Previously, upto tax year 2019, the persons (mentioned in clauses a to d of sub section (1) of section 151) other than the companies were liable to tax on profit on debt at the rates from 10% to 15% under final tax regime (tax rates given in division IIIA of part 1 of the first schedule).
Enhancement of Tax Rates
Now from tax year 2020 (Finance Act 2019) the increased rates are as follows:
- Where profit on debt does not exceed Rs 5 million (Old Rate: 10% New Rate: 15% )
- Where profit on debt exceed Rs 5 million does not exceed Rs 25 million (Old Rate: 12.5% New Rate: 17.5% )
- Where profit on debt exceed Rs 25 million does not exceed Rs 36 million (Old Rate: 15% New Rate: 20% )
Normal Tax Regime
Now as per new amendments through Finance Act 2019, if the profit on debt exceeds Rs 36 million per annum then the person other than companies shall be charged to tax under normal tax regime.
Explanation:
Where profit on debt exceeds Rs 36 million in a tax year, section 7B will not be applicable. Prfit on debt will not be separately taxed for persons other than companies. In such cases, profit on debt will be will be chargeable to tax unde the head “Income from other sources” under section 39 and tax shall be imposed at the rates specified in paragraph (1) or (2), as the case may be, of division 1, part 1 of the first schedule.
Now, when filling tax return for tax year 2020, if the banks (as withholding agent ) deducted tax on profit on debt @ 10 %, when profit on debt is less than Rs 500,000 then taxpayer will have to pay more 5% and the liability will be @15%. The tax will be then payable with return. Adjustable, when have some advance taxes in refunds.
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