India: Amendment In Finance Act, 2020 Vis-à-vis Finance Bill 2020

Sr. no

Finance Bill, 2020

Finance Act, 2020

1.

Section 2 : Clause (15A) definition of Chief Commissioner

In the definition of Chief Commissioner the words "or a Director General of Income-tax", and "or a Principal Director General of Income-tax" shall be inserted.

Now the term "Chief Commissioner" means a person appointed to be a Chief Commissioner of Income-tax or a Director General of Income-tax or a Principal Chief Commissioner of Income-tax or a Principal Director General of Income-tax under sub-section (1) of section 117.

2.

Section 6 : Changes in Provisions relating to Residential Status

(i)

Amendment in Section 6 for substituting 182 days with 120 days if total income from Indian sources exceeds Rs. 15,00,000

The Fin Bill proposed an amendment in the Explanation 1(b) to provide that the period of stay in India, for an Indian citizen and Person of India origin, shall be reduced from 182 days to 120 days

The Fin Act has provided that the new threshold of 120 days or more (instead of 182 days or more) shall only be applicable to Indian Citizen / Person of Indian origin (PIO) having total income other than income from foreign sources exceeding Rs. 15,00,000 during the previous year.

Accordingly, Indian Citizen / PIO having total income, other than income from foreign sources, less than Rs. 15,00,000 during previous year shall continue to be governed by the old threshold of 182 days or more for becoming a resident in India.

(ii)

Provision of 'Deemed Resident' applicable if total income from Indian sources exceeds Rs. 15 lakhs

The Fin Bill proposed to insert a new clause (1A) to section 6 of the Income-tax Act ('the Act') to provide that an Indian citizen shall be deemed to be resident in India if he is not liable to tax in any country or jurisdiction by reason of his domicile or residence or any other criteria of similar nature.

The Fin Act has made an amendment in section 6(1A) of the Act to provide that an Indian citizen shall be deemed to be resident in India only if his total income, other than income from foreign sources, exceeds Rs. 15,00,000 during the previous year and he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.

(III)

Amendment in provision of section 6(6) which defines Resident but Not ordinary Resident (RNOR)

As per Section 6(6) of the Act, a resident individual or HUF is deemed as Resident but Not Ordinarily Resident in India, if he satisfies any of the following conditions:

a) Individual or Karta of HUF been a non-resident in 9 out of 10 preceding years; or

b) Stay of individual or Karta of HUF in India for 729 days or less in preceding 7 years.

The Fin Bill proposed amendment in the clause by providing that:

An Individual / HUF shall be deemed to be Resident but Not Ordinarily Resident if he / Karta of HUF has been a non-resident in any 7 out of the 10 immediately preceding years;

The second condition related to stay of individual or Karta of HUF in India for 729 days or less in preceding 7 years was proposed to be removed.

The proposed amendment has been withdrawn by The Fin Act. Therefore, the existing conditions as contained under section 6(6) of the Act shall continue.

However, The Fin Act has inserted the following two more situations wherein a person resident in India is deemed to be 'Not Ordinarily Resident' in India:

a) An Indian Citizen or a PIO whose total income (other than income from foreign sources) exceeds Rs. 15,00,000 during the previous year and who has been in India for a period of 120 days or more but less than 182 days;

b) An Indian Citizen who is deemed to be resident in India as per new Section 6(1A) of the Act.

Further income from foreign sources has been defined to mean income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).

3.

Section 10(23C) : Implication of Corpus donation received / paid by the funds or institutions

The Fin Act provides that the corpus donations shall not form part of the income of the funds or institutions availing the benefit of section 10(23C) of the Act. A consequential amendment has also been made that corpus donations by one such entity to another entity shall not be treated as application of income.

4.

Section 11 : No Deduction of Corpus Donations made to Section 10(23C) approved Institutions, etc

The Fin Act provides that corpus donation given by a Section 12AA registered institution to section 10(23C) approved institution will not be treated as an application of income. This amendment has been introduced so that these institutions do not avail the dual benefit of exemption as the corpus donations received by institutions approved under section 10(23C) shall not be treated as an income in their hands.