Finance Bill 2020 - Amendments

Amendments to Finance Bill 2020
Section Amendment to Finance Bill 2020 Implications
Sec 6(1) Expl 1(b)
Threshold for residency of Indian citizens and Indian origins
visiting India whose total income excluding income from
foreign sources exceeds 15 lakhs during the PY reduced
from 182 to 120 days
Intends to provide relaxation to NRIs
by reducing residency thresholds to
120 days for those having income
exceeding INR 15 lakhs
Sec 6(1) Expl 1A
An Indian citizen whose total income excluding income from
foreign sources exceeds 15 lakhs during the PY and is not
liable to tax in any other country or territory shall be deemed
to be resident in India
The amended provisions intends to
narrow down the scope of taxability to
only those Indian citizens with total
income exceeding INR 15 lakhs per
annum
Sec 6(6)
Added to existing definition of “Not Ordinarily Resident”
• Indian citizens and Indian origins visiting India whose total
income excluding income from foreign sources exceeding
INR 15 lakhs during the PY who has been in India for a
total period 120 days or more but less than 182 days
• Indian citizen deemed to be resident in India
The amended provisions has omitted
the proposed definition of RNOR and
has included deemed resident and NRI
staying in in India for 120 days or more
but less than 182 days

Expl to Sec 6
Definition of “income from foreign sources” – Income which
accrues or arises outside India except income derived form
a business controlled in or profession set up in India
Clarification on the term - income from
foreign sources
Expl to 3rd
proviso
Sec 10(23C)/ Expl 2
Sec 11(1)
An explanation is proposed to be added to clarify that
income of the fund or trust or other relevant institution shall
not include voluntary contribution made with specific
direction that they shall form part of corpus of such fund,
trust, etc
Clarification on income of any fund,
trust shall exclude contributions with
specific directions which shall form
part of corpus fund
12th
proviso to Sec
10(23C)
Provision where voluntary contribution with a specific
direction shall form part of the corpus of the trust or
institution is proposed to be extended to contribution to
corpus of university, educational institution, hospital, other
medical institution
Extending the treatment contribution to
corpus of trust, institutes as application
of fund to contribution to corpus of
university, education institute etc

Sec 10(23FE)
Exemption of dividend/ LTCG/ interest arising from an
investment made by wholly owned subsidiary of Abu Dhabi
Investment Authority and Sovereign Wealth Fund in India,
whether in the form of debt or share capital or units (earlier
only debt or equity) subject to specified condition.
The entities eligible for such exemption is proposed to also
include specified pension funds
As per the amended provisions,
investments could be made in share
capital or units as against term used
earlier as equity. Eligible entities would
also include specified pension fund
Sec 10(23FE)
Restrict exemption u/s 10(23FE) to investment made during
the period from April 1, 2020 to March 31, 2034
Clarifies that exemption is available
only for investments during the
specified period

Sec 10(23FE)
• Expand the scope of entities investments qualifying for
exemption to include investment made in business trust
as specified in Sec 2(13A)(i) or category I or II Alternative
investment Fund regulated by SEBI having 100%
investment in the specified companies (carrying out
activities as specified under clause (b))
• Further the amendment also authorizes CBDT to issue
guidelines for interpretation of the above eligibility clause
which have to be laid before the Parliament
• The amendment further provides that if a person avails
exemption and subsequently, it fails to satisfy any
condition for exemption, then the said income for which
the exemption is claimed would be taxable in the year in
which such failure takes place
Provides much clarity by specifying
the list of qualified investments
Sec 10(34)
Provides clarity that exemption is available for dividend
income if DDT is paid under Sections 115-O and 115BBDA
even if it received after April 1, 2020
This is a much required amendment for
taxpayers following cash system of
accounting

Sec 80M
Dividends received from foreign company and business
trust is also proposed to be allowed as deduction in
computing the total income of the recipient domestic
company
Deduction is allowed to dividends
received from foreign company and
business trust as well. Removes
cascading effect of tax. Foreign
companies with POEM distributing
dividends to Indian parent Co should now
qualify for deduction under Section 80M
Sec 115A(1)(a)
Clause (BA) is substituted with the following
(BA) the amount of income-tax calculated on the amount
of income by way of interest to referred to in –
i. Sub-clause (iia) at the rate of 5 percent – Interest
u/s 10(47
ii. Sub-clause (iiaa), (iiab) or (iiac) at the rate specified in
the respective sections – Section 194LC, 194LD and
194LBA respectively
As per existing provisions, interest under
all the sections mentioned herewith were
taxable at 5 percent in the same clause.
However, TDS rate u/s 194LC was
proposed to be reduced to 4 percent in
the original finance bill 2020. Thus, by
splitting the clauses, taxability of interest
under each section is delinked now

Sec 115BAA(2)(i)
Deduction under Chapter VI-A allowed to companies opting
for lower tax rates are (a) Section 80JJAA - with effect from
April 1, 2020 (b) Section 80M – with effect from April 1,
2021
Section 80M is applicable only from
April 1, 2021 onwards (assessment
year)
Sec 115BAB(2)(c)(i)
Deduction allowed to new manufacturing companies opting
for lower tax rates, are (a) Section 80JJAA – with effect from
April 1, 2020 (b) Section 80M – with effect from April 1, 2021
Section 80M is applicable only from
April 1, 2021 onwards (assessment
year)
Sec 115BAC(5)
Option can be exercised by Individual/ HUF having no
income from business or profession every year at time of
filing ITR
For Individuals/ HUF having income from business or
profession, option can be exercised only once and once
the new option has been exercised, it shall apply to
subsequent assessment years
The earlier provisions imposed the
condition only on individuals/ HUFs
having income from business that once
the option of paying tax under new rejig
is opted, it shall apply to all subsequent
years. Amended provisions now cover
income from profession as well for this
condition

Sec 194J
Rate of TDS on fees for technical services (other than fees
for professional services) or royalty for sale, distribution or
exhibition of cinematographic films is proposed to be
reduced to 2% from the existing rate of 10%
Relief by way of reduced rate of TDS
at 2% is also extended to the Cinema
industry on Royalty payments for
sale, distribution or exhibition of
cinematographic films
Sec 194A(5)
TDS on interest other than interest on securities.
Central Government by way of notification in the Official
Gazette, may provide for non-deduction of TDS or
deduction at a lower rate from such payment to such
person or class of persons, as may be notified
It’s a new addition in the Finance Bill.
Central Government has assigned
itself power to notify such non-
deduction or deduction at lower rate.
Sec 194K
i. TDS at 10% introduced on any income received from
Mutual Funds u/s 194K
ii. However, TDS will not apply in case -
a) The payment does not exceed INR 5,000 during the
financial year; or
b) If the income is in the nature of Capital Gain
Amended provisions has cleared the
clouds on the transaction of
redemption of mutual funds units.
Capital Gain on account of
redemption of units will not be subject
to TDS under Section 194K

Sec 194N
TDS by Banking Company, Co-operative Society or Post
Office in case of payment is made in cash to the recipient
who is an account holder with the payer
i. TDS at 2% on a sum exceeding INR 1 crore
ii. If the recipient has not filed income tax return for all 3
preceding previous years –
a) 2% on a sum exceeding INR 20 Lakhs but does not
INR 1 Crore
b) 5% on a sum exceeding INR 1 crore
Amended provisions provides relief to
taxpayers (person who withdraws
money) who have been regularly filing
return of income and hence rewarding
law abiding citizens by way of lower
TDS rates
Sec 194LBA(2A) TDS under section 194LBA is not applicable on dividend
income referred to in section 10(23FC)(b) paid by Business
Trust (REITs or InvITs) to its unit holders (resident as well
as non-resident), if the SPV (as referred in section
10(23FC)) has not exercised the option u/s 115BAA, ie
lower tax regime
This proposed amendment would
bring back the previous regime of
REITs and InvITs distributing dividend
freely to unit holders. However,
 SPVs shall continue to pay tax at
higher rates
 Dividend would be taxable in the
hands of unit holder

Sec 194-O
(4) – Empowering CBDT to issue guidelines (with the
approval of Central Government) to remove difficulties arising
in giving effect to Section 194-O (5) – Every guidelines to be
laid before each house of Parliament and it is binding on
Income-tax authorities as well as e-commerce operator (6) –
For this section, e-commerce operator shall be deemed to be
person responsible for paying e-commerce participant
Deeming provisions for e-commerce
operator removes the earlier
requirement of paying to e-commerce
participant.
This section is in effect from
October 1, 2020 onwards. Thus, TDS
compliance is deferred by 6 months
Sec 197A(1F)
Central Government by way of notification may provide for
non-deduction of TDS or deduction at a lower rate from such
payment to such person or class of persons, including
institution, association or body or class of institutions,
associations or bodies, as may be notified by the Central
Government in official Gazette
It’s a new addition in the Finance Bill.
As per existing provisions, Central
Government could only notify non-
deduction, not lower rate
Sec 92CB
Amended to include income referred in Section 9(1)(i) under
Safe harbour mechanism
Consequential amendment is proposed
as income referred in Sec 9(1)(i) is also
subject to SHR as proposed in the
introduced finance bill

Sec 206C(1G)
&
Sec 206C(1H)
TCS provisions for purchasing of overseas tour package
or making foreign remittance exceeding INR 7 lakh during
a financial year (1G) and TCS on sale of goods exceeding
INR 50 lakh to a buyer in a financial year by seller having
turnover of more than INR 10 crores (1H) to be effective
from October 1, 2020.
Following proviso are proposed to replace the existing
proviso in sub-section (1G) -
i. Threshold of INR 7 lakhs in financial year would apply
only for remittances other than for purchase of
overseas tour packages
ii. TCS at 0.5% only if remittance is out of loan obtained
for pursuing any education (section 80E)
iii. TCS is not applicable if buyer of overseas tour
packages / remitter has already deducted TDS
 The substituted proviso intends
to provide that the threshold of
INR 7 Lakhs in a FY would not
apply even if the remittance is
through LRS for the purchase of
overseas tour packages
 Provides relief to students
applying for studies outside India

Sec 206C(1G)
&
Sec 206C(1H)
Following words have been inserted at the requisite places
in sub-section (1H) to keep export and import of goods out
of the purview of TCS.
i. In sub-section (1H), the words ‘being exported out of India
or goods’ are inserted after the words ‘other than goods’
ii. In second proviso to sub-section (1H), the words ‘on
the goods purchase by him from the seller’ are inserted
after the words ‘provision of this Act’
iii. In Explanation (a)(C) to sub-section (1H), the words ‘any
other person’ has been substituted with the words ‘the
person importing goods into India or any other person’
 No TCS on export and import
of goods from / to India is a
welcome move
 Clarifies that TCS and TDS
cannot be applicable on same
transaction
Proposed new Sub-sections
(1-I) – CBDT is authorised to issue guidelines for removal of
any difficulty
(1J) – Guidelines to be binding on Tax Authorities and the
person liable to collect such tax.

TDS rates and
surcharge
Rates of TDS and surcharge for FY 2020-21
• 20% TDS rate on dividend income in respect of non-
resident(Indian or any other person or company other than
domestic companies)
• Dividend income shall also be included for the purpose of
surcharge at the rate of 10% and 15% of such TDS
• Dividend income shall be excluded for the purpose of
surcharge at the rate of 25% and 37% of such TDS.
Also provided that where the total income includes dividend
income, the rate of surcharge on the amount of Income-tax
deducted in respect of that part of income shall not exceed 15%.
 Withholding on dividend income
of non-residents, as per the
existing provision was required
to be done at 40 percent (in
case of non-treaty jurisdiction).
However, This seemed to be an
anomaly as the final tax liability
was still at 20 percent in such
cases
 Amended provisions provides
much clarity by specifying the
rate of TDS on dividend
 Relaxation has been provided
to HNIs by excluding dividend
income from higher surcharge
rates
 Will Section 115-A benefit and
20 percent interest deduction –
both are available, or dividends
are to be offered to tax on gross
basis – needs clarity

163(3)
163(3) – It shall apply to consideration received or receivable for
specified services provided on or after the commencement of
this Chapter, and to consideration received or receivable for e-
commerce supply or services made or provided on or after April
1, 2020
Amended provisions proposes
the levy even on supply of goods
or provision of services online or
through internet
164(ca)
E-commerce operator means a non-resident who owns,
operates or manages digital or electronic facility or platform for
online sale of goods or online provision of services or both
Definition of e-commerce
operator to be only non-resident
164(cb)
E-commerce supply or services means –
i. Online sale of goods owned by e-commerce operator or
services provided by operator
ii. Online sale of goods or provision of services facilitated by
the operator
iii. Any combination of the above
Definition of supply of goods or
provision of services online. This
definition also includes e-
commerce aggregators
164(d)
Equalization Levy means tax leviable on consideration received
or receivable for any specified service or e-commerce supply or
services under the provisions of this Chapter
Definition of Equalization Levy
modified to include levy on online
supply of goods and services
165
Marginal Heading of the section changed to “Charge of
Equalization Levy on specified services”
Earlier, section was specifically
assigned to Equalization Levy on
Advertisements
Equalization Levy was introduced by the Finance Act 2016. The Finance Bill 2020 intends to make the below
proposed amendments.

Section Amendment to Finance Bill 2020 Our Intake
165A New section inserted. Each sub-sections enumerated below
165A(1)
Equalization Levy at 2% shall be levied from April 1, 2020,
on the consideration received / receivable by e-commerce
operator from e-commerce supply or services to –
i. Person resident in India
ii. Non-resident in the specified circumstances as
referred in section 165A(3)
iii. Person who buys goods or services or both using
internet protocol (“IP”) address located in India
 Equalization Levy is proposed to be
levied on supply of goods or
services to India
 However the rate is reduced to 2%
165A(2)
Equalization Levy shall not to be charged –
i. Where e-commerce operator has Permanent
Establishment (“PE”) in India and such supply of
goods and / or services is connected with such PE
ii. Where equalization levy is leviable u/s 165
iii. Sales, Turnover or Gross Receipts of e-commerce
operator, from such e-commerce supply is less than
INR 2 Crore in the preceding FY
 Similar to earlier provisions, no levy
in case the e-commerce operator
has PE in India as it would
tantamount to business income
 Threshold limit for non-levy is kept
on a higher side to eliminate smaller
or new players
165(3)
Specified Circumstances means –
i. Sale of advertisement, which is targets a customer,
either resident in India or who access advertisement
through IP address located in India
ii. Sale of data, collected by a person, either resident in
India or who uses IP address located in India
Equalization levy on services from
Non-resident to non-resident only on
those which affects the Indian
customers

Section Amendment to Finance Bill 2020 Our Intake
166
Marginal Heading of the section changed to “Collection and
recovery of equalization levy on specified services”
Change of heading only
166A
New section inserted. Every e-commerce operator is
required to remit equalization levy to the credit of Central
Government u/s 165A quarterly on the due date mentioned
below:
 Equalization on levy on supply of
goods or provision of services is a
regular tax and not a deduction
from payment
 The onus of paying the levy is on
the e-commerce operator
 Due date of paying the levy is 7th
day of the month following the
quarter with 31st March being due
date for last quarter of the FY
167 to 180
Provisions relating to filing of annual statement, interest and
penalty for non-deduction or delay in remitting the
equalization levy, rectification of mistakes, litigation
proceedings and others are proposed to be aligned to
include Equalization Levy u/s 165A
All regulatory and compliance
provisions have been modified and
aligned to include equalization levy
on supply of goods and services
Sec 10(50)
Amended to exempt income arising from e-commerce
supply or services chargeable to equalisation levy applicable
from April 1, 2021
It is consequential amendment to
exempt income arising from e-
commerce supply or services
chargeable to equalisation levy
Quarter ending Due Date
30th June 7th July
30th September 7th October
31st December 7th January
31st March 31st March

Thank you
Sandeep Jhunjhunwala
Director
Nangia Andersen LLP
sandeep.jhunjhunwala@nangia-andersen.com
+91 97401 55469/ +91 80 2228 0999
The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do
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