New Income Tax Rates for FY 2019-20 (AY 2020-21)

The Government has introduced two new tax regimes for the domestic companies in Section 115BAA and Section 115BAB through the Taxation Laws (Amendment) Ordinance, 2019.

Section 115BAA has been inserted to provide for reduced tax rate of 22% in case of all domestic companies. Whereas, Section 115BAB has been inserted to provide for a reduced tax rate of 15% in case of those domestic manufacturing companies which have been incorporated on or after October 1, 2019.

Tax rates for Assessment Year 2020-21

1. IN CASE OF INDIVIDUAL, HUF, AOP, BOI OR AJP

1.1-1. Individuals being Super Senior Citizens (Age 80 years or more at any time during the financial year)

1.2. Individuals being Senior Citizens (Age 60 years or more but less than 80 years at any time during the financial year)

1.3. Others Individuals, HUFs, AOP, BOI OR AJP

1.4. Rebate under Section 87A

For the Assessment Year 2020-21, in case of a resident individual, rebate up to Rs. 12,500 is allowed from the amount of tax if his total income does not exceed Rs. 500,000. Where his total income includes long-term capital gains arising from transfer of equity shares, units of equity oriented mutual fund or units of business trust as covered under Section 112A, such rebate shall not allowed from tax payable on such capital gains.

1.5. Surcharge

For the Assessment Year 2020-21, the rate of surcharge shall be as under:

*The Finance (No. 2) Act has been amended to withdraw the enhanced surcharge, i.e., 25% or 37%, as the case may be, from income chargeable to tax under section 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%. However, where other income of a person does not exceed Rs. 2 crores but after including the incomes as referred to in section 111A, 112A and 115AD, the total income exceeds Rs. 2 crores then irrespective of the amount of other income, surcharge shall be levied at the rate of 15% on the amount of tax payable on both other income as well as income referred to in section 111A, 112A and 115AD.

1.5-1 Marginal Relief

Marginal relief shall be calculated in the following steps:

Step 1- Calculate actual total income

The first step is to compute the total income of an assessee, i.e., aggregate of normal and special income.

Step 2- Calculate tax on total income and surcharge thereon

The next step is to calculate tax on total income of an assessee as per the rates prescribed in his case. After computing the tax on total income, calculate the amount of surcharge as applicable.

Step 3- Calculate deemed total income

In this step, the deemed total income of an assessee is computed as if his income does not exceed the limit as prescribed for the applicability of relevant rate of surcharge. Hence, the threshold limit prescribed for the applicability of relevant rate of surcharge is deemed as total income of an assessee.

Example, if an individual has total income of Rs. 1,05,00,000 then he shall be liable to pay surcharge at the rate of 15% of tax on total income because his total income exceeds Rs. 1 crores. So, in this case the threshold limit for applicability of surcharge is Rs. 1 crores which shall be deemed as total income of assessee.

Step 4- Calculate tax on deemed total income and surcharge thereon (if any)

The next step is to calculate the tax on deemed total income (as computed in step 3) as per the rates applicable in case of the assessee. After computing the tax on deemed total income, calculate the amount of surcharge on it (if any).

Step 5- Find out the difference in income

Find out the difference between actual total income (as computed in step 1) and deemed total income (as computed in step 3).

Step 6- Find out the difference in tax

Find out the difference between tax plus surcharge on actual total income (as computed in step 2) and tax plus surcharge on deemed total income (as computed in step 4).

Step 7- Compute marginal relief

The marginal relief is allowed where the difference in tax (as computed in step 6) exceeds the amount of difference in income (as computed in step 5). The marginal relief so computed is reduced from the amount of surcharge computed in respect of actual total income.

1.6. Health and Education Cess

The health and education cess is levied at the rate of 4% on the amount of income tax plus surcharge

2. IN CASE OF FIRM OR LLP

2.1. Tax Rates

A firm (including LLP) is liable to pay tax at the flat rate of 30% of taxable income.

2-2.Surcharge

If total income of a firm or LLP exceeds Rs. 1 crore, the surcharge is levied at the rate of 12% on the amount of tax payable on total income.

2-3.Health and Education Cess

The health and education cess is levied at the rate of 4% on the amount of income tax plus surcharge

3. Tax rates in case of domestic company for Assessment Year 2020-21

3.1 Tax Rates

The tax rates for the domestic company for the Assessment Year 2020-21 shall be as follows:

3.2. Surcharge

* Surcharge shall be levied at a flat rate of 10% only on income offered to tax under section 115BAA or Section 115BAB. Surcharge on all other incomes, which are chargeable to tax at special rate, shall be levied as per the existing provisions, i.e., at the rate of 7% or 12%, as the case may be.

The surcharge shall be subject to marginal relief.

3.3. Health and Education Cess

The health and education cess is levied at the rate of 4% on the amount of income tax plus surcharge

4. IN CASE OF FOREIGN COMPANY

4-1. Tax Rates

A foreign company is liable to pay tax at the rate of 40% of taxable income.

4-2. Surcharge

The rate of surcharge in case of a foreign company shall be 2% and 5% if its total income exceeds Rs. 1 crores and 10 crores, respectively.

4-3. Health and Education Cess

The health and education cess is levied at the rate of 4% on the amount of income tax plus surcharge

5 IN CASE OF LOCAL AUTHORITY

5.1. Tax Rate

A local authority is liable to pay tax at the rate of 30% of taxable income.

5-2. Surcharge

If total income of local authority exceeds Rs. 1 crore, the surcharge is levied at the rate of 12% on the amount of tax payable on total income.

5.3. Health and Education Cess

The health and education cess is levied at the rate of 4% on the amount of income tax plus surcharge

 6. IN CASE OF CO-OP. SOCIETY OR CO-OP. BANK

6-1. Tax rates

6-2. Surcharge

If total income of co-op. society exceeds Rs. 1 crore, the surcharge is levied at the rate of 12% on the amount of tax payable on total income.

6-3. Health and Education Cess

The health and education cess is levied at the rate of 4% on the amount of income tax plus surcharge

7. MAT

However, the provisions of MAT shall not be applicable in case of following:

  1. Foreign companies which do not have permanent establishment (PE) in India or who are opting for presumptive taxation scheme of Section 44B, Section 44BB, Section 44BBA or Section 44BBB;

  2. Income accruing or arising to a company from life insurance business as referred to in Section 115B;

  3. A domestic company which has opted for the tax regime of Section 115BAA or Section 115BAB

8. ALTERNATE MINIMUM TAX (AMT)