NEW DELHI :
Big changes in India’s direct tax regime will come into force on Wednesday, covering a host of stakeholders, including non-resident Indians (NRIs), company shareholders, digital firms and individual income taxpayers, with provisions of the Finance Act taking effect on 1 April.
One of the key changes that take effect applies to non-residents. NRIs who have more than ₹15 lakh income from Indian sources will be deemed as Indian residents for the purpose of taxation if they had spent 120 days in India in the previous year. Earlier, the time Indian citizens or persons of Indian origin needed to spend in India to qualify as Indian tax resident was 182.
One relief the government has granted is that only the Indian sourced income of NRIs will be taxed in India in such cases, not their global income.
Another key change that will kick in is the taxation of dividends in the hands of shareholders, in contrast to the earlier system of levying a dividend distribution tax (DDT) on the company. However, the amendments incorporated while the Finance Bill was cleared in Parliament gives the relief that there will be no tax liability on the dividend income received by a shareholder after 1 April, if it was distributed by the company before 1 April and DDT had been paid by the company on it.
According to Ved Jain, a former president of accounting standard setter Institute of Chartered Accountants of India (ICAI), the new personal income tax slabs for individuals who do not opt for tax incentives, becomes applicable for the income earned from 1 April.
As per this, tax rate on income in the range of ₹5-7.5 lakh is 10%, while income in the range of ₹7.5-10 lakh is taxed at 15% and income in the range of ₹10-12.5 lakh is at 25%. Taxpayers can either opt for the new slab system or continue in the old system. They are also allowed to switch between the two regimes.
Another major change that comes into force is the equalization levy, so far applicable only to online advertising and related services, on all types of e-commerce transactions in India as well as those transactions which use Indian data. This could potentially cover all digital business earning more than ₹2 crore of revenue from India or using Indian data. Although equalization levy, which was introduced in 2016, is levied at 6% on payments made to offshore platforms hosting online advertisements, it will be taxed only at 2% on e-commerce transactions.
The government has already offered relief to businesses in terms of extension of deadlines for various compliance requirements under direct and indirect taxes including the due date for filing tax returns for FY19. It has also offered a waiver of late fee, interest and penalty for various defaults under the Income Tax Act to help businesses tide over the disruptions caused by the Coronavirus pandemic. These relaxations, according to Archit Gupta, founder and chief executive officer of ClearTax, a tax-related service provider, have brought much-needed relief to taxpayers.