Amidst the crisis arising out of coronavirus, the Ministry of Finance has extended the deadline for several statutory items from 31st March 2020 to 30th June 2020. However, the Finance Bill 2020 has come into force from April 2020. With this, several amendments proposed in the Union budget have also come into effect on Wednesday. These changes are linked to the provisions of income tax, linked to dividend distribution tax. You should be aware of these changes in detail.
New Tax Regime
In the new financial year, you have the option to opt for a new tax regime or stay with the old. There are seven tax slabs for Individual Taxpayers under the new system. There is no tax on income up to 2.5 lakh, 5% tax on income between 2.5 lakh and 5 lakh, 10% tax on income from 5 lakh to 7.5 lakh, 15% between 7.5 lakh to 10 lakh, 20% on 10 lakh to 12.5 lakh, there is a provision of 30% tax on income above 15 lakh, 25% on 12.5 lakh to 15 lakh. Moreover, those whose income is less than 5 lakh can continue to claim exemption up to 12,500 under Section 87A of the Income Tax Act. However, under certain conditions under the new tax system, you will have to pay tax at a lower rate. Under this, you will have to leave the exemption under house rent Alliance (HRA), standard reduction on salary, section 80C, and 80D. You should understand the whole mathematics thoroughly to choose any one option.
Dividend Distribution Tax (DDT)
The Dividend Distribution Tax (DDT) has been removed in the Finance Bill, 2020. This tax was levied on dividends distributed by companies. So far, companies had to pay a 15% tax on DDT. Even if surcharge and cess were added, the companies had to pay a dividend distribution tax of about 20.56%. From April one, investors will have to pay tax as per the prescribed slab on income from dividends. Companies will have to deduct TDS at the rate of 10% on paying dividends above Rs 5,000.
Residential Rules
Many tax-related rules depend on the accommodation of the textiles. According to the new rules, if an Indian citizen or a person of Indian origin spends less than 120 days in the country in the past year, he will be called a non-resident Indian (NRI). The relaxation in the rules has relieved a large number of overseas Indians.
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