India

Individual - Significant developments

Last reviewed - 03 October 2019

COVID-19 reliefs

  • A special fund, the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund), has been set-up for providing relief to the persons affected from the outbreak of COVID-19. Donation made to the PM CARES Fund shall be eligible for 100% deduction under the Income-tax Act without any upper limit for claiming deduction.
  • The due date for filing the original, as well as revised, income-tax returns for the financial year (FY) 2018/19 (tax year 2019/20) has been extended from 31 March 2020 to 30 June 2020.
  • For delayed deduction/payment of tax deducted at source made between 20 March 2020 and 30 June 2020, a reduced interest rate of 0.75% per month will be charged in place of 1%/1.5% as applicable.
  • The date for making various investment/payment for claiming deduction under Chapter-VIA-B of the Income-tax Act, which includes LIC, PPF, NSC, etc., mediclaim, donations, etc., has been extended to 30 June 2020. Hence the investment/payment can be made up to 30 June 2020 for claiming the deduction under these sections for FY 2019/20.
  • To avoid genuine hardship to individuals who have come to India on a visit for a particular duration before 22 March 2020 and could not leave/depart on an evacuation flight on or before 31 March 2020 due to the COVID-19 pandemic/travel restrictions, a clarification has been issued by Central Board of Direct Taxes that such individuals can retain their non-resident/not-ordinarily resident status in India for FY 2019/20, wherein their presence in India during the said period (refer the below table) will be disregarded while applying the residency rule prescribed in this regard.

    Scenario Period to be excluded for residency determination
    Individuals who were unable to leave India on or before 31 March 2020 Stay in India from 22 March 2020 to 31 March 2020
    Individuals who were quarantined due to COVID-19 on or after 1 March 2020 Stay in India from the beginning of quarantine till the date of departure (via evacuation flight) or 31 March 2020, whichever is earlier
    Individuals who departed on an evacuation flight before 31 March 2020 Stay in India from 22 March 2020 till the date of departure

    Since the lockdown continues in FY 2020/21, a circular excluding the period of stay of the concerned individuals up to the date of normalisation of international flight operations is expected to be issued for applying the residency rule for FY 2020/21.

New personal tax regime (NPTR)

Effective 1 April 2020, an optional NPTR, devoid of any deductions or exemptions, has been introduced with lower tax rates spread across six income levels as provided below:

Taxable income (INR*) Tax on column 1 (INR) Tax on excess (%)
Over (column 1) Not over 
0 250,000 - 0
250,000 500,000 - 5
500,000 750,000 12,500 10
750,000 1,000,000 37,500 15
1,000,000 1,250,000 75,000 20
1,250,000 1,500,000 125,000 25
1,500,000   187,500 30

* Indian rupees

However, if the NPTR is not opted, the existing income tax rates shall apply (see the Taxes on personal income section).

Under the NPTR, the taxpayer is not eligible to claim certain exemptions/deductions/set-off of losses/carryforward of losses, such as:

  • Leave travel allowance.
  • House rent allowance.
  • Allowance under Section 10(14) of the Income-tax Act, except certain prescribed allowances.
  • Exemption of free food and beverages through vouchers provided by the employer.
  • Standard deduction of INR 50,000 and deduction for professional tax.
  • Deduction of interest payment on housing loans for self-occupied property and restrictions on set-off of loss from let out property.
  • All Chapter VIA deductions of the Income-tax Act available for expenditure by way of employee’s contribution to provident fund, children tuition fees, insurance premium, donations, medical premium, etc., except employer’s contribution to notified pension scheme, such as National Pension Scheme (NPS).

The NPTR option can be exercised for every financial year if the taxpayer has no business income. If the taxpayer has business income, the option once exercised shall be mandatory for all subsequent financial years as well, with only a one-time change being permitted later.

Dividend income

Dividend income received from an Indian company was not taxable in the hands of the shareholder if dividend distribution tax (DDT) had been paid on the same by the company. This was applicable to resident as well as non-resident shareholders.

However, dividend income in excess of INR 1 million was chargeable to tax in the case of an individual, Hindu Undivided Family (HUF). or firm that is a resident in India at the rate of 10%. Also, dividend income received from an SEBI registered Indian mutual fund was not taxable in the hands of recipient. This applied to resident as well as non-resident shareholders.

Effective 1 April 2020, dividends will now be taxed in the hands of the shareholders or unit holders at the applicable rates, and, correspondingly, the domestic company or mutual fund will not be required to pay any tax on distribution of income.