From the 1st Budget presented in Independent India by the first Finance Minister, R K Shanmukham Chetty on 27th November, 1947 to the latest one presented by India’s first woman Finance Minister, Nirmala Sitharaman on 1st February, 2020, Budget presentation has been the most awaited annual event both for corporate citizens as well as the common man. It has always received mixed reactions and shaped the economy in its own way, whether we like to admit or not. Irony is even after 40 years, the Common Man’s perplexed look in the famed cartoonist R K Laxman’s cartoon strip way back in 1980 matches the look on the Aam Aadmi’s face (not to be confused with AAP !) in 2020 !! The wry comments of the cartoonist about the Budget presented in 1980 by the then Finance Minister R Venkataraman holds good even today. No wonder a cartoon is the most non-offensive and effective communication that holds a mirror to realities in the true sense. Love it or hate it, one cannot ignore a cartoon that reflects the universal truth. More so Laxman’s which is timeless, ageless & priceless !!
Nirmala Sitharaman’s budget speech was long and unfinished. I assure you I will not unleash a long editorial this time. The time-tested and all-weather-proof, cartoon says it all. Suffice to say the devil lies in the details and more so in the fine print of the Budget which we have tried to summarise and carry relevant highlights. You can decipher and decode yourself if it is presented from the economic angle or points towards the ‘Aspirational India’ and ‘Caring Society’ that the Minister referred to.
Apart from the budget notification, the 230th issue of Samhita also carries round up of other updates that MCA, SEBI, RBI & IBBI have made. Incorporation form SPICE has been upgraded to Spice+ with registration under ESI, PF, PT (for Maharashtra), GST & bank account opening also being included in a single incorporation form. While the comprehensive one-time registration will help entrepreneurs to start off their operations without any delay post incorporation, it remains to be seen how the form ‘behaves’ on the MCA portal. Any technical glitches or resubmission requirement even for a small error could derail the whole process. Also need to wait and watch if the MCA help desk turns friendly to prove in letter and spirit the Government’s initiative of Ease of Doing Business & Ease of Living. Fingers crossed if the Spice+ will truly spice up starting up in India !
Under the broad banner of Ease of Living, the Finance Minister Ms. Nirmala Sitharaman presented the Union Budget-2020-21 on 01.02.2020 with sub-themes as – Aspirational India, Economic Development and Caring Society. Just the analysis of Direct Tax notifications itself indicates that nothing is to be taken at face value based on highlights and media reports. It pays to go through the fine print in the budget along with the Notes on Clauses which reflects a few radical as well as subtle but significant changes that are nowhere near the theme of “Ease of Living”. Analysis of the Finance bill 2020 (only Direct taxes) by our associate, CA R.Krishnamurthy and carried as a separate document. Broadly the following topics have been covered:
New Tax slabs for individuals and HUFs ( lower tax but no deductions)
Bracket (in lakh)
Tax rate (%)
Tax residency status – reduced from 180 days to 120 days.
Employer’s contribution to NPS, PF and Superannuation Fund > Rs 7.5 Lakhs, to be treated as perquisite in the hands of Employee.
Increase of Tax Audit limit u/s 44AB from 1 crore to 5 crores, subject to cash receipts and payments not exceeding 5% of such Receipts and such Payments respectively.
Where the stamp duty value of immovable property sold exceeds 10% of the consideration value, the excess amount > Rs. 50,000 shall be charged to tax under the head income from other sources.
Transfer Pricing Reporting date shall be 31st October.
Dividend Distribution Tax abolished from 01.04.2020. Henceforth person receiving the dividend shall be liable to tax.
Breather for tax on ESOP – employee need not pay tax on deemed perquisite at the time of grant of Employee Stock Options. Taxable event is earlier of the 3:
after the expiry of 48 months from the end of the relevant assessment year when ESOP was issued or transferred; or
from the date of the sale of ESOP by the employee; or
from the date of the cessation of employment.
This relaxation is available for both ESOP shares as well as Sweat Equity shares issued or transferred by a start-up company recognized u/s 80-IAC of the Income Tax, Act ( recognised start-up for tax purposes).
TDS related changes:
Limits for TDS liability for individuals, HUF, AOP, BOI was earlier indicated in Tax Audit Section 44AB i.e. such assesses having total sales, gross receipts or turnover of Rs. 1crore from business or Rs. 50 lakhs from profession were required to deduct TDS from payments. Now these limits have been included u/s 194C directly. Similar change for requirement for TDS applicability has been made in Sections 194A, 194H, 194I, 194J and 206C.
TDS on fees for technical services reduced from 10% to 2%.
TDS by E-comerce operator for payments made to e-commerce participant.
Applicability: E-Commerce Operator for the sale facilitated/ executed via its platform including digital or electronic facility.
Time of Liability: The operator is required to deduct tax at the time of credit of amount of sale or service or both to the account of participant’s account or at the time of payment whichever is earlier.
Rate of TDS: 1% of the gross amount of such sale or service or both.
No TDS upto Rs.5,00,000 transaction value if individual / HUF e-com participant has PAN or Aadhar.
TDS not applicable for income earned by e-com operator from advertisements.
W.e.f. 01.04.2020 TCS (Tax Collection at Source) applicable at the rate of 0.1% on consideration received from a buyer in excess of sales of Rs. 50 Lakhs, if the turnover of seller is above Rs. 1 crore during the immediately preceding financial year. In non-PAN/Aadhar cases, the rate shall be 1%.
Only select provisions have been highlighted above, while the details are attached titled as “Highlights of Union Budget 2020-21”.
2. GST updates
Input Tax Credit
The Sub-section (4) of section 16 of CGST Act, 2017 is being amended to extend the scope of claiming the Input tax credit on the debit notes received after September of subsequent year following the end of financial year to which invoice pertaining to such debit note was issued.
Earlier the ITC on invoice and debit note relating to invoice issued in a FY was not available after the due date of furnishing of the return under section 39 for the month of September of subsequent year following the end of financial year to which such invoice relates or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
No refunds shall be made if the rate of GST as per the existing law is less than the rate as per the law at the time it was collected.
3. Customs Act updates
Under Customs Act, Health Cess of 5% will be levied on import of medical devices (goods referred to under Fourth Schedule) to finance the health infrastructure and services.
SPICe+ – comprehensive form for Company incorporation & other registrations
As part of Government of India’s Ease of Doing Business (EODB) initiatives, MCA has notified The 2 new web forms, SPICe+ and AGILE – PRO through the Companies (lncorporation) Amendment Rules, 2020 which shall come into force on 15.02.2020. The highlights of the same are as follows:
W.e.f. 15.02.2020, RUN service shall be applicable only for change of name of existing companies and PART-A of the Web Form SPICe+ shall be used for applying for name of the company.
Web Form SPICe+ has been divided into 2 parts i.e. Part-A and Part-B. Part-A of the form has replaced the RUN service w.r.t. application of name for a new company. Part-A of the Form can be submitted without Part-B with the option of one resubmission.
Companies are now mandatorily required to apply for EPFO, ESIC and Profession Tax (for companies incorporated in Maharashtra) registrations and also open a bank account through web Form AGILE – PRO
Condonation of delay for LLPs
Section 67(1) of the LLP Act, 2008 empowers the Central Government, by a notification in the Official Gazette, to direct that any provisions of the Companies Act, 2013 shall apply to LLPs.
Accordingly, vide a notification by the MCA, the provisions of Section 460 of Companies Act, 2013 i.e. Condonation of delay in certain cases, are applicable to LLPs w.e.f 30.01.2020. With a view to give an opportunity todefaulting LLPs, any delay in making an application to the CG or delay in filing any documentwith the RoC may be condoned by the Central Government at its discretion. If a delay is condoned, penal provisions shall not apply and the default shall be treated as if it was never committed.
Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2020
Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 amended w.e.f. 03.02.2020. The changes made are as follows:
Sub-sections 11 and 12 of Section 230 shall come into force on 03.02.2020.
A member of the company can make an application for the purpose of takeover offer if such member along with any other member holds not less than 3/4th of the shares in the company, and such application has been filed for acquiring any part of the remaining shares of the company. The prescribed fee for filing the application is Rs.5,000.
The sub-rule also specifies what the application of arrangement for takeover offer must contain. This includes Valuation Report issued by a Registered Valuer and also details of bank account to be opened by the acquirers where at least 50% of the takeover offer price must be deposited.
NCLT (Amendment) Rules, 2020
The National Company Law Tribunal (Amendment) Rules, 2020 shall come into force on 03.02.2020.
Rule 80A inserted – under Section 230(12) of CA, 2013, application to be made in Form NCLT-1 by an aggrieved party in the event of any grievances w.r.t. takeover of companies other than listed companies. NCLT application fee Rs. 5,000 along with prescribed documents i.e. affidavit, Memorandum of Appearance, Board resolution, grounds for grievance etc.
Extension of due date- Form AOC-4 and MGT-7 for UT of J&K and Ladakh
The due date for filing Forms AOC-4, AOC-4 (CFS), AOC-4 XBRL and MGT-7 for the year ended 31.03.2019 has been extended till 31.03.2020 for the Union Territory of Jammu & Kashmir (UT of J&K) and Union Territory of Ladakh, without payment of any additional fee.
Nidhi (Amendment) Rules, 2020
The Nidhi (Amendment) Rules, 2020 shall come into force on 10.02.2020. Through the said rules, in place of the existing Forms NDH-1, NDH-2 & NDH-3 new forms have been notified and shall be available on MCA-21 from 11.02.2020.
Companies (Accounts) Amendment Rules, 2020
As per the notification dated 30.01.2020 every NBFC that is required to comply with Indian Accounting Standards (Ind AS) shall file the financial statements with ROC together with Form AOC-4 NBFC (Ind AS) and the consolidated financial statement with Form AOC-4 CFS NBFC (Ind AS) from the date of the publication of the said Rules in the Official Gazette. Form AOC-4 NBFC (Ind AS) has been notified and shall be available on MCA-21 from 11.02.2020.
Disclosure Standards for AIFs
SEBI is constantly improving the disclosure standards of Alternative Investment Funds (AIFs).
Based on feedback received on the Consultation Paper released in December, 2019, SEBI has introduced standard templates for Private Placement Memorandum for raising of funds from investors by Category I, II and III AIFs.
AIFs are required to carry out mandatory audits.
Mandatory benchmarking of the performance of AIFs (including Venture Capital Funds) and the AIF industry has been introduced. A framework for facilitating the use of data collected by Benchmarking Agencies will be put in place to provide customized performance reports.
Benchmarking requirements shall not apply to Angel Funds registered under Category I VC Funds.
Transfer of membership of RVs
IBBI has prescribed timelines and procedure for transfer of membership of Registered Valuers (RV) from one Registered Valuer Organization (RVO) to another RVO, considering that RVOs were delaying the transfers without proper justification. This move is meant to streamline the functioning of RVOs and RVs.
Note: The contents of this Newsletter are only a summary and has not dealt with any issue in detail. Any action taken or proposed to be taken must be in consultation with professionals and not merely based on the articles / news updates. S. C. Sharada & Associates disclaims all liability on
action taken without professional advice.
S. C. Sharada & Associates,
Company Secretaries. #405, 7th Cross, IV Block, Koramangala, Bangalore – 560 034.
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