Tax Reckoner 2020-2021
 
Snapshot of Tax rates specific to Mutual Funds
 
The rates are applicable for the financial year 2020-21 and subject to enactment of the Finance Bill, 2020
 
 
  Effective : 1st. April 2020.
 
1. Income Tax Rates
Option A
For Individuals, Hindu Undivided Family, Association of Persons, Body of
Individuals and Artificial juridical persons
 
Total Income Tax Rates
Up to Rs. 2,50,000 (a)(b)(d) NIL
Rs. 2,50,001 to Rs. 5,00,000(d)(e) 5%
Rs. 5,00,001 to Rs. 10,00,000(d) 20%
Rs. 10,00,001 and above(c)(d) 30%
   
  (a) In case of a resident individual of the age of 60 years or above but below 80 years, the basic exemption limit is Rs. 300,000.
(b) In case of a resident individual of age of 80 years or above, the basic exemption limit is Rs 500,000.
(c) Rate of surcharge
    • 37% on base tax where specified income exceeds Rs. 5 crore;
    • 25% where specified income exceeds Rs. 2 crore but does not exceed Rs. 5 crore
    • 15% where total income exceeds Rs. 1 crore but does not exceed Rs. 2 crore; and
    • 10% where total income exceeds Rs 50 lakhs but does not exceed Rs. 1 crore.
    Specified income – Total income excluding income under the provisions of section 111A and 112A of the Act.
    Marginal relief for such person is available.
(d) Health and Education cess @ 4% on aggregate of base tax and surcharge.
(e) Individuals having total income not exceeding Rs. 500,000 can avail rebate of lower of actual tax liability or Rs. 12,500 .
   
  Option B
The Finance Bill, 2020 has proposed New Personal Tax Regime:
 
Total Income Tax Rates
Up to Rs. 2,50,000 (a)(b)(d) NIL
Rs. 2,50,001 to Rs. 5,00,000(d)(e) 5%
Rs. 5,00,001 to Rs. 7,50,000(d) 10%
Rs. 7,50,001 to 10,00,000 15%
Rs.10,00,001 to 12,50,000 20%
Rs.12,50,001 to 15,00,000 25%
Rs.15,00,001 and above 30%
   
   
2. Securities Transaction Tax (STT)
STT is levied on the value of taxable securities transactions as under.
 
Transaction Rates Payable By
Purchase/Sale of equity shares (delivery based) 0.1% Purchaser/Seller
Purchase of units of equity oriented mutual fund Nil Purchaser
Sale of units of equity oriented mutual fund 0.001% Seller (delivery based) 0.001% Seller
Sale of equity shares, units of equity oriented mutual fund (non-delivery based) 0.025% Seller
Sale of a option in securities 0.05%* Seller
Sale of an option in securities, where option is exercised 0.125% Purchaser
Sale of a futures in securities 0.01% Seller
Sale of units of an equity oriented fund to the Mutual Fund 0.001% Seller
Sale of unlisted equity shares and units of business trust under an initial offer 0.2% Seller
   
   
3. Special rates for non-residents as per domestic provisions
(1) The following incomes in the case of non-resident are taxed at special rates on gross basis:
 
Transation Rates (a)
Dividend (b) 20%
Interest received on loans given in foreign 20% currency to Indian concern or Government of India (not being interest referred to in section 194LB or section 194LC) 20%
Income received in respect of units purchased in 20% foreign currency of specifies Mutual Funds / UTI 20%
Royalty or fees for technical services 10%
Interest income from a notified infrastructure 5% debt fund, specified loan agreement and specified long-term bonds 5%
Interest on FCCB, FCEB / Dividend on GDRs(b) 10%
   
  (a) These rates will further increase by applicable surcharge and education cess.
(b) In case the non-resident has a Permanent Establishment (PE) in India and the royalty/ fees for technical services paid is effectively connected with such PE, the same is taxable at 40% (plus applicable surcharge and health and education cess) on net basis.
(c) Interest payable to a non-resident in respect of monies borrowed by any Indian company or business trust from a source outside India by way of issue of rupee denominated bond during the period 17 September 2018 to 31 March 2019 is exempt from tax.
   
  (2) Tax on non-resident sportsmen or sports association on specified income @ 20% plus applicable surcharge and education cess.
   
 
4. Capital Gains rates applicable to unit holders as per domestic provisions
 
Transaction Short-term capital gains tax rates (a) Long-term capital gains tax rates (a)(b)
Sale transactions of equity shares / unit of an equity oriented fund which attract STT 15% 10%
Sale transaction other than mentioned above:
Individuals (resident and non-residents) Progressive slab rates 20% / 10%�
Firms 30%
Resident Companies 30% /25%(d)/22%(e)/15%(f)
Overseas financial organisations specified in section 115AB 40% (corporate) 30% (non corporate) 10%
FIIs 30% 10%
Other Foreign companies 40% 20% / 10%(c)
Local authority 30% 20% / 10%
Co-operative society rates Progressive slab or 20%(g)
 

* Income-tax at the rate of 10% to be levied on long-term capital gains exceeding Rs. 1 lakh (without indexation benefit and foreign exchange fluctuation)
(a) These rates will further increase by applicable surcharge & health and education cess.
(b) Income-tax rate of 20% with indexation and 10% without indexation.
(c) Long term capital gains arising to a non-resident from transfer of unlisted securities or shares of a company, not being a company in which the public are substantially interested, subject to 10 per cent tax (without benefit of indexation and foreign currency fluctuation.
(d) If total turnover or gross receipts in the financial year 2018-19 does not exceed Rs. 400 crores.
(e) This lower rate is optional and subject to fulfillment of certain conditions as provided in section 115BAA.
(f) This lower rate is optional for companies engaged in manufacturing business (set-up & registered on or after 1 October 2019) subject to fulfillment of certain conditions as provided in section 115BAB.
(g) The Finance Bill, 2020 proposes new optional tax regime for co-operative societies. Thus, co-operative societies have the option to be taxed at progressive slab rates or 20% subject to fulfillment of certain conditions as provided in section 115BAD.

   
5. Personal Tax Scenarios (Amount in Rupees)
Individual Total Income
475,000 825,000 1,000,000 1,200,000 1,500,000 5,650,000 11,150,000 21,150,000 # 51,150,000 #
Tax in FY 2020-21 (Option A)* NIL*** 49,400 85,800 132,600 226,200 1,673,100 3,722,550 7,946,250 21,532,290
Tax in FY 2020-21 (Option B) ** NIL*** 50,700 78,000 119,600 195,000 1,638,780 3,686,670 7,907,250 21,489,546
Additional Tax burden/ (Savings) in Option B - 1,300 (7,800) (13,000) (31,200) (34,320) (35,880) (39,000) (42,744)
Additional Tax burden/ (Savings) (%) in Option B - 2.63% (9.09%) (9.80%) (13.79%) (2.05%) (0.96%) (0.49%) (0.20%)
   
Resident senior citizen (age of 60 years but below 80 years) Total Income
475,000 825,000 1,000,000 1,200,000 1,500,000 5,650,000 11,150,000 21,150,000 # 51,150,000 #
Tax in FY 2020-21 (Option A) * NIL*** 46,800 83,200 130,000 223,600 1,670,240 3,719,560 7,943,000 21,528,728
Tax in FY 2020-21 (Option B) ** NIL*** 50,700 78,000 119,600 195,000 1,638,780 3,686,670 7,907,250 21,489,546
Additional Tax burden/ (Savings) in Option B - 3,900 (5,200) (10,400) (28,600) (31,460) (32,890) (35,750) (39,182)
Additional Tax burden/ (Savings) (%) in Option B - 8.33% (6.25%) (8.00%) (12.79%) (1.88%) (0.88%) (0.45%) (0.18%)
Resident senior citizen (age 80 years and above) Total Income
475,000 825,000 1,000,000 1,200,000 1,500,000 5,650,000 11,150,000 21,150,000 # 51,150,000 #
Tax in FY 2020-21 (Option A) * NIL*** 36,400 72,800 119,600 213,200 1,658,800 3,707,600 7,930,000 21,514,480
Tax in FY 2020-21 (Option B) ** NIL*** 50,700 78,000 119,600 195,000 1,638,780 3,686,670 7,907,250 21,489,546
Additional Tax burden/ (Savings) in Option B - 14,300 5,200 - (18,200) (20,020) (20,930) (22,750) (24,934)
Additional Tax burden/ (Savings) (%) in Option B - 39.29% 7.14% - (8.54%) (1.21%) (0.56%) (0.29%) (0.12%)
* For purpose of tax calculation under Option A, ad hoc deduction of INR 150,000 has been claimed. The ad hoc deduction is only illustrative in nature. Basis actual deduction, the tax amount will vary.
** For purpose of tax calculation under Option B, no exemption/ deductions have been claimed.
*** NIL tax on account of rebate under section 87A.
# If the said taxable income includes capital gains under section 111A and section 112A of the Act, then enhanced surcharge of 37% and 25% would not be applicable and accordingly effective tax rate would be lower.
 
 
Income-tax implications on income in respect of units of Mutual Fund
Type of Investor Withholding tax rate
Resident 10%*
NRI 20%**
 

The Finance Bill, 2020 proposes to abolish income distribution tax and instead proposes to tax income from mutual fund units in the hands of the unit holders.
* Tax not deductible if dividend income in respect of units of a mutual fund is below Rs. 5,000 in a financial year.
** The base tax is to be further increased by surcharge at the rate of:
• 37% on base tax where specified income exceeds Rs. 5 crore;
• 25% where specified income exceeds Rs. 2 crore but does not exceed Rs. 5 crore;
• 15% where total income exceeds Rs. 1 crore but does not exceed Rs. 2 crore; and
• 10% where total income exceeds Rs. 50 lakhs but does not exceed Rs. 1 crore.
Specified income – Total income excluding income under the provisions of section 111A and 112A of the Income-tax Act,1961 (‘the Act’)
Further, “Health and Education Cess” is to be levied at 4% on aggregate of base tax and surcharge.

   
Capital Gain Taxation  
  Individual / HUF $ Domestic Company @ NRI $ #
Equity Oriented Schemes
Long Term Capital Gains (units held for more than 12 months) :: Short Term Capital Gains (units held for 12 months or less)
Long Term capital gains 10%* 10%* 10%*
Short term capital gains 15% 15% 15%
 
Other Than Equity Oriented Schemes
Long Term Capital Gains(units held for more than 36 months) :: Short Term Capital Gains (units held for 36 months or less )
Long Term capital gains 20% 20% Listed - 20%
Unlisted - 10%
Short term capital gains 30% ^ 30%/25%^^/22% ^^^/15%^^^^ 30% ^
 
Tax Deducted at Source (Applicable only to NRI Investors)#
  Short term capital gains$ Long term capital gains$
Equity oriented Schemes 15% 10%
Other than equity oriented Schemes 30% ^ Listed - 20%&
Unlisted - 10%*
 
* Income-tax at the rate of 10% (without indexation benefit and foreign exchange fluctuation) to be levied on long-term capital gains exceeding Rs. 1 lakh provided transfer of such units is subject to STT.
$ Surcharge to be levied at:
• 37% on base tax where specified income exceeds Rs. 5 crore;
• 25% where specified income exceeds Rs. 2 crore but does not exceed Rs. 5 crore;
• 15% where total income exceeds Rs. 1 crore but does not exceed Rs. 2 crore; and
• 10% where total income exceeds Rs. 50 lakhs but does not exceed Rs. 1 crore.
Specified income – Total income excluding income under the provisions of section 111A and 112A of the Act.
Further, Health and Education Cess to be levied at the rate of 4% on aggregate of base tax and surcharge.

@ Surcharge at 7% on base tax is applicable where total income of domestic corporate unit holders exceeds Rs 1 crore but does not exceed 10 crores and at 12% where total income exceeds 10 crores. However, surcharge at flat rate of 10 percent to be levied on base tax for the companies opting for lower rate of tax of 22%/15%. Further, “Health and Education Cess” to be levied at the rate of 4% on aggregate of base tax and surcharge.

# Short term/ long term capital gain tax (along with applicable Surcharge and Health and Education Cess) will be deducted at the time of redemption of units in case of NRI investors. However, the Finance Bill, 2020 proposes withholding tax of 20% on any income in respect of units of mutual fund in case of non-residents as per section 196A of the Act. Hence, based on language provided in said section, it seems that apart from any income distributed to NRI, withholding tax at 20% may be applicable on capital gains notwithstanding that such capital gains are taxable at a rate lower than 20%.

! The Finance Bill, 2020 proposes to insert new section (i.e. section 194K) which provides for withholding tax of 10% on any income in respect of units of mutual fund in case of residents. However, as per press release issued on 4 February 2020, it has been clarified that withholding tax of 10% is only on dividend income and not on capital gains.

& After providing indexation.
** Without indexation.
^ Assuming the investor falls into highest tax bracket.
^^ If total turnover or gross receipts in the financial year 2018-19 does not exceed Rs. 400 crores.
^^^ This lower rate is optional and subject to fulfillment of certain conditions as provided in section 115BAA.
^^^^ This lower rate is optional for companies engaged in manufacturing business (set-up & registered on or after 1 October 2019) subject to fulfillment of certain conditions as provided in section 115BAB.
 
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Further, the domestic companies are subject to minimum alternate tax (except for those who opt for lower rate of tax of 22%/15%) not specified in above tax rates.
Transfer of units upon consolidation of mutual fund schemes of two or more schemes of equity oriented fund or two or more schemes of a fund other than equity oriented fund in accordance with SEBI (Mutual Funds) Regulations, 1996 is exempt from capital gains.
Transfer of units upon consolidation of plans within mutual fund schemes in accordance with SEBI (Mutual Funds) Regulations, 1996 is exempt from capital gains.
Relaxation to non-residents from deduction of tax at higher rate in the absence of PAN subject to them providing specified information and documents.

Bonus Stripping: The loss due to sale of original units in the schemes, where bonus units are issued, will not be available for set off; if original units are: (A) bought within three months prior to the record date fixed for allotment of bonus units; and (B) sold within nine months after the record date fixed for allotment of bonus units. However, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such unsold bonus units.
 
Disclaimer: The information set out above is included for general information purposes only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws as certified by the mutual funds tax consultant. Any action taken by you on the basis of the information contained herein is your responsibility alone.