Individual and HUF taxpayers should inform their choice of the New and Old Income Tax Slab Rates announced in Budget 2020 to the deductor – to ensure accurate TDS deduction.
How will the TDS be deducted?
At the beginning of the financial year, employees need to tell their employer if they wish to opt for the New Income Tax Regime. This will enable the employer to deduct TDS accurately.
In case the employee does not express the choice to opt for the Income Tax Regime at the beginning of the financial, then the employer will deduct TDS as per the Old Income Tax Slab rates.
Usually, at the beginning of the Financial Year, employees are required to disclose their planned investments and expenses to the employer through Form 12BB – so TDS is deducted accurately on their Salary.
(2/2)Employee to intimate employer of intention to opt for new concessional rates.Intimation so given will be applicable for the year &can’t be modified.However,employee will continue to have the right to exercise such option or continue with earlier scheme at time of filing ITR.
Once an employee opts for the New regime at the beginning of the financial year, the employee cannot change during the financial year.
However, an employee can change the option of Income Tax Rates while filing the Income Tax Return.
If the employee is having Income from Business and Profession – they cannot change the Income Tax Regime in the future financial years except in certain circumstances.
For example:
At the beginning of the financial year 2020-21 in April, Amit tells his employer – that he wants to opt for the New Income Tax Regime. His employer deducts TDS accordingly as per the New Income Tax Regime during the year on his salary. During the financial year in October, Amit wants to switch the Old Income Tax regime. But cannot until the end of the Financial Year when filing his Income Tax Return.
What are the Income Tax Slab rates for FY 2020-21?
Netflix is one of the world’s largest and popular content streaming platform with over 169 million users. With total revenue of $ 4 Billion, one expects Netflix to pay taxes in millions. But, just like other major Silicon Valley Companies, Netflix has paid $ 0 Tax in U.S. in 2018.
Senator Sanders has been very vocal about his feelings towards the loophole exploiting companies. Bernie said, “$8.99 Netflix subscription is more than the company paid in federal income taxes last year (nothing),“. If that wasn’t enough, Sanders also lashed out at tech behemoth Amazon for avoiding taxes.
The online content streaming services like Netflix and Amazon prime are considered a Luxury in India. However, the ‘Netflix Culture’ is getting mainstream day by day. Netflix India had a revenue of INR 466 Crores in the fiscal year 2019-2020. If the trends continue, India could be Netflix’s biggest market ever. Still, these companies have been using legal loopholes to avoid taxes.
How are countries Taxing these companies?
Although on paper, slashing the Corporate Tax seems the pretty obvious and go-to choice, Netflix’s case in the U.S. suggests otherwise. Reducing corporate tax from 35% to 21% didn’t work for the U.S. as companies always found buffer around it.
According to several Senior Senators, Corporate Taxation has been a continuous issue for a very long time. But this is changing, several countries are coming down hard on these loopholes. France, introduced a ‘Digital Service Tax’ under which a flat 3% tax will be levied on Tech companies doing business in France. Sounds Familiar? Because it is, India levied a ‘2 % Equalization Tax’ on any tech/digital company doing business in India.
How did Netflix do it?
In 2018, Netflix posted a profit of $ 845 million. Rationale governs that Netflix should pay $ 177 million i.e 21% in Taxes to the U.S. Government. Just like major Silicon Valley Tech Giants, Netflix has been using legal loopholes to avoid taxes.
The US Government has a ‘Double Taxation Treaty’ with several nations to protect the interests of the companies. These treaties allow companies to claim a ‘Tax Rebate’ if they have already paid taxes in other nations.
Netflix used this loophole to its advantage. Not only it benefited from the Double Taxation Treaty, but it also claimed Tax Rebate for future ‘Tax Purposes’.
According to the 10-K Report mandated by the U.S. Securities and Exchange Commission, companies are allowed to provides tax income information that is geographically specific. Unsurprisingly Netflix’s ‘Foreign Tax Provision’ of $ 133 million was pretty close to the $ 131 million Tax paid by Netflix.
Netflix ‘Cruising’ on tax havens
Apart from the ‘Double taxation treaty’, Netflix has been recently accused of using Tax Havens like Netherlands to further save on taxes. If news reports are to be believed, Netflix moved somewhere around $ 330 million in tax havens. According to reports, only 4 million euros were paid to the Ducth, while Neflix used 3 BV accounts to transfer money.
Using safe havens to save on taxes has been a major business practice for a long time. The Cruise industry has also been avoiding taxes in the US for decades. Most of the famous companies have been registered in tax havens like Bahamas, Malta and Panama for Tax-Deferring reasons.
Why do Tax Revenues from Online companies matter so much?
India is the second most populous country in the world. We have the highest number of growing middle class people. On top of that we are among the youngest nations in the world. These important Socio-Economic traits have made India a huge market for global corporations.
Companies like Amazon, Facebook and Netflix are spending millions on marketing their products to India’s novel consumer base. Netflix’s subscriber count has risen from 1.2 million to 2 million in just one year. If the trend continues, India will soon overtake U.S. subscribers i.e 60 million. Hence, It will become very important for India to extract tax revenues from digital companies.
India is a significant player in the digital tax negotiations. Even during the coronavirus outbreak, India has been putting efforts to change the way digital business models are taxed in India.
What is “Equalization Levy”
The equalization levy was introduced in 2016. It was originally designed as a 6% on gross revenues from online advertising services. In the financial year 2017-2018, the revenue from the equalization levy was INR 550 Cr (USD 73.4 million). Only nonresident businesses are subject to the tax.
The expansion
India announced on March 23 that its tax aimed at foreign digital companies, the “equalization levy,” will be expanded. The new expansion will apply a 2% on revenues of e-commerce operators and suppliers. This change is applicable from April 1. This change expands the equalization levy from online advertising to nearly all online commerce done in India. The change is for businesses that do not have taxable presence in India.
Who will it be applicable to
This will impact those companies that don’t have a base in India, but sell their goods here. Any overseas platform that streams, advertises, or sells goods to an Indian IP address will be taxable. The levy would be imposed on those companies that have a turnover or sales of over INR 2 Cr (USD 267,000) in the previous year. Facebook, Google Amazon, eBay and many more will be affected by the tax.
Not a part of Income Tax
The equalization levy is essentially a tariff and is not based on ability to pay. Businesses with higher profit margins on their digital business with India will face a lower marginal tax rate than businesses with lower profitability. The 2% revenue tax equates to a 20% income tax if a business has a 10% profit margin in India. This compares to the statutory tax rate of 22%. The lower a business’ profit margin, the higher the marginal tax rate. Equalization levy may also add to the cost of operations for foreign companies. They may not get credit for the equalization levy in their residence country or avail any favorable treaty benefits.
What is SEP
Significant Economic Presence is a nexus test introduced in the financial year 2018-2019. Income of nonresident businesses can be attributable to India for digital transactions by nonresidents in India above a payment threshold. The test defines the significant economic presence for the purposes of corporate income tax. The equalization levy paired with the significant economic presence test represents one of the more coordinated efforts to tax digital business models.
The temptation to tax the more profitable business sectors
The extent of possible compliance disruptions caused by the tax is not not immediately clear. Neither is it clear how much India could garner from the tax. The timing of the introduction of the levy appears to be an attempt to increase revenue collections during the pandemic. The temptation to apply special taxes to digital firms right now when they may be more profitable than the rest of the global economy may be strong. But broad-based, neutral policies should be the tools of choice for taxation. A tax base that relies too heavily on a particular business sector could be left standing in the cold when the economic winds shift.
An element of surprise
India’s internet users are increasing at a fast pace. The country’s e-commerce and digital ad markets are also expanding, making it extremely attractive for Amazon and other players. However, the amount of revenue that can be generated by the new tax remains unclear. The technology giants seem to have been taken by surprise by the tax. India’s finance minister did not make any mention of the levy during her budget speech in February. The levy was reportedly included in the Finance Bill on March 23.
Push-back from major tech heavyweights & the six-month deferment
Facebook and Google are seeking to delay paying India’s 2% digital tax. Given the ongoing circumstances surrounding the COVID-19 pandemic, Google and Facebook have asked the tax to be deferred by at least six months. India, on the other hand, is looking to boost its tax reserves, which will also provide the country with additional resources to fight the coronavirus.
The equalization levy essentially operates as a tariff on foreign-provided digital goods and services The significant economic presence (SEP) test can create challenges in minimizing double taxation. This might lead to international friction. If every country chose its own way of defining nexus, there would be an overlap in taxation where two countries think they have the right to tax the same income.
The start to this decade has been anything but perfect. Safe to say that 2020 has been a true horror story. The most surreal part of it is the Covid-19 Pandemic. The Pandemic has affected more than 90% of the countries. News channels, social media, newspapers are abuzz with news of the Covid-19 Pandemic. Many Individuals have sorted to spread awareness about the Pandemic on twitter.
As you might know, twitter is a micro-blogging site that is extensively used. There are around 350 million active users on Twitter and every day nearly 500 million tweets happening. Twitter allows its users to ‘Tweet’ on a trending topic. Also, the nature of Twitter avoids it being turned into a ‘meme sharing platform’. Due to this reason, Twitter translates into a very convenient way to communicate with the world. This core competence of Twitter is widely used by Governments, Organizations and Individuals to spread their message.
Covid-19 has been the worst humanitarian crisis of modern world. Governments have been going out of their ways to spread awareness about the disease. And unsurprisingly, Twitter has been a major contributor towards their propaganda campaigns. Let’s look at how Twitter has been a crucial tool in our fight against Covid-19.
Twitter Diplomacy
Twitter has been traditionally used by Governments as a solid diplomatic tool. We’ve seen enough twitter feuds between major world leaders. There are extensive debates, Q&A sessions and threads on tweets from their Twitter handles. Often ‘Twitter Diplomacy’, Governments are using this reach to spread awareness and make important announcements regarding Covid-19.
Just like in this Tweet, the Italian Prime Minister is lauding American President for his support and his gesture of solidarity.
Long and friendly conversation with President @realDonaldTrump. Very grateful for the solidarity and support from American friends. Let’s keep on working together to win this hard challenge 🇮🇹🇺🇸
Recently, New York City has become the epicenter for Coronavirus. Nearly 50,000 Individuals have been infected in the Big Apple. It’s no secret that keeping people’s morale up is the biggest task for any Government during these grim times. Hence to boost morale, the official Twitter handle of the White House tweeted a New York Post’s article. The article talks about a healthcare worker who returned to work after recovering from COVID-19.
Thank you to the dedicated doctors, nurses, and medical professionals saving lives in New York City and across the country.
Due to the Formal nature of Twitter, World Leaders use it to address their nations in times of crisis. We can see the French President rallying the G20 Nations to fight Covid-19 together. In his tweet sent on March 31, 2020, President Macron seems to have quite a bit of engagement already.
Réunion aujourd’hui avec les dirigeants du G20. Pour combattre l’épidémie du COVID-19 qui s’étend dans le monde entier, nous agissons avec coordination et solidarité. Nous allons lancer une initiative forte en soutien à l’Afrique face au virus.
On April 1, 2020, the Indian Government announced a new dedicated Twitter handle for circulation of authentic news, updates and other announcements regarding COVID-19. The Twitter handle is jointly operated by the Ministry of Information and Ministry of Health Department. This is a crucial step to negate the spread of misinformation regarding this sensitive issue.
— #IndiaFightsCorona (@COVIDNewsByMIB) April 3, 2020
Indian Prime Minister is known to be an avid user of the platform as well. PM Modi’s tweets have engagements in millions, and he often drives interactions with his followers. Below is a snippet of one such instance, where PM Modi interacts with a patient who just recovered from Covid-19.
Organizations have used Twitter in the most creative ways. But It has been extensively used for Marketing and Consumer Relations. So much so, major companies have dedicated Twitter Teams. There’s no doubt that Twitter holds more or less the same importance for companies as any other social media channel. And it’s not just Companies, many NGOs and Government organizations also use twitter to drive conversations.
Twitter tells the user which topics are trending. Organizations use these trending topics to communicate their message related to that topic. This gives them instant reach and interaction for minimal cost. Since the past two months, Companies and other organizations have been using Twitter to create viral threads and gain instant consumer attention.
Whenever an event as big as the Covd-19 outbreak happens, fake news and rumors catch fire. Some companies use Twitter to instill truth in times of chaos. For example, in the snippet below, we are debunking some fake news regarding the Financial New Year starting date.
There have been rumors about the change in the financial year. The Ministry of Finance released a late-night notification on 30th March’ 20 calling this as “fake news.”
The door’s of World Bank have been constantly knocked by Government’s seeking aid. To help the worst hit countries, the World Bank announced a aid of $ 14 Billion to help various countries.
In a bid to inspire people and to create awareness about COVID-19, United Nations recently tweeted a video. This video highlights the Humanitarian systems that are at work in Virus hit Countries.
Humanitarians are mobilized in solidarity with some of the world’s most vulnerable people in the face of #COVID19.
While some organizations use Twitter for updating their customers with the latest compliance, some raise awareness about pressing issues. Zomato gained a lot of attention on social media when they raised awareness about a campaign to feed the daily wagers.
Ministry of Railway recently retweeted a tweet from UN lauding Indian Railways converting passenger coaches as Covid-19 isolation wards. More than a thousand people have already interacted with the tweet so far.
.#कोविड19 से निपटने के लिए भारतीय रेल ने ट्रेन के डिब्बों को आइसोलेशन वार्ड में बदलकर कोविड-19 के मरीज़ों के स्वस्थ होने के लिए एक साफ और स्वच्छ जगह तैयार की है- @UNinIndiapic.twitter.com/MwujoRFpqw
Apart from being an impactful medium for Governments and Organizations, the place where twitter makes the most impact is through reputed Individuals. Since Facebook is losing its shin, Instagram and Twitter are emerging as the next big thing. But the Nature of Instagram limit’s its users from making formal announcements and driving discussions. Areas in which Instagram lacks is where Twitter excels.
In the times of Covid-19 Pandemic, many reputed Individuals are using Twitter proactively for communicating diplomatic messages. Like Jens Stoltenberg, NATO’s Secretary-General recently tweeted a picture of aid being sent by Turkey to fellow NATO nations.
#NATO solidarity in action: Turkey 🇹🇷 sending a cargo plane with medical supplies to Italy 🇮🇹 & Spain 🇪🇸 today to support our joint fight against #COVID19. Proud to see NATO Allies supporting each other through our disaster relief center. #StrongerTogetherpic.twitter.com/9f8gvHvVzs
Cristiano Ronaldo is probably among the most followed Individuals on the Internet. He has a total following of 83 Million. With that amount of reach, anything that he tweets becomes gospel truth. To create awareness about the importance of staying home, he tweeted a picture of him and his family. The tweet has garnered nearly quarter-million likes already.
In this difficult moment for the whole world, let’s be thankful for the things that matter – our health, our family, our loved ones. Stay home and let’s help all the health workers out there fighting to save lives.🙏🏽❤️🌈 #stayhomesavelivespic.twitter.com/lVEBu5vbqW
In India, thousands of Individuals are storming twitter with their opinions regarding COVID-19. Some are also sharing various measures that have been taken by local governing authorities to curb the spread. This Samaritan took to Twitter to share the innovative idea implied in Tripura. The tweet posted on April 1, 2020 seems to have garnered quite a bit of applause. Take a look.
Disinfection tunnel installed at tiruppur ,Tamilnadu . People have to enter it , before entering the local market.
— Prashanth Rangaswamy (@itisprashanth) April 1, 2020
As many companies are working from home, and with whole of the country under lockdown, Twitter has become a powerful tool to share your ideas, opinions and drive debates with the world. However, one needs to stay away from fake news and encouraging rumors.
Financial year remains the same…There have been rumors about the change in the financial year. It was forwarded with the comment that change had been undertaken because of the coronavirus outbreak. This claim is false. The Ministry of Finance released a late-night notification on March 30, 2020 calling this as “fake news.” It may be noted that only the date of compliance which was required by March 31, 2020 either by the taxpayers or by the tax authorities has been deferred till June 30, 2020.
Confusion regarding amendments to the Indian Stamp Act…The ministry of finance also released notifications related to amendments to the Indian Stamp Act. It pertains to putting in place an efficient mechanism for collection of Stamp Duty. This change was earlier notified to be implemented from April 1, 2020. However, due to the prevailing situation, it has been decided that the date of implementation will now be postponed to July 1, 2020.
RBI’s proposal to align its Financial Year…The fake news about change in the financial year got circulated. This has created a chaos among the taxpayers that the present announcement is resulting in the extension of the financial year. Financial year of RBI used to be from July 1 to June 30 and not normal from April to March. The RBI has now proposed to change it to normal FY of April to March from next year. For this, they will be beginning from July 2020 to March 2021. This news appears to have been wrongly drawn by the majority of the readers.
Any queries? We are here to help…We understand the amount of confusion created, especially at this time of the year. Also, the COVID 19 pandemic has led to the circulation of a lot of fake news and messages. Shoot your tax related queries & we’ll help you simplify them.
Extension for Tax Saving Investments for current FY…The Ministry of Finance has announced the compliance relaxations for Tax Saving Investments u/s 80C, 80D. It is going to give a three-month window till June 30. The deadline for Tax-Saving Investments has always been the last date of Financial Year, i.e March 31. Hence by this time, individuals who wish to claim a Tax Deduction of INR 1.5 lakh on their returns need to make investments under Chapter VI A. But here Comes The Twist!
The government had last week extended the due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer to June 30, 2020.
Investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act and other acts such as Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law was extended to 30th June 2020.
This will allow taxpayers to make investments in various savings instruments such as National Savings Certificate, Public Provident Fund, National Pension Scheme for income tax rebate by June 30.
It can be highlighted that the lack of access to information and systems including ERP needed to file returns and other documents, due to the lockdown, is leading to delays in compliance.
