Income Tax 01 Feb,2020
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Union Budget – 2020 Proposals: Compliance Related Reliefs
PRABHAKAR K.S.Proprietor, Shree Tax Chambers

Hon'ble Finance Minister while presenting her second Union Budget on 1st February, 2020, has proposed unexpected but desired two-compliance related reliefs, Rationalization of Tax Audit provisions and Non-residents Tax Return compliance.

1. Rationalization of Tax Audit Provisions

Section 44AB of the Income Tax Act, 1961 mandates a compulsory tax audit by a Chartered Accountant for those businesses whose total sales, turnover or gross receipts, if exceeds one crore rupees and in the case of professionals, whose gross receipt exceeds fifty lakh rupees in any previous year.

To reduce the compliance burden on Small and Medium Enterprises (SME Business), the Hon'ble Finance Minister has proposed to increase the current threshold limit for business from one crore rupees to five crore rupees subject to -

  •  aggregate of five percent of all receipts received in cash during the previous year, and

  •  aggregate of five percent of all payments made in cash during the previous year.

To ease administration issues and avoid the last-minute rush, it is proposed to mandate all such assessees to file their 'Tax Audit Report' atleast one month in advance or prior to the due date of filing of such 'Return of Income.

Currently, the due date of filing such ''Tax Audit Report' is 30th September, which also proposed to amend as 31st October of the relevant assessment year.

It is also proposed to do away with the existing distinction between a working and a non-working partner of a firm with respect to the due dates by amending dozens of relevant provisions prospectively with effect from 1st April, 2020 to apply from the assessment year 2020-21 onwards.

2. Non Residents & Exemption from filing of Returns

Section 115A of the Income Tax Act deals with the taxation of two types of income received by a non-resident including foreign company -

  •  Dividends or Interest income

Where the total income of a non-resident individual or of a foreign company includes such dividends excluding distributed profits of domestic companies at 20 percent, interest received from Government at 20 percent, interest received from a infrastructure debt fund at 5 percent, interest from domestic companies at 5 percent, interest from bonds and government securities at 5 percent, distributed income of a business trust at 5 percent, income received in respect of mutual fund units purchased in foreign currency at 'nil' rate.

  •  Royalty or fee for technical services

Where the total income of a non-resident individual or a foreign company include such royalty or fees for technical services other than from Government or an Indian concern in pursuance of an agreement made by a non-resident or foreign company with the Government at 25 percent.

Compliance - Currently, Section 115A (5) of the Income Tax Act, 1961 exempts or did not prescribe any such 'Return' which actually required to be filed under Section 139(1) subject to certain conditions such as if his total income consists only such dividend and interest income and if requisite tax has been deducted at source.

However, the Act mandates to file a 'Return under Section 139(1)' if there is an income from royalty or fee for technical services.

From the above, it emerges that compliance relief has not been extended to non-residents whose total income consists of only such income received by way of royalty or fees for technical services.

Now, Hon'ble Finance has proposed to extend the 'Compliance or Return Filing' relief to non-residents whose total income consists royalty or fees for technical services subject to requisite tax has been deducted at source, by amending section 115A of the Act with prospective effect from 1st April, 2020 to apply from the assessment year 2020-21 onwards.