

provisions for start-ups be in profits for the initial phase to
• Currently, tax holiday provisions be able to take the benefit of the
under Section 80-IAC provide a tax holiday, it has now been
100 percent deduction of the proposed to increase the block
profits earned by 'eligible start-ups' period of 7 years to 10 years.
for a period of 3 consecutive years
out of 7 years from year of
incorporation provided that the
turnover of the business does not
exceed INR 250 million.
• It has been proposed to enhance
the turnover limit for eligibility
from existing INR 250 million to
INR 1,000 million.
Corporate taxation
Tax holiday for affordable housing
Incentive to affordable housing • Currently, the tax holiday

extended provisions of section 80-IBA
• Under the existing provisions of relating to affordable housing
Section 80-IBA, assessee engaged apply to the projects approved by
in the business of developing and competent authority during the
building affordable housing period from 1 June 2016 to 31
projects are eligible for a 100 March 2020
percent deduction of the profits • To incentivise building affordable
and gains derived from such housing, the date by which the
business, subject to the fulfilment competent authority can approve
of certain conditions. the project is proposed to be
extended to 31 March 2021.
Corporate taxation
Business trust and unit holders
Modification of the definition of Exemption of dividend received

“business trust” under section by business trust from SPV
2(13A) • Under the existing provisions of
• Section 2(13A) of the Act currently the Act, dividend received by a
defines “business trust” as a trust business trust from its SPV was
registered as an InvIT or REIT subject to DDT under section
(under the relevant SEBI 115-O.
regulations of 2014), and the units • With the abolition of DDT,
of such trust are also required to dividends received by a business
be listed on a recognised stock trust from the SPV are proposed to
exchange. be made tax exempt in the hands
• SEBI has amended the 2014 of business trust and shall be
Regulations (in 2019), and done taxable in the hands of unit
away with the requirement of holders.
mandatory stock exchange listing
of InvIT units.
• It is proposed to amend the
definition of “business trust” to
exclude reference to mandatory
listing of units of the business trust
on the stock exchange.
Corporate taxation
Tax Exemption on certain income • The exemption is subject to the

of Indian Strategic Petroleum condition that the crude oil is
Reserves Limited replenished in the storage facility
• It is proposed to provide within three years from the end of
exemption for any income accruing the financial year in which the
or arising to Indian Strategic crude oil was removed from the
Petroleum Reserves Limited storage facility for the first time.
(ISPRL) (a wholly owned subsidiary • The tax exemption will take effect
of Oil Industry Development from AY 2020-21.
Board), for its income arising from
arrangement/ replenishment of
crude oil stored in its storage
facility in pursuance to directions of
the Central Government in this
behalf.
Corporate taxation
Exemption for promoting investment by sovereign wealth funds in infrastructure
companies
Exemption of income of sovereign • The investment is required to be − Its assets upon dissolution
wealth funds from equity and made on or before 31 March 2024 should vest with the
debt investments in Indian and held for at least three years. government of the foreign
infrastructure companies • The sovereign fund would need to country.
satisfy the following conditions: − It should not undertake any
• To promote investments by
sovereign wealth funds (including − It should be wholly owned and commercial activity in or outside
the wholly owned subsidiary of Abu controlled (directly or indirectly) India.
Dhabi Investment Authority) in by government of a foreign − It is notified by the Central
Indian infrastructure companies, it company. Government in the Official
is proposed to insert a new clause − It should be set up and Gazette.
to exempt dividend, interest, or regulated under laws of the
long-term capital gains from their foreign country.
investments in Indian companies − Its earnings are credited either
engaged in developing, or to the account of the
operating and maintaining, or government of the foreign
developing, operating or country or any other account
maintaining specified infrastructure designated by that Government
facilities or other business as may and does not inure to any
be notified. private person.
Corporate taxation
Rationalisation of tax deduction for donations
Amendment in Section 80GGA • Further deduction under section

• Section 80GGA provides for 80GGA to a donor shall be allowed
deduction in respect of donations only if the prescribed statement is
given to an approved research furnished by the donee in respect
association, university, college, or of donations received. In the event
another institution for specified of failure to do so, a fee or penalty
purposes. shall be levied.
• To further promote the agenda of • The amendment is proposed to be
digitalisation and less cash effective from 1 June 2020.
economy, the existing threshold of
INR 10,000 for cash donations has
been reduced to INR 2,000.
Corporate taxation
Amendment to Rule 5 of First Schedule
• Section 44 read with Rule 5 to the • It is proposed to provide that any

First Schedule is a separate code sum payable for certain specified
for taxation of insurance companies expenses in section 43B by such
other than life insurance insurance company be allowed as
companies. deduction in computing the income
• Currently, as is the case for any in the previous year in which such
other taxpayer, any expenditure sum is actually paid.
debited to profit and loss account • The amendment is to take effect
not admissible under the provisions from AY 2020-21.
of section 30 to 43B is to be added
back in computing taxable income
of such insurance companies.
However, correspondingly, the
expenditure added back is currently
not being allowed subsequently
when actually paid.
Corporate taxation
Taxation of co-operative societies
New taxation regime for co- income-tax rate of 22 percent, if it from any earlier assessment
operative societies opts for not availing specified year attributable to the above
• The Government vide Taxation incentives. deductions or incentives; and
Laws Amendment Act, 2019 • The applicable surcharge rate for − by claiming the depreciation,
provided for an optional regime of such co-operative societies is 10 except additional depreciation,
taxation for a domestic company, percent. in the manner prescribed.
wherein it can opt for paying taxes • If the co-operative society fails to • Units located in IFSC can continue
at the rate of 22 percent, subject satisfy the conditions specified, the to avail the benefit of the
to certain conditions. option shall become invalid in concessional taxation regime
• To remove the disparity between respect of the assessment year without foregoing the deduction
companies and co-operative relevant to that previous year and specified under Section 80LA.
societies, a concessional taxation subsequent assessment years. • The co-operative society needs to
regime similar to companies has • The total income of the co- exercise the option on or before
been introduced by inserting operative society is computed: the due date prescribed for filing
Section 115BAD for a resident co- − without claiming the specified the return of income.
operative society. deductions and incentives, such • The option is irrevocable and
• The optional tax regime is as tax holiday under section cannot be withdrawn once opted.
applicable for AY 2020-21 and 10AA, additional depreciation • Provisions relating to AMT would
onwards. under section 32(1)(iia) etc.; not be applicable and consequently
• Any resident co-operative society − without set off of any loss no credit of AMT would be
shall be eligible to a reduced carried forward or depreciation available.
Corporate taxation
Amendments to the Finance Act, 2013
Commodity transaction tax

• The Finance Act, 2013 had introduced CTT on the sale of commodity derivatives based on non-agricultural commodities
traded in recognised associations.
• To align the provisions of CTT with changes in the commodity derivative market (on account of introduction of new
products, such as “option in goods”), it is proposed to charge CTT on the new commodity derivatives product as under:
S. No. New commodity derivative products Rate Payable by Value of taxable commodities
transaction
Sale of commodity derivatives based on prices or indices of Price at which commodity
1 0.01% Seller
prices of commodity derivatives derivative is traded
2 Sale of option in goods 0.05% Seller Option Premium
Sale of option in goods, where option is exercised resulting in

3 actual delivery of goods 0.0001% Purchaser Settlement Price
Sale of option in goods, where option is exercised resulting in a Difference between settlement
4 0.125% Purchaser
settlement otherwise than by the actual delivery of goods price and strike price
• The transactions in new commodity derivative products, which are subject to CTT shall not be deemed as speculative
transactions under section 43(5) of the Act.
• The amendment is proposed to be effective from AY 2020-21..
Non-resident taxation
Applicability of SEP deferred and definition revised
• Through Finance Act, 2018, • A new definition is proposed for • These transactions or activities will
explanation 2A was added to SEP (largely similar to the existing constitute SEP irrespective of
section 9(1)(i) to clarify that SEP of one) to cover: whether:
an NR in India will constitute a − transactions in respect of any − the agreement for such
"business connection" in India. SEP goods, services, or property transactions or activities is
was also defined to include certain carried out by an NR with any entered in India
transactions and activities carried person in India that includes − the NR has a residence or place
on beyond thresholds to be provision of download of data or of business in India
prescribed. software in the country provided − the NR renders services in India
• In view of the pending discussion the revenue therefrom exceeds • Further, the income deemed to
under Pillar 1 (public consultation monetary threshold as may be accrue or arise in India in relation
paper issued by the OECD prescribed; or to a SEP will be only so much as is
Secretariat), the applicability of − systematic and continuous attributable to the transactions and
SEP is proposed to be deferred to soliciting of business activities or activities as specified earlier.
AY 2022-23 and onwards. engaging in interaction with • Revised definition is proposed to
users (exceeding the number as be applicable from AY 2022-23 and
may be prescribed) in India. onwards.
Extension of source rule in respect of income from advertisement and use of data
of Indian consumers/users
• Under Explanation 1 to section − such advertisement that targets • It is also proposed to extend this
9(1)(i), for an NR, the income of a a customer who resides in India source rule to cases covered under
business deemed to accrue or arise or a customer who accesses the SEP.
in India, where all operations are advertisement through internet • Explanation 3A is proposed to be
not carried out in India, will be protocol address located in applicable from AY 2021-22 and
only be such part of the income as India; onwards, whereas attribution of
is reasonably attributable to the − sale of data collected from a income relating to cases of SEP is
operations carried out in India. person who resides in India or to be applicable from AY 2022-23
• It is proposed to extend the source from a person who uses internet and onwards.
rule for NR taxpayers by adding a protocol address located in
new Explanation 3A to section India; and
9(1)(i) to provide that income − sale of goods or services using
attributable to the operations data collected from a person
carried out in India will include who resides in India or uses
income from: internet protocol address
located in India.
Exemption from indirect transfer provisions to NR investors in FPIs
• NR investors are currently • In line with the changes made by

exempted from the levy of indirect SEBI to the FPI regulations, it is
transfer tax in respect of an proposed that:
investment held in Category-I or − exemption granted to Category-
Category-II FPI under the SEBI I and Category-II FPIs under the
(FPI) Regulations, 2014. Last year, erstwhile regulations be
SEBI (FPI) Regulations, 2019, grandfathered
notified by SEBI, repealed the − exemption be granted to
2014 regulations. Under the 2019 Category-I FPI under the 2019
regulations, SEBI has done away regulations
with the broad basing criteria and • This amendment is proposed to be
reduced the categories of FPIs applicable from AY 2020-21.
from three to two.
Consideration for sale, distribution, or exhibition of cinematographic films
proposed to be taxed as royalty
• Explanation 2 to section 9(1)(vi) • The exclusion of cinematographic

defines royalty to include films is not there in the definition
consideration for transfer of all or of ‘royalty’ under India’s tax
any rights (including the granting treaties Accordingly, it is proposed
of a licence) in respect of any to amend the definition of royalty
copyright, literary, artistic or to delete this exclusion of
scientific work including films or consideration for the sale,
video tapes for use in connection distribution, or exhibition of
with television or tapes and for cinematographic films from the
radio broadcasting, but not definition of royalty.
including consideration for the • This amendment is proposed to be
sale, distribution, or exhibition applicable from AY 2021-22 and
of cinematographic films. onwards.
Conditions for offshore funds’ exemption from “business connection” relaxed
• Section 9A provides that in case of

Condition Relaxation Rationale
certain offshore funds (an eligible
investment fund), the fund Aggregate participation or For calculation of This existing condition is
management activity carried out investment in the fund, directly or aggregate participation or difficult to comply with in
indirectly, by persons resident in investment in the fund, the initial years for the
through an eligible fund manager
India to not exceed 5% of the directly or indirectly, by an reason that eligible fund
(situated in India) acting on behalf corpus of the fund Indian resident, manager, who is resident
of such fund will not constitute a contribution of the eligible in India, is required to
business connection in India. This fund manager during the invest his/her money as
is subject to several conditions. first three years up to INR “skin in the game” to
• Two of the several conditions for 250 million is not to be create reputation to
the offshore funds are proposed to accounted for attract investment
be relaxed in view of Monthly average corpus of the If the fund has been The period for fulfilling the
representations: fund to not be less than INR 1 established or incorporated requirement of monthly
billion except where the fund is in the previous year, the average of the corpus of
established in the previous year in condition of monthly INR 1 billion ranges from
which case, the corpus of fund to average of the corpus of 6 months to 18 months.
not be less than INR 1 billion at the fund to be at This wide variation based
the end of a period of 6 months INR 1 billion is to be on mere date of
from the last day of the month of fulfilled within 12 months establishment of the fund
its establishment or incorporation, from the last day of the is discriminatory and
or at the end of such previous month of its establishment hence, is to be corrected.
year, whichever is later or incorporation
Section 90 and 90A aligned with revised preamble of the DTAA as amended by MLI
• Sections 90 and 90A empower the • India is a signatory to the MLI proposed that CGT may enter into
CGT to enter into an agreement under the OECD G20 project to an agreement with another country
with another country or specified tackle BEPS. Article 6 of the MLI or specified territory for, inter alia,
territory respectively for: (a) provides for modification of a CTA the avoidance of double taxation of
granting relief on income on which to include text of the preamble income under the Act and the
income-tax has been paid both, in that will modify India’s DTAAs to corresponding law in force in that
India and that other country or curb revenue loss through treaty country or specified territory
specified territory; (b) avoidance of abuse and BEPS strategies by without creating opportunities for
double taxation; (c) exchange of ensuring that profits are taxed non-taxation or reduced taxation
information; and (d) recovery of where substantive economic through tax evasion or avoidance
income-tax under the Act or laws activities generating the profits are (including through treaty-shopping
of the other country or specified carried out. arrangements aimed at obtaining
territory. • With a view to align the enabling reliefs provided in this agreement
provisions of the Act with those of for the indirect benefit of residents
the MLI, it is proposed to amend of any other country or territory).
sections 90 and 90A to include the • This amendment is proposed to be
text of the preamble in Article 6 of applicable from AY 2021-22 and
MLI in these sections. It is onwards.
Section 94B: Interest paid to PE of an NR bank to be excluded from interest disallowance
• Section 94B of the Act disallows • Also, in cases where the lender is a − where the borrower is an Indian
the deduction of interest exceeding PE of a foreign company (which company/ Indian PE of a NR
the specified limit and subject to has extended loans aggregating to company; and
other thresholds mentioned in the 51% or more of the book value of − lender is the Indian PE of an NR
section in case of an Indian the total assets of the borrowing engaged in the business of
company (or a PE of a foreign company), the lender and the banking.
company in India) if the interest is borrower are deemed to be AEs for
paid to an AE. Section 94B does the purposes of section 94B.
not apply where the payer of • It is proposed to amend section
interest is an Indian banking 94B to provide that the provisions
company or a PE of a foreign of deemed AE (and consequently
company engaged in the banking the disallowance of interest
business. deduction) under section 94B will
not apply in a situation:
Exemption to NRs from filing return of income
• Section 115A of the Act provides • It is proposed that the exemption the provisions of Chapter XVII-B of
special rates of taxation for income from the requirement to file a the Act at rates, which are not
in the nature of dividend, interest, return of income in India will be lower than the rates prescribed
royalty, and FTS earned by an NR applicable to income in the nature under section 115A(1) of the Act.
(including foreign companies). of specified royalty and fees for • The amendment will take effect
Under sub-section (5), such an NR technical services, besides interest from AY 2020-21. .
is exempted from the requirement and dividend income as noted
to file a return of income in India if above.
its total income consists only of • The additional condition proposed
specified interest or dividend to be imposed in applicability of
income and appropriate taxes have this exemption is that the taxes on
been withheld at source on such such income (i.e., specified
income. interest, dividend, royalty, and
FTS) have been deducted under
Capital gains
Provisions regarding units in the “cost of acquisition” of the

segregated portfolios in mutual units in the segregated portfolio,
fund schemes: the “cost of acquisition” of the
• SEBI now permits creation of units in the main scheme will be
segregated portfolios within the pro-rated in the ratio of the NAV of
debt and money market mutual the assets transferred to the
fund schemes. The unit holders in segregated portfolio.
Simultaneously, the “cost of
the main scheme are allotted the
acquisition” of the units in the
same number of units in the
segregated portfolio. main scheme will be reduced by
• Therefore, for taxation purposes, the “cost of acquisition” of the
the period of holding of the units units in segregated portfolio.
in the segregated portfolio will • These amendments will apply
include the earlier period of in relation to the assessment
holding of the units in the main year 2020–21 and subsequent
scheme. Further, for computing years.
Capital gains
Capping the “fair market value”

of land or building (acquired
before 1 April 2001) at its “stamp
duty value” as on 1 April 2001
• Currently, (under section
55(2)(b)(i) and (ii) of the Act), an
assessee can opt to take the “cost
of acquisition” of a capital asset
(acquired before 1 April 2001) at
either its actual cost of acquisition
or “fair market value” as on 1 April
2001.
• Where the capital asset is land or
building, it is now proposed to cap
the “fair market value” of the
capital asset at its “stamp duty
value” as on 1 April 2001.
Procedural and miscellaneous
Other miscellaneous proposals
Period and scope of concessional • Further, a concessional withholding government securities and rupee
withholding tax rate under tax rate of 4 percent will apply to denominated bonds of an Indian
section 194LC extended borrowings from a source outside company payable until 30 June
• Currently, the concessional India by way of long-term bonds or 2020 to FIIs and QFIs.
rupee denominated bonds on or • It is now proposed to extend the
withholding tax rate of 5 percent is
after 1 April 2020 until 30 June above period until 30 June 2023.
applicable to borrowings made by
an Indian company or a business 2023 that are listed on a • Further, it is proposed that this
trust until 30 June 2020 from a recognised stock exchange in any concessional withholding tax rate
source outside India by way of IFSC. will also apply to interest on
foreign currency loans/long-term municipal debt securities payable
Period and scope of concessional on or after 1 April 2020 until 30
bonds or rupee denominated
withholding tax rate under June 2023 to FIIs and QFIs.
bonds.
section 194LD extended
• It is now proposed to extend the
above period until 30 June 2023. • Currently, the concessional
withholding tax rate of 5 percent is
applicable to interest on
Withholding tax rate reduced to • It is now proposed to drop this

2% on fees for technical services Rationalisation of provisions mechanism. A new mechanism will
paid to residents (Section 194J) relating to provision of tax- be introduced under which an
• Currently, the withholding tax rate related information to assessees annual statement of tax-related
applicable to fees for technical (section 285BB ) information will be uploaded to a
services payable to residents • Currently, (under section 203AA), registered account of the assessee.
(except residents who are engaged income tax authorities provide tax- • This change will be effective from 1
only in the business of operating a related information (including June 2020.
call centre) is 10 percent. It is now details of tax deducted at source or
proposed to reduce the withholding tax collected at source) to an
tax rate on applicable to fees for assessee electronically through
technical services (excluding fees Form 26AS.
for professional services) to 2
percent.
Widening the applicability of TCS • In both the above cases, if the • The above TCS provision shall not
under section 206C buyer does not have PAN/Aadhar, be applicable on certain buyers,
To widen the tax net, it is proposed to the rate of applicable TCS shall be such as government authorities
amend section 206C to levy TCS on 10 percent. and other buyers notified by the
overseas remittance and overseas Government.
It is proposed to amend section 206C • The above amendment will take
tour package as under:
to levy TCS on sale of goods above effect from 1 April 2020.
• Authorised dealer (dealing in
specified limit stated below:
foreign exchange) receiving an
• A seller, whose turnover from
amount of INR 0.7 million or more
business exceeds INR 100 million
in financial year for remittance
during the immediately preceding
under LRS of RBI, shall be liable to
financial year, shall be liable to
collect TCS at the rate of 5 percent
collect TCS at the rate of 0.1
on sum received from a buyer
percent on consideration received
remitting such amount out of
from a buyer in excess of INR 5
India.
million. In non-PAN/Aadhar cases,
• A seller of an overseas tour
the rate shall be 1 percent.
package shall be liable to collect
TCS at the rate of 5 percent on any
amount received from buyer of
such package.
Proposed amendment in provision Insertion of new sections 234G • Similar to the introduction of the e-
of section 206AA and 271K assessment scheme in 2019, it has
• Section 206AA of the Act provides • New section 234G is proposed to been proposed to implement the e-
for the requirement to furnish PAN be inserted that provides for a fee appeal scheme for appeals filed to
and withholding tax rates in case of INR 200 for every day of failure the CIT(A) to impart greater
PAN is not furnished. This section to furnish newly prescribed efficiency, transparency, and
is proposed to be amended to statement/certificate under section accountability by:
include reference to newly inserted 35(1)(ii)/(iia)/(iii) of the Act. In − eliminating interface between
section 194-O and the prescribed addition to this fee, a penalty of CIT(A) and appellant to the
withholding rate (in no PAN/ INR 10,000 that may extend to extent technologically feasible;
Aadhaar cases) is proposed to be 5 INR 1,00,000 may be levied under − optimising utilisation of
percent for section 194-O. section 271K for such failure. resources through economies of
scale and functional
E-Appeal Scheme proposed specialisation; and
(Section 250) − introducing an appellate system
with dynamic jurisdiction in
• An appeal to CIT(A) can be filed which appeal shall be disposed
online through a registered of by one or more CIT(A).
account on the e-filing portal.
• To give effect to above scheme, the to the newly inserted section 12AB − For period before 180 days not
Central Government may by way of (regarding registration or exceeding 365 days – ITAT on
notification, direct any of the cancellation of trust) in addition to being satisfied that the assessee
existing provisions relating to the existing section 12AA has deposited aforesaid amount
jurisdiction and procedure for not less than 20 percent and the
disposal of appeals shall not apply Proposed amendment in provision delay is not attributable to the
or shall apply with such exceptions, of section 254 assessee.
etc. Such direction may be issued • ITAT power to grant stay of
until 31 March 2022. demand is proposed to be • The total period of stay that
amended as under: includes extension shall not, in any
Proposed amendment in provision − For initial stay of 180 days – case, exceed 365 days.
of section 253 Upon deposit by the assessee of
• Section 253(1) of the Act provides an amount not less than 20
for the orders that are appealable percent of the amount of tax,
before the Income Tax Appellate interest, fee, penalty, or any
Tribunal. This section is proposed other sum payable, or furnish
to be amended to include reference security of equal amount in
respect thereof.
Proposed insertion of new section It is also proposed to provide a c) invoice in respect of supply or
271AAD person who causes to make or cause receipt of goods or services or
To deal with the issue of fake and to make a false entry or omits or both to or from a person who do
fraudulent invoices under GST causes to omit any entry, shall also not exist.
regime, it is proposed to introduce a pay by way of penalty a sum, which is
new section to provide for a levy of equal to the aggregate amounts of This amendment will take effect from
penalty equal to the aggregate such false entries or omitted entry. 1 April 2020.
amount of false entries or omitted The false entries is proposed to
entry on a person, if it is found during include use or intention to use –
any proceeding under the Act that in a) forged or falsified documents,
the books of accounts maintained by such as a false invoice or, in
him there is a: general, a false piece of
i. false entry or documentary evidence; or
ii. any entry relevant for b) invoice in respect of supply or
computation of total income of receipt of goods or services or
such person has been omitted to both issued by the person or any
evade tax liability. other person without actual
supply or receipt of such goods or
services or both; or
Provision for e-penalty under c) introducing a mechanism for • At present, there is no explicit
section 274 (2A) imposing of penalty with dynamic reference under the section
The e-penalty scheme will be jurisdiction in which penalty shall allowing Insolvency Professional to
launched on the lines of the E- be imposed by one or more act as an authorised representative
assessment Scheme-2019. Under the income-tax authorities. of a company under Insolvency
proposed section 274 (2A), the Proceedings.
This amendment will take effect from • Accordingly, a residuary category
Central Government may notify an e-
1 April 2020. as ‘any other person, as may be
scheme for the purpose of imposing
penalty to impart greater efficiency, prescribed’ has been inserted to
Amendment in list of authorised remove/overcome such practical
transparency, and accountability by:
representative (Section 288) difficulties.
a) eliminating the interface between • Section 288(2) of the Act provides
the Assessing Officer and the a list of persons who are entitled to
assessee in the course of be ‘authorised representative’ of
proceedings to the extent the assessee to appear before any
technologically feasible; income tax authorities or appellate
b) optimising utilisation of the tribunal in connection with any
resources through economies of proceeding under this Act.
scale and functional
specialisation;
Widening the applicability of tax amount to the account of e- section; or (b) No TDS needs to be
deducted at source (TDS) commerce participant. This would deducted by virtue of above
TDS on e-commerce transactions i.e., also be the case where payment is exemption (as discussed in
payment by e-commerce operator to made directly by the purchaser to previous bullet).
e-commerce participant for sale of the e-commerce participant.
goods or provision of services • Exemption from TDS if the gross This exemption will not apply to
facilitated by it, has been proposed to amount of sales or services or both any amount received by an e-
be introduced (New section – 194-O). made during the year by an e- commerce operator for hosting
The main features of this section are commerce participant (being advertisements or providing other
as follows: individual or HUF) does not exceed services which are not in
• E-commerce operator would INR 5 Lakhs and such participant connection with the sale of goods
deduct TDS @1% on gross amount provides his PAN or Aadhaar to the or services.
of sales or services or both made e-commerce operator.
• Transaction would not be subject to Consequential amendment are
by e-commerce participant (who
TDS under any other provision of proposed in section 197 for lower
sells goods or provides services
Chapter XVII-B of the Act if (a) TDS, section 204 to define person
through electronic facility).
TDS has already been deducted by responsible for paying any sum in
• TDS needs to be deducted at the
e-commerce operator under this case of person not resident in India
time of credit or payment
and section 206AA to provide for
(whichever is earlier) of such
higher deduction @5% in case of non
PAN/Aadhaar cases
TDS on income in respect of units • This section provides that any Amendment in TDS provisions -
• Income distributed by mutual person responsible for paying to a section 194, 194LBA, 195, 196A,
funds to its unitholders is currently resident unit holder, any income in 196C and 196D
subject to additional income tax in respect of units of a Mutual Fund In view of the removal of DDT and
the hands of mutual funds. It is specified under clause (23D) of taxability of dividend income in the
now proposed to shift the incidence section 10 or units from the hands of shareholders / unit holders,
of tax on income from mutual administrator of the specified the following new TDS provisions
funds to unit holders. undertaking or units from the have been proposed to be
• Therefore a new section 194K has specified company, shall withhold introduced:
been proposed to be inserted to tax at the rate of 10 percent, if the • Section 194 - include TDS at the
levy TDS on such distributions. such income exceeds INR 5,000/- rate of 10% on dividend. Threshold
in a financial year. limit for TDS on payment of
dividend to be increased from INR
2,500/- to INR 5,000/-
• Section 194LBA - provide for TDS • Further, it is proposed that TDS on Proposed amendment in section
at the rate of 10% on dividend dividend / income from units under 197
paid by business trust to its the above provision shall be Section 197 of the Act provides for a
unitholder (both resident and non- applicable irrespective of mode of certificate for deduction of TDS at a
resident) payment of dividend / income from rate lower than that prescribed under
• Section 195 - to delete exemption units different TDS provisions. This section
provided to dividend income is proposed to be amended to include
referred to in section 115-O from Proposed amendment in provision reference to the newly inserted
withholding tax of section 115TD section 194-O, i.e., an amount paid
• Section 196A - To revive the Section 115TD of the Act provides for by e-commerce operators to e-
section’s applicability on TDS on special provisions relating to tax on commerce participant.
income in respect of units of accreted income of certain trusts and
mutual funds institutions
• Section 196C and 196D have been
amended to remove exclusion This section is proposed to be
provided to dividend income amended to include reference to the
referred to in section u/s 115-O newly inserted section 12AB in
addition to the existing section 12AA
Proposed amendment in section Registration of trusts, Approval of trusts, institutions,

204 institutions, and funds for tax and funds (section 80G)
Section 204 of the Act defines the exemption [section 10(23C)] • The power of granting approval for
phrase ‘person responsible for paying’ • The power of granting approval for registration of trusts, institutions,
for the purpose of Chapter XVII and registration of trusts, institutions, and funds has been extended to
section 285. Consequent to proposed and funds was earlier with the principal commissioner or
insertion of section 194O, this section commissioner of income tax commissioner.
is also proposed to be amended to (exemptions). This has now been • Trust/institution/fund (i.e., donee)
provide meaning of ‘person extended to include principal will now have to furnish a
responsible for paying’ in case of a commissioner or commissioner of prescribed statement providing
non-resident. The phrase in this income tax. prescribed particulars of donors
context would mean, the person • New timelines for filing application under section 80G.
himself or any person authorised by for registration (by trusts, • The donee will also furnish a
such person or the agent of such institutions, and funds) and certificate specifying particulars of
person in India including any person approval by the principal the donation (within the prescribed
treated as an agent under section commissioner/commissioner have time), to the donor.
163.” been prescribed. • Income-tax deduction under
section 80G shall be allowed to the
donor only on the basis of above
information furnished by the
donee.
Approval of survey operation Expansion in the scope of DRP • The scope of “eligible assesses” is
under section 133A of the Act scheme (section 144C) extended to include non-residents.
• Currently, an income-tax authority • Currently, under the DRP Scheme, • These provisions will apply to any
(below the rank of joint director or an AO has to forward a draft variation proposed by the AO after
joint commissioner of income-tax) assessment order to the assessee, 1 April 2020.
can conduct a survey (section if he/she proposes to make any
variation in the income or loss E-appeal scheme proposed
133A) after taking prior approval of
returned by the assessee. In such (section 250)
a joint director/joint commissioner.
• These provisions have now been a case, the assessee may file an • Until now, only the appeal can be
amended so that a higher level of objection to the DRP. filed online through registered
income-tax authority is involved in • It is proposed that if the AO account on the e-filing portal.
approving such a survey. proposes any change, which is However, the process that follows
Accordingly, a survey (133A) is prejudicial to the interest of the after filing of appeal before CIT(A)
now proposed to be conducted by assessee (even if such change is neither electronic nor faceless.
a subordinate income-tax authority does not affect the income/loss
only with prior approval of the returned), such draft order will
higher authority, i.e., also be sent to the assessee. The
commissioner/director of income assessee can take up this order
tax. before the DRP.
• Similar to the introduction of e- • To give effect to the above • The time limit for issuing any
assessment scheme in 2019, it has scheme, the Central Government directions by the Central
been proposed to implement the e- may (by way of notification) direct Government to ensure proper
appeal scheme for appeals before any of the existing provisions implementation of the e-
CIT(A) to impart greater efficiency, relating to jurisdiction, and the assessment scheme has been
transparency, and accountability procedure for disposal of appeals extended from 31 March 2020 to
by: may apply with such exceptions, 31 March 2022.
− eliminating interface between etc. Such a direction may be
CIT(A) and appellant to the issued until 31 March 2022. Amendment in person responsible
extent technologically feasible; for verification of return of
− optimising utilisation of Scope of the e-assessment income (section 140)
resources through economies of scheme expanded (section 143) • Under section 140 of the Income-
scale and functional • Currently, the e-assessment tax Act, income tax return of a
specialisation; and scheme covers only the company should be signed or
− introducing an appellate system assessment under section 143(3) verified by the managing director
with dynamic jurisdiction in of the Act. The scheme shall now of the company or any other
which appeal shall be disposed be extended to “best judgment director if the managing director
of by one or more CIT(A). assessment” passed under section cannot verify due to unavoidable
144 of the Act. reasons.
• Further, in case of LLP, the income Extension of scope of deduction • It is now proposed that tax will be
tax return should be verified by the of TDS (section 194A) deducted at the rate of 10 percent
designated partner or any other • Currently, a cooperative society is by cooperative societies whose
partner (in case there is no such not required to deduct tax on turnover exceeds INR 50 crores
designated partner). payment of interest by cooperative during the immediately preceding
• To ensure ease of compliance, it is society to its member or another FY and the payment of interest to
proposed to amend section 140 of cooperative society. Also, the person concerned exceeds INR
the Income-tax Act to enable any society not engaged in the 40,000 (INR 50,000 in case of a
other person, as may be prescribed business of banking is not required senior citizen).
by the board to verify the return of to deduct tax on payment of
income in case of a company and interest on deposit taken by it.
LLP.
Definition of section 194C Insertion of taxpayer’s charter required to get his/her accounts
widened in case of contract • To build trust between the audited by an accountant and
manufacturing taxpayers and the tax furnish that by the due date for
• Currently, the definition of “work” administration, it is proposed to furnishing the return of income.
under existing section 194C does insert a new section 119A in the • To reduce compliance burden for
not include manufacturing or Act to empower the CBDT to: MSMEs, the threshold limit for
supply of goods where (raw) − adopt and declare a taxpayer’s getting the accounts audited under
materials are not supplied by charter; and section 44AB of the Act has been
customers. − issue such orders, instructions, enhanced from a turnover of INR
• It is now proposed that if material directions, or guidelines to other 10 million to a turnover of INR 50
is supplied by an associate of the income-tax authorities, as it million for a person carrying on
customer to a contract may deem fit for the business. However, cash receipts
manufacturer, that will qualify as administration of the charter. and cash payments of such a
“work” and hence, liable to TDS person should not exceed 5% of
under section 194C. Rationalisation of provisions his/her total receipts or total
relating to tax audit payments during the year,
respectively.
• Currently, every person carrying on • This amendment apply with effect
business, if his/her total sales, from AY 2020-21
turnover, or gross receipts in
business exceeds INR 10 million, is
Pre-filling of income tax returns • Further, the due date for filing It is now proposed that the due date
for persons with income from accountant’s reports is proposed to for filing the return of income of the
business or profession or for be advanced by a month before firm’s partners (which is liable to tax
charitable trusts the due date of filing the return of audit) will be 31 October.
• Currently, in all cases, the tax income. Consequently, for AY
2020-21, the due date for The due date for filing income tax
audit report is required to be filed
by the due date for furnishing the accountant’s reports* shall be 30 return for companies and other
return of income. September 2020. assessees (whose accounts are
• The Income Tax Department required to be audited under the Act)
Changes in due date for filing of is proposed to be extended from 30
proposes to issue pre-filled income
return of income for certain September to 31 October.
tax returns in case of persons with
taxpayers
income from business or profession
or charitable trusts. To facilitate Currently, in case of a firm that is
this, the due date for filing tax liable to tax audit, the due date for
audit report is proposed to be filing of return of income for its
advanced by a month from the due working partners is 30 September
date for filing the return of income. and other partners is 31 July.
Consequently, for AY 2020-21, the
due date for filing tax audit report
shall be 30 September 2020.
*required under section 10,10A,12A,32AB,33AB,33ABA,35D,35E,44AB,44DA,50B,80-IA,80-IB,80JJAA,92F,115JB,115JC,115VW
Rationalisation of provisions relating to trusts or institution
• Sections 11, 12, 12A, and 12AA • Further, it is proposed that any 10(23C)/10(46) or under section
provide for the registration process existing or new trust or institution 11/12 will be granted. In other
and taxation scheme for an eligible desirous of availing the exemption words, benefit of both exemptions
trust or institution and funds, and regime will have to re-apply or will not be granted simultaneously.
operate as a separate code. apply, as the case may be, for
• It is proposed to alter the exemption.
registration process and time • Also, similar to the exclusion
period for such eligible trust or provided to a trust or institution
institution. The existing eligible to claim benefit of
registration process under section exemption under section 10(23C)
12AA of the Act will apply until 31 (relating to inter alia exemption of
May 2020, and a new section 12AB income of hospitals, etc.), entities
is proposed to be inserted to apply eligible for exemption under
from 1 June 2020. The new section 10(46) (constituted under
registration is proposed to apply central or state enactments) are
for a defined period of 3 or 5 years also proposed to avail the benefit.
as applicable, unlike the unlimited It is also proposed that exemption
time period under the existing either under section
provision.
5
Proposed Dispute Resolution − The proposed scheme to be

Scheme (‘Vivad Se Vishwas’) called the ‘Vivad Se Vishwas’
The Finance Minister made the scheme.
following announcements in the − Under the proposed scheme, a
Budget speech: tax payer would be required to
pay only the amount of the
• Currently, there are 483,000 direct disputed taxes and get complete
tax cases pending in various a waiver of interest and penalty
appellate forums. provided he/she pays by 31
• In the last budget, the Sabka March 2020.
Vishwas Scheme was launched to − Those who avail this scheme
reduce litigation in indirect taxes. after 31 March 2020 will have to
It resulted in settling more than pay some additional amount.
189,000 cases. − The scheme will remain open
until 30 June 2020.
• It is proposed to bring a scheme
− Tax payers in whose cases
similar to the indirect tax ‘Sabka
appeals are pending at any level
Vishwas’ scheme for reducing
can benefit from this scheme.
litigations related to direct taxes.
• The following are the key features
of the proposed scheme:
Transfer pricing
Key amendments
Due date of filing accountant’s APA provisions to cover Safe harbour rules to cover
report (Form 3CEB) advanced determination of profit determination of profit
• To enable pre-filed annual income attributable to a PE attributable to a PE
tax returns, the due date of filing • It is proposed to expand the scope • The safe harbour rules [under
Form 3CEB has been advanced by of the Advance Pricing Agreement section 92CB read with Rule 10TA
a month. (APA) provisions to include to 10TF] have been proposed to be
• Due date of filing Form 3CEB has determination of profit attributable expanded to cover profits
been proposed to be one month [under section 9(1)(i) of the Act] attributable [under section 9(1)(i)
prior to the due date of filing the to a PE. The benefit of the rollback of the Act] to a PE. This will be
annual income tax return. For FY can also be availed by such PEs. applicable for AY 2020–21, and
2019–20, the due date of filing • The provisions will apply to an APA subsequent assessment years.
3CEB is proposed to be 31 October entered into on, or, after 1 April
2020. 2020.
• Consequently, for FY 2019–20, the
due date for maintaining the
contemporaneous TP
documentation will also be 31
October 2020.
Indirect Tax
• Customs
• Goods and Services Tax
• Central Excise Duty
Customs
Important announcements on Customs
General • Customs duty exemptions will be

• With a focus to boost domestic comprehensively reviewed by the
manufacturing and entice large Government by September 2020.
investments in mobile phones, Customs law and procedures will
electronic equipment, and semi- be reviewed for their alignment
conductor packaging, a detailed with needs of changing times and
scheme will be announced. This ease-of-doing business.
announcement is in line with the Suggestions from trade and
recent 2 percent adhoc incentive industry will be solicited on these
granted, in addition to MEIS, to aspects.
export of mobile phones during 1
January 2020 to 31 March 2020.
Customs Act 1962
Legislative changes
• The Central Government is or any other benefit. Such duty credit importer’s responsibility of reasonable
empowered to “prohibit” can be used by a person to whom it is care
uncontrolled import or export of issued or transferred in a manner to Authorities can temporarily suspend
any other goods, either absolutely be prescribed. Also, recovery of any preferential tariff treatment pending
or conditionally, in addition to gold such credit obtained by fraudulent verification per rules of FTA
or silver, to prevent injury to the means and subsequently transferred Goods imported with undue benefit
economy. can be made from the person to under FTA are liable for confiscation
• Explanation inserted to Section 28 whom such credit was issued. Goods may be released on furnishing
to explicitly clarify that any notice • Provisions related to administration of security or deposit of differential
issued prior to 29 March 2018 shall of ROO under various FTAs have duty in cash ledger
continue to be governed by been introduced. The objective is Request for verification to determine
provisions of erstwhile Section 28 to curb undue concessions claimed the origin can be made within a
as it stood immediately before under FTAs and protect domestic period of five years from date of
such date, notwithstanding order industry. Few key aspects are as import subject to FTA and suspension
of any Appellate Tribunal, court, or follows: of preferential benefit under FTA and
any other law, to the contrary. − Importer to provide declaration can also be extended to identical
• Facility of “Electronic Duty Credit that goods qualify for FTA goods imported from same producer
Ledger” will be provided in benefit or exporter
customs’ automated system to − Importer to possess sufficient
enable duty credit in lieu of duty information regarding origin
remission to be given for exports criteria, value addition content,
etc.
Economic Indicators | Direct Tax | Indirect Taxes | Regulat−
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origin shall not absolve the
Customs Act 1962
Legislative changes
• The scope of measures to • In line with the best international

safeguard domestic industry will be practices and to ensure level
enhanced beyond levy of safeguard playing field for domestic industry,
duties. The scope of “safeguard anti-circumvention measures are
measures” will also include the made more comprehensive and
following: wide in scope by amending rules
− Application of tariff-rate quota governing identification,
− Such other measures as may be assessment, and collection of
considered appropriate following:
Generally, tariff-rate quota shall − Anti dumping duty for dumped
not be lower than average level of articles
import in past three representative − Countervailing duty on
subsidised articles
years of which statistics is
available. Such quota may be
allocated to supplying countries in
a manner to be prescribed.
Customs Tariff – Other legislative changes
Health Cess
• A new duty of customs, ‘Health Notes

Cess’, has been introduced on • Exemption from payment of Health
import of medical devices falling Cess on import of above medical
under specified headings devices where no BCD is payable
and also on inputs/parts used in
Description of goods From 02 the manufacturing of specified
February medical devices
2020 • Value for applying ad valorem rate
All goods falling under 5 percent of Health Cess to be based on
CTH 9018, 9019, 9020, ad provisions of section 14 of the
9021 and 9022 of the valorem Customs Act
First Schedule to the
Customs Tariff Act, 1975
Customs
Rate movement
BCD has been increased on the following goods
Description of goods Up to 01 Feb 2020 From 02 Feb 2020

Specified house hold items- Tableware, kitchenware, glassware, padlocks, brooms, 10% 20%
brushes, combs, etc.
Specified household appliances – Fans, grinders, dryers, coffee and tea maker, fluid 10% 20%
heaters, etc.
Specified footwear 25% 35%
Specified toys 20% 60%
Specified stationary items 10% 20%
Compressor of refrigerator and air conditioner 10% 12.5%
Industrial fans, railway carriage fans, air circulator 7.5% 10%
Fingerprint readers for use in mobile phone Nil 15%
Headphones and earphones Applicable BCD 15%

Specified freezers, specified refrigerating equipment/devices, heat pumps, ice-making 7.5% 15%
machinery
Water cooler, vending machine 10% 15%
Specified gemstones, precious and semi-precious stones Nil 0.5%
Customs
Rate movement

Pressure vessels, welding and plasma cutting machines, motors like single phase AC 7.5% 10%
motors, stepper motors, wiper motors
Specified goods and their parts used in manufacturing of catalytic converter including 5% 7.5%
parts of catalytic converter
Noble metal solutions and compounds used in manufacturing of catalytic converter and 5% Applicable BCD
their parts
Platinum or palladium used in manufacturing of catalytic 5% Applicable BCD
converter and their parts
Other chemicals products and preparations falling under CTH 3824 99 00 10% 17.5%
Specified static converters 15% 20%

Copper and articles thereof used in manufacturing of Nil Applicable BCD
specified electronic items
Customs
Rate movement

Dip bridge rectifier; printed circuit board (populated, loaded, or stuffed) 10% 20%
Specified chargers and power adapters Applicable BCD 20%
Specified catalytic convertor 10% 15%
Specified goods used for construction/repair of road Nil Applicable BCD
Specified goods used in high voltage power transmission project 5% 7.5%
Rotary tillers/weeder 2.5% 7.5%
Gold used in the manufacture of semiconductor devices or Nil 12.5%
light emitting diodes
Customs
Rate movement
Description of goods Up to 31 Mar 2020 From 01 Apr 2020

PCBA of cellular mobile phones 10% 20%
Vibrator/Ringer of cellular mobile phones Nil 10%
Completely built units of commercial vehicles under CTH 8702, 8704 (excl. electric 30% 40%
vehicles)
Completely built units of commercial electric vehicles under CTH 8702, 8704 25% 40%
Semi knocked down forms of electric passenger 15% 30%
vehicles under CTH 8703
Semi knocked down forms of electric vehicles – bus, trucks, and two wheelers under 15% 25%
CTH 8702, 8704, 8711
Completely knocked down forms of electric vehicles - 10% 15%
passenger vehicles, three wheelers, two wheelers, bus, and trucks under 8702, 8703,
8704, 8711
Description of goods Up to 30 Sep 2020 From 01 Oct 2020

Display panel and touch assembly of cellular mobile Nil 10%
phones
Customs
Rate movement
BCD has been decreased on the following goods

Newsprint, uncoated paper used for printing newspaper and lightweight coated 10% 5%
(subject to specified conditions); calendared plastic sheets (used for smart cards)
Specified parts used in the manufacturing of microphone 10% Nil
Platinum or palladium used in the manufacture of specified goods, including catalyst, 12.5% 7.5%
metal compounds, metal solutions
Polyester liquid crystal polymers for use in manufacturing connectors 7.5% Nil
Calcined petroleum coke 10% 7.5%
Spent catalyst/ash containing precious metals 12.5% 11.85%
Very low sulphur fuel oil meeting specified certification and conditions for import 10% Nil
Micro-fuse base, sub-miniature fuse base, and their covers 7.5% Nil
Customs
Rate movement
Amendment in Social Welfare Surcharge for the following products

Tiles, cubes of specified dimension; monumental or building stone simply cut sawn 10% Nil
with a flat surface
Marble, marble block/ tile, travertine, and alabaster 10% Nil
Whey, almonds, walnuts, maize, specified orange juice 10% Nil

Printed circuit assemblies for the following goods: Nil 10%
Automatic teller machines, specified static convertors and inductors, specified

microphones and loud speakers, telephone answering machines, specified electronic
switches, specified plugs and socket for co-axial cables, proximity cards and tags,
specified electrical machines
Printed circuit boards for specified transmission apparatus, digital still image video Nil 10%
cameras cameras
Information technology software, falling under CTH 8523 Nil 10%
Customs
Rate movement
Amendment in Social Welfare Surcharge for the following products

Flat panel display falling under CTH 853180 and parts of indicator panel incorporating Nil 10%
LCD & LED falling under CTH 853190
Specified electronic switches, specified electro mechanical, snap-action switches Nil 10%
Units of automatic data processing machines, facsimile machines, and tele printers Nil 10%
Drawing and drafting machines under CTH 9017 and its printed circuit assemblies Nil 10%
Specified electric conductors of voltage not exceeding 1,000 volts with connectors Nil 10%

All commercial vehicles (including electric vehicles), imported as completely built unit 10% Nil
falling under heading 8702 or 8704
Customs
Pruning of exemptions leading to increase in effective rate of duty
Increase in effective BCD rate on account of withdrawal of exemptions and concessions

Specified edible oils and refined vegetable oils of edible grade under chapter 15 85% 100%
Glycerol water, glycerol iyes falling under CTH 1520 20% 30%
Parts used for manufacturing specified printers Nil Applicable duty
Colour television tubes Nil 10%
Specified MP3 or MP4 or MPEG 4 player 5% Applicable duty
Specified audio cassettes for blinds and pre-recorded cassettes Nil Applicable duty
Kyanite salts, in a form indicative of their use for manurial purpose 5% Applicable duty
Isolated soya protein 10% 30%
Instant print film 5% 10%
Specified polymers of ethylene 7.5% 10%
Customs
Pruning of exemptions leading to increase in effective rate of duty
Increase in effective BCD rate on account of withdrawal of exemptions and concessions

Polymers of styrene in primary forms 7.5% 10%
Lead bars, rods, profiles, and wires 5% 10%
Zinc tubes, pipes and tube, or pipe fittings 7.5% 10%
Tin plates, sheets, and strip of specified thickness; tin powder and flakes 5% 10%
Sprinklers and drip irrigation systems for agriculture and horticulture purposes 5% 7.5%
Specified goods for manufacturing of optical disk drives Nil Applicable duty
Dextrose monohydrate 20% 30%
Propane, butane 5% 10%
Phosphoric acid, for the manufacture of fertilisers 5% 20%
Customs
Rate movement
Miscellaneous Changes Certain product-specific

• New tariff heading and relevant clarification technical in nature has
rates have been prescribed for wall been provided for the following
fans, open cell for television set, products:
− Dyed woven fabric of yarn
unassembled solar cells, solar cells
falling under CTH 5407 52
assembled in modules or made up
− Satellite/payloads
in panels
− Scientific and technical
• Certain redundant Custom Duty
exemption notifications have been instruments
withdrawn
• Existing exemption notification to
be pruned further after taking
stakeholders’ suggestion
• Anti-dumping duty withdrawn on
Purified Terephthalic Acid” when
imported from specified countries
*Only key rate amendments have been captured
Goods and Services Tax
Introduction
• The FM termed GST as a historic − Introduction of new simplified

structural reform in India. returns from 1 April 2020
• Key benefits of GST highlighted by − Implementation of e-invoicing in
the FM in her speech included the phased manner
following: − Aadhaar based verification of
− Reduction in turnaround time of taxpayers
trucks due to abolition of check − Dynamic quick response code
posts for B2C invoices
− 10 percent reduction in overall − Use of data analytics and AI
tax incidence with an average of tools for crackdown on
4 percent household savings fraudulent cases, including input
− Increase in tax base with tax credit and refunds
addition of 6 million taxpayers − Review of GST rate structure to
after certain teething issues in address issues, such as inverted
the initial two years duty structure
• The budget announcements
contemplate a complete overhaul
of the technological and
compliance framework around GST,
including the following:
Legislative changes
• Input tax credit: The time limit for availing input tax credit on debit notes is relaxed. This is done by delinking the date
of issuance of debit note from the date of original invoice. The amendment can be understood with the help of the
following example:
• Offences and penalties: The provisions governing offences and penalties are made more stringent. This has been done
by broadening the scope of penal and prosecution provisions wherein, the beneficiaries are gaining benefits out of the
specified offences and at whose instance such offences are conducted/committed will be:
− Liable for penalty equivalent to tax evaded or credit availed/passed on
− Liable for imprisonment with fine
• Fraudulent availment of input tax credit without an invoice or bill is now prescribed to be cognizable and non-bailable
offence.
• Transition provisions: Enabling provisions governing the timelines of availment of transitional credit have been inserted
in the GST law with retrospective effect from 1 July 2017, to overcome the argument of excessive legislation.
Legislative changes
Miscellaneous/procedural • Provision prescribing time limit for • The refund of accumulated credit
changes issuance and resultant late fee for of compensation cess on tobacco
• Taxpayers voluntarily registered non issuance/delay in issuance of products arising out inverted duty
under the GST laws are now TDS certificate by the deductor is structure disallowed with effect
allowed to apply for cancellation of omitted. The government will from 1 July 2017. This has been
registration. prescribe a form and manner in done by giving retrospective effect
• Additional/joint commissioner, which the TDS certificate shall be to the relevant notification dated
commissioner empowered to issued. 30 September 2019.
extend the timelines for filing an • Timelines, enabling the
application for revocation of government to issue orders for
cancellation of registration removal of difficulties in
• Enabling provision is inserted to implementation of provisions under
provide for time and manner of GST laws, are extended from three
issuance of invoice for specified years to five years from the date of
category of supplies or services commencement of the relevant
GST statutes.
Tariff related changes
The following retrospective changes

in tax rates have been made:
• Exemption granted for fishmeal
from 1 July 2017 to 30 September
2019
• GST rate reduction on pulley,
wheels, and other parts falling
under Chapter heading 8483 and
used as parts of specified
agricultural machinery to 12
percent for period 1 July 2017 to
31 December 2018
• Under the aforesaid scenarios, no
refund shall be granted if the tax
has already been collected by the
supplier
Central Excise Duty
Rate movement: Increase in NCCD rate for cigarettes and tobacco products
Description of goods Rate up to 1 February 2020 Rate from 2 February 2020

Other than filter cigarettes of length:
• Not exceeding 65 mm INR 90 per thousand INR 200 per thousand
• Exceeding 65 mm but not exceeding 70 mm INR 145 per thousand INR 250 per thousand
Filter cigarettes of length:
• Not exceeding 70 mm INR 90 per thousand INR 440 per thousand
• Exceeding 70 mm but not exceeding 75 mm INR 145 per thousand INR 545 per thousand
• Other INR 235 per thousand INR 735 per thousand
Cigarettes of tobacco substitutes INR 150 per thousand INR 600 per thousand
Hookah or gudaku tobacco 10% 25%
Smoking mixtures for pipes and cigarettes 45% 60%
Other manufactured tobacco products, such as chewing tobacco, 10% 25%
Jarda scented tobacco, snuff, tobacco extracts, essence, etc.
Regulatory Landscape
• Banking and finance sector
• Changes in FDI
• Securities laws
• Insolvency for financial service

providers under IBC
Banking and finance sector
Guidelines for “on-tap” licensing for small finance banks in the
private sector issued by RBI
Eligible promoters Scope of activities Minimum capital

requirement
• Individuals (Indian resident) with 10 • Can undertake basic banking • Minimum paid-up capital of INR 2
years in FSI at senior level services billion
• Private sector companies/societies, • Non-risk sharing activities subject • Initial minimum capital
NBFC, MFI, LAB, Payments Bank to RBI approval requirement for Urban Cooperative
(controlled by residents) with five • Act as Category II authorised Banks converting into SFB is INR 1
years of experience dealer billion, which should be raised to
• Not allowed: • Promoters’ financial and non- INR 2 billion within five years of
− JV by different promoter group financial services to be ring-fenced business commencement
− Public sector entities and large • Minimum capital adequacy ratio of
business house (> INR 50 billion 15 percent of risk-weighted assets
assets)1
− AIF
1 Non-FSI business accounting for > 40 percent in terms of total assets / gross income
Banking and finance sector
Guidelines for “on-tap” licensing for small finance banks in the
private sector issued by RBI
Promoter’s contribution Corporate structure Others
• Minimum initial paid-up voting • Can either be set up as a • Applicants to furnish viable
equity capital of at least 40 percent2 standalone entity or under a business plans
with a lock-in period of five years holding company • Preference to applicants who set
• Minimum promoter contribution for • For holding company: up in a cluster of unbanked
converting NBFC, MFI, LAB, and UCB − Promoter to set up an NOFHC states/regions, such as north-east,
is capped at 26 percent instead of or east, and central regions
40 percent with lock-in period of five − Promoter to be registered as an • Minimum 50 percent of loan
years NBFC – CIC portfolio constitute of loans of INR
• Promoter’s stake to be reduced to 40 • Payments bank can function 2.5 million
percent within five years to 30 together with a SFB under the • To meet CRR and SLR as
percent within 10 years and 15 NOFHC structure maintained by commercia banks
percent in 15 years • SFB and NBFC/MFI cannot co-exist • 75 percent priority sector lending
• Material change (10 percent or requirement, with 40 percent
more) between the time of Adjusted Net Bank Credit in
application till grant of bank license various sub-sectors
should be brought to RBI’s prior
notice. Further, any material change
post grant of bank license will
require prior RBI approval 2 NBFC/MFI/LAB with promoter shareholding between 26 percent and 40 percent allowed to apply
Changes in FDI
Bifurcation of powers between the Government and RBI
• With a view to give the Key features of new regime are summarised below:
Government greater control over • List of debt and non-debt instruments are specified as under:
equity inflows in the country,
Foreign Exchange Management Debt instruments Non-debt instruments
(Non-debt Instruments) Rules, (governed by RBI) (governed by the Central Government)
2019 (NDI Rules) were notified on • Government bonds • All investments in equity in incorporated entities
17 October 2019 by MoF. • Corporate bonds (public, private, listed, and unlisted)
• Power to regulate debt instruments • All tranches of • Capital participation in LLPs
will continue to be under RBI’s securitisation structure, • All instruments of investment as recognised in
domain and will be governed by which are not equity the FDI policy as notified from time to time
Foreign Exchange Management tranche • Investment in units of AIFs, REITs and InVITs
(Debt Instruments) Regulations, • Borrowings by Indian firms • Investment in units of mutual funds and ETFs,
2019 (DI Regulations). through loans which invest more than 50 percent in equity
• Depository receipts whose • The junior-most layer (i.e., equity tranche) of
underlying securities are securitisation structure
debt securities • Acquisition, sale of or dealing directly in
immovable property
• Contribution to trusts
• Depository receipts issued against equity
instruments
Changes in FDI
Bifurcation of powers between the Government and RBI
• FVCIs have been permitted to • Aggregate limit of investment by • NRIs and OCI can also purchase or
invest in equity, equity linked FPI of 24 percent in Indian sell exchange traded funds, which
instruments or debt instruments of company increased to respective invest less than or equal to 50
Indian start-ups (irrespective of sectoral cap/statutory ceiling, as percent in equity on repatriation
the sector in which the start-up is applicable to the Indian Company, and non-repatriation basis without
engaged in). with effect from 1 April 2020. The any limit.
• NRIs and OCI can also purchase or companies may, however, increase
sell units of domestic mutual or decrease the aggregate limit
funds, which invest more than 50 with the approval of its board of
percent in equity both on directors and its shareholders by a
repatriation and non-repatriation special resolution.
basis, without any limit.
Changes in FDI
Sector-specific changes
The Government has liberalised the Manufacturing: 100 percent FDI E-commerce: E-commerce
FDI in following sectors with effect under the automatic route permitted marketplace entity with FDI shall
from 5 December 2019: in “contract manufacturing” have to obtain and maintain a report
of statutory auditor by 30 September
Coal and lignite: 100 percent FDI Digital media: FDI up to 26 percent every year for the preceding financial
under automatic route permitted for permitted under government route year confirming compliance of the e-
the following: for uploading or streaming of news commerce guidelines
• Sale of coal and current affairs through digital
• Coal mining activities, including media
associated processing
infrastructure (which would include
coal washery, crushing, coal
handling, and separation [magnetic
and non-magnetic])
Changes in FDI
Sector-specific changes
Single Brand Product Retail − Sourcing of goods from India for • Retail trading through e-commerce
Trading (SBRT): 100 percent FDI global operations can now be can also be undertaken prior to
under automatic route is permitted: done directly by the entity opening of brick and mortar stores,
• For FDI of more than 51 percent, undertaking SBRT or its group subject to the condition that the
sourcing of 30 percent of value of companies (resident or non- entity opens brick and mortar
goods procured shall be done from resident) or indirectly by them stores within two years from date
India. Further, the local sourcing through a third party under a of start of online retail
requirements can be met as an legally tenable contract; and
average during the first five years, − To consider the entire sourcing
and thereafter on an annual basis from India for global operations
towards its India operations. for meeting the 30 percent local
Further, local sourcing sourcing requirements
requirements can be met as under:
− All procurements made from
India by the SBRT entity for that
single brand shall be counted
towards 30 percent local
sourcing, irrespective of whether
the goods procured are sold in
India or exported
Securities laws
Relaxation in debt investment norms for FPIs and re-opened the VRR
On 23 January 2020, RBI announced • Relaxation: The 20 percent − At any point in time,
a few relaxations in the General threshold mentioned above has investments in securities
Investments Limits route. It increased been increased to 30 percent, maturing within one year should
the limits under VRR and re-opened which means an FPI’s investment not exceed 20 percent (now 30
the allocation of investment limits in bonds maturing within one year percent) of FPI’s total portfolio
under VRR. can go upto 30 percent of the FPI’s in corporate debt securities
total investment in the respective − Investment by a single FPI or a
General Investment Limits route: category of bonds group of related FPIs should not
• Existing framework: At any point • Existing framework: FPI exceed 50 percent of the issue
in time, an FPI’s investment in investments in security receipts size of a debt security
bonds maturing within one year are not subject to following
should not exceed 20 percent of its restrictions applicable to corporate
total investment in the respective debt investments:
category of bonds (e.g., − At the time of investment, the
government securities, corporate debt instrument should have
bonds) minimum residual maturity of at
least one year
Securities laws
Relaxation in debt investment norms for FPIs and re-opened the VRR
• Relaxation: Henceforth, the above VRR: • FPIs that have been allotted
mentioned exemptions will also The relaxations/amendments in the investment limits under VRR can
apply to investments in the VRR framework are as follows: transfer their investments made
following securities: The allocation of limits that were under the general investments
− Investments in debt instruments hitherto available upto 31 December limits to VRR
issued by asset reconstruction 2019 has been re-opened effective 24 • Though mutual fund investments
companies January 2020. are not permitted under VRR,
− Debt instruments issued by an • The overall investment limits have investments in exchange traded
entity under the CIRP as per the been increased from INR 750 funds have been specifically
resolution plan approved by the billion to INR 1.5 trillion allowed the ETF invests only in
NCLT under the IBC debt securities
This relaxation brings all types of

debt investments in stressed assets in
par with security receipts.
Insolvency for financial service providers under IBC
Framework on insolvency of financial service providers under IBC
On 15 November 2019, the The key highlights of Rules are as − Interim moratorium from the
Government extended the scope of follows: date of filing of the application
IBC to cover FSPs and notified • CIRP of FSPs: of CIRP by RBI until its
Insolvency and Bankruptcy − CIRP of a FSP, who has admission or rejection by NCLT.
(Insolvency and Liquidation committed a default per IBC, However, the business of FSP
Proceedings of Financial Service shall be initiated only based on remains uninterrupted and its
Providers (FSP) and Application to an application made by the license or registration shall not
Adjudicating Authority) Rules, 2019 appropriate regulator, i.e., RBI be suspended or cancelled
(Rules) for insolvency resolution and and it shall be dealt with by the during interim moratorium
liquidation proceedings of NBFCs adjudicating authority, i.e., NCLT − Such moratorium shall not apply
including HFCs with asset size of INR − NCLT shall appoint an individual to any third-party assets or
5 billion or more. as an administrator proposed by properties in custody or
RBI who shall act as an possession of the FSP.
insolvency professional, interim − The administrator has been
resolution professional, empowered to take control and
resolution professional or custody of such
liquidator, as the case may be assets/properties, only for the
purpose of dealing with them in
the manner as may be notified
by the Government.
Insolvency for financial service providers under IBC
Framework on insolvency of financial service providers under IBC
− RBI may constitute an advisory • Voluntary

committee of three or more liquidation/dissolution:
experts within 45 days of the − FSP is required to obtain a prior
insolvency commencement date, permission of RBI before
if deemed necessary, to advise initiating voluntary liquidation.
the administrator in the − NCLT shall provide RBI with an
operations of the FSP during opportunity of being heard
CIRP. before passing an order for
− Once a resolution plan has been liquidation or dissolution of FSP
approved by the Committee of under IBC.
Creditors, the administrator
shall seek a “no objection” from
RBI to the effect that it has no
objection to the persons, who
would be in control or
management of FSP after
approval of the resolution plan.
Policy Updates
• Banking and finance
• Foreign investment
• Securities laws
• IFSC
• Others
Policy updates
Banking and finance • Governance reforms to be carried • Banking Regulation Act, 1949 to be
• Factor Regulation Act, 2011 to be out in PSU banks to make them amended to strengthen the
amended to enable NBFCs (not more competitive and certain PSU Cooperative Banks’ regulatory
registered as NBFC-factors) to banks to be encouraged to framework and governance norms
extend invoice financing to the approach capital market to raise • Debt recovery under SARFAESI will
MSMEs through TReDS additional capital now also be available to NBFCs
• To enhance working capital credit • DICGC permitted to increase with asset size of INR 1 billion (as
for MSME entrepreneurs, a scheme Deposit Insurance Coverage for a against current threshold of INR 5
to be introduced to provide depositor, which is now INR billion) or loan size of INR 5 million
subordinate debt by banks 1,00,000 to INR 5,00,000 per (as against current threshold of
• To address the liquidity constraints depositor INR 10 million)
of the NBFCs/HFCs, existing Partial
Credit Guarantee scheme
introduced in Union Budget 2019-
20 for NBFCs to be further
supported by devising a
mechanism, wherein the
Government will offer support by
guaranteeing securities so floated
Policy updates
Foreign investment Securities laws IFSC

• To attract skilled teachers, • Limit for FPI investment in • International Bullion exchange(s)
innovate, and build better labs corporate bonds to be increased to to be set up in GIFT-IFSC as an
steps to be taken to enable 15 percent of the outstanding additional option for trade by
sourcing of ECBs and FDI to deliver stock of corporate bonds (as global market participants
higher quality education against existing threshold of 9 • Stamp duty exemption proposed
• Investment Clearance Cell to be percent) for instruments of transaction in
set up through a portal to provide • To improve investors’ confidence, stock exchanges and depositories
“end to end” facilitation and and to expand the scope of credit established in any IFSC
support, including pre-investment default swaps, new legislation to
advisory, information related to be introduced for providing a
land banks and facilitate clearances mechanism for netting of financial
at centre and state level contracts
• Specified categories of government • The Government to float a new
securities would be opened fully for debt ETF consisting primarily
non-resident investors government securities
Policy updates
Others
• Companies Act, 2013 and other
laws will be amended to do away
with criminal liability for acts that
are civil in nature
• Amendments to be carried out in
Pension Fund Regulatory and
Development Authority Act, 2013
to facilitate separation of NPS trust
for government employees from
PFRDA
• To promote affordable housing
projects, the date of approval of
affordable housing projects for
availing tax holiday (presently 31
March 2020) extended by one
more year
Glossary
Glossary
AAR Authority for Advance Rulings CAD Current account deficit

Act The Income-tax Act, 1961 CAT Common Admission Test
ADR American Depository Receipt CbCR Country-by-Country Report
AE Associated Enterprises CBDT Central Board of Direct Taxes
AGM Annual General Meeting CCR, 2004 CENVAT Credit Rules, 2004
AIBP Accelerated Irrigation Benefits Programme CENVAT Central Value Added Tax
AIF Alternative Investment Fund CETA Central Excise Tariff Act, 1985
AML Anti money laundering legislation CG Capital Gain
AMT Alternate Minimum Tax CGT Central Government
AO Assessing Officer CIC Core Investment Company
AOP Association of Persons CIT Commissioner of Income Tax
APA Advance Pricing Agreements CIT(A) Commissioner of Income Tax (Appeals)
CKD Completely Knocked Down
ARE Alternate Reporting Entity
CPSE Central public sector enterprise
AY Assessment Year
CSR Corporate Social Responsibility
BBT Buy Back Tax
CTA Covered Tax Agreements
BCD Basic Customs Duty
CTT Commodity Transaction Tax
BEPS Base Erosion and Profit Shifting
CVD Counter Vailing Duty
BOE Bill of Entry
DAPE Dependent Agent Permanent Establishment
BOI Body of Individuals
DDT Dividend Distribution Tax
CAAR Customs Authority for Advance Ruling
Glossary
DGH Director General of Hydrocarbon FTP Foreign Trade Policy

DIPP Department of Industrial Policy and Promotion FTS Fees for Technical Services
DRP Dispute Resolution Panel FVCI Foreign Venture Capital Investor
DTA Domestic Tariff Area FY Financial Year
DTAA Double Taxation Avoidance Agreements GAAR General Anti-Avoidance Rules
DTC Direct Tax Code GDP Gross Domestic Product
EC Heath and Education Cess GDR Global Depository Receipt
ECB External Commercial Borrowings GIFT Gujarat International Finance Tec City
EOU Export Oriented Units GOI Government of India
EPF Employees’ Provident Fund GST Goods and Services Tax
EPFS Employee Provident Fund Scheme, 1952 GSTN Goods and Services Tax Network
FDI Foreign Direct Investment GTA Goods Transport Agent
GTI Gross Total Income
FEMA The Foreign Exchange Management Act, 1999
HC High Court
FERA Foreign Exchange Regulations Act
HUF Hindu Undivided Family
FII Foreign Institutional Investor
IBC The Insolvency and Bankruptcy Code, 2016
FIPB Foreign Investment Promotion Board
ICDS Income Computation and Disclosure Standards
FMV Fair Market Value
IFC Internal financial controls
FPI Foreign Portfolio Investor
IFSC International Financial Services Centre
FTC Foreign Tax Credit
IGST Integrated Goods and Services Tax
FTCR Foreign Tax Credit Rules
Glossary
Ind AS Indian Accounting Standards MTM Marked to Market

InvIT Infrastructure Investment Trusts NABARD National Bank For Agriculture & Rural Development
InvIT NAV Net Asset Value
Regulations SEBI (Infrastructure Investment Trusts) Regulations 2019
NBFC Non Banking Financial Company
IT Rules Income-tax Rules, 1962
NOC No Objection Certificate
ITAT Income Tax Appellate Tribunal
NONG non oil, non gold
ITC Input Tax Credit
NPA Non Performing Assets
LED Light Emitting Diode
NPS National Pension Scheme
LLP Limited Liability Partnership
NR Non-Resident
LOB Limitation of Benefit
NRE Non-Resident External
LTCG Long Term Capital Gains
NRI Non-Resident Indian
MAP Mutual Agreement Procedures
NTRO National Technical Research Organisation
MAT Minimum Alternate Tax OCI Overseas Citizen of India
MCA Ministry of Corporate Affairs ODI Outward Direct Investment
MCAA Multilateral Competent Authority Agreement OECD Organization for Economic Cooperation and Development
MGNREGA Mahatma Gandhi National Rural Employment Guarantee Act PAN Permanent Account Number
MLI Multilateral Instrument PCBA Printed circuit board assembly
MSME Micro, Small and Medium Enterprise PE Permanent Establishment
MSP Minimum Support Price PMLA Prevention of Money Laundering Act, 2002
MT Metric ton POEM Place of Effective Management
Glossary
PPT Principal Purpose Test SC Supreme Court

PY Previous Year SCM Settlement Commission
QFI Qualified Foreign Investor SCN Show cause notice
QIB Qualified Institutional Buyers SCRA The Securities Contracts (Regulation) Act, 1956
R&D Research and Development SEBI The Securities and Exchange Board of India
R&I Road & Infrastructure cess SEP Significant Economic Presence
RBI Reserve Bank of India SEZ Special Economic Zone
RCS Regional Connectivity Scheme SFT Statement of Financial Transactions
RDBs Rupee Denominated Bonds SHEC Secondary and Higher education cess
REER Real effective exchange rate SLM Straight Line Method
REIT Real Estate Investment Trust SLP Special Leave Petition
RO Reverse Osmosis SME Small and Medium Enterprise
SPV Special Purpose Vehicle
ROC Registrar of Companies
SR Security Receipts
RPT Related Party Transaction
STCG Short-term Capital Gain
SAD Special additional duty
STT Securities Transaction Tax
The Securitisation and Reconstruction of Financial Assets and
SARFAESI Enforcement of Security Interest Act, 2002 SWS Social Welfare Surcharge
SAT Securities Appellate Tribunal TA Tax Authorities
SBO Significant beneficial owner TAN Tax Deduction / Collection Account Number
SBRT Single Brand Retail Trading TCS Tax Collected at Source
Glossary
TDS Tax Deducted at Source

TPO Transfer Pricing Officer
TP Transfer Pricing
VCF Venture Capital Fund
VO Valuation Officer
WOS Wholly Owned Subsidiary
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In Tax Union Budget Detailed Analysis One Noexp

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Union Budget 2020

• Macroeconomic fundamentals in focus

• Further rate cuts expected to be on

• The FM unveils Bahi-Khata

Weak demand driving slowdown

Weak demand driving slowdown

Growth in domestic demand (in real values)

Private consumption Government consumption Total fixed investment

Source: CMIE, RBI

Fiscal space, inflation, and currency valuation causing concerns

Fiscal space, inflation, and currency valuation causing concerns

Source: CMIE, RBI, Economic Survey 2020, Union Budget 2020.

Further rate cut dependent on the RBI’s inflation expectation

Further rate cut dependent on the RBI’s inflation expectation

Apart from the near-term growth- Policy rates

Source: CMIE, RBI.

Budget 2020 focuses on some key sectors

Budget 2020 focuses on some key sectors

− Allocation of INR 1.7 lakh crore Start-ups MSMEs

Source: The Union Budget 2020

Simplified tax regime - Option to the tax payer [Section 115BAC]

Change in residency rules [Section 6]

• Currently, an Indian citizen/person • Likewise for qualifying to be a ‘Not

Also, employee is not taxable on

Deferment of tax on stock Appropriate changes are proposed to allowances/perquisites by virtue of

Carry forward of business losses and unabsorbed depreciation

Extending the benefit of carry • It is proposed to also extend this

Corporate tax rate card

*Compliant with prescribed conditions under section 115BAA;

Tax rate card – Co-operative societies

Income slabs (in INR) Rate of tax (%)

Expenditure on scientific research

Expenditure on scientific research • Subject to above-mentioned entity − furnishes to the donor, a

Option for not availing deduction for specified businesses

Providing an option of not • At present, an assessee does not

Taxation of real estate transactions

Enhanced safe harbour limit for • The deeming provisions to

Tax holiday for start-ups

Rationalisation of tax holiday • Considering that start-ups may not

Tax holiday for affordable housing

Incentive to affordable housing • Currently, the tax holiday

Business trust and unit holders

Modification of the definition of Exemption of dividend received

Tax Exemption on certain income • The exemption is subject to the

Rationalisation of tax deduction for donations

Amendment in Section 80GGA • Further deduction under section

Amendment to Rule 5 of First Schedule

• Section 44 read with Rule 5 to the • It is proposed to provide that any

Taxation of co-operative societies

Amendments to the Finance Act, 2013

Commodity transaction tax

Sale of option in goods, where option is exercised resulting in

Applicability of SEP deferred and definition revised

Exemption from indirect transfer provisions to NR investors in FPIs

• NR investors are currently • In line with the changes made by

• Explanation 2 to section 9(1)(vi) • The exclusion of cinematographic

Conditions for offshore funds’ exemption from “business connection” relaxed

• Section 9A provides that in case of

Section 94B: Interest paid to PE of an NR bank to be excluded from interest disallowance

Exemption to NRs from filing return of income

Provisions regarding units in the “cost of acquisition” of the

Capping the “fair market value”

Other miscellaneous proposals