This article provides an overview of significant income tax-related relief measures taken by the Government of India to assist the corporate and individual taxpayers in the face of the unique and pressing challenges presented by the current COVID-19 pandemic. Due to the severe impact on the lives of people, considering both health and economic factors, the consequences are going to be grave in days to come.
The rapid spread of COVID-19 is causing extreme economic disruptions worldwide. With the ongoing lockdown phase in India and many other countries around the world, commercial activities have come to a standstill. In this critical situation, there is a dire need for some life support measures for rehabilitation of the economy at large along with some relief measures for the general public in taxation perspective.
The Government has provided various relief and relaxation measures under taxation, and other laws bring cheer to the taxpayers in this situation of distress. Subsequently, the said measures got the presidents to consent as Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020. The brief description of Income Tax related measures goes as under:
Extension in Due Dates for filing Belated / Revised Tax Returns:
The Last date for filing Income Tax returns (belated as well as a revised tax return) for Financial Year 2018-19 has been extended from 31st March 2020 to 30th June 2020.
Extension of various compliance-related Due Dates under different laws:
There has been an extension of the due dates under the Income Tax Act, Wealth Tax Act, Black Money Act, Equalization Levy law, Securities Transaction Tax (STT) law, Commodities Transaction Tax (CTT) Law, Vivad Se Viswas Act and Prohibition of Benami Property Transaction Act, for the following:
- Due dates for Issuance of any intimation or notice, passing of any order, completion of any proceeding or such other action, by whatever name called, by any of the tax authorities.
- Furnishing of return, filing of the appeal, submitting other applications and documents or such other record, by whatever name called.
The due dates and time limit expiring between 20th March 2020 to 29th June 2020 have been extended to 30th June 2020.
Furthermore, In a clarification to the compliance of Section 10AA of Income Tax Act, 1961 where the required approval has been received on or before the 31st March 2020 in accordance with the provisions of the SEZ Act, the date for commencement of manufacture or production of articles or things or providing any services for such SEZ Units has been extended to 30th June 2020.
Aadhaar and PAN linking due date Extension:
The due date for linking Aadhaar and PAN is now extended to 30th June 2020 from the earlier set date of 31st March 2020. The Non-compliance shall make PAN inoperative.
Relaxations in Vivad Se Vishwas Scheme (VSV Scheme):
The VSV Scheme was introduced by the finance minister in her budget speech to avoid the prolonged litigation for matters provided in the scheme by paying the disputed tax amount with immunity from payment of interest and penalty on the same. The bill has already received the Presidents assent and become Direct Tax Vivad Se Viswas Act, 2020.
The applicant under VSV Scheme was required to pay only the disputed taxes / specified percentage of disputed demands by 31st March 2020. However, an additional percentage of the disputed taxes was payable if the taxes are paid after 31st March but before 30th June 2020.
Now the time limit for making payment under Vivad Se Vishwas Scheme has been extended from 31st March 2020 to 30th June 2020 without any additional percentage of the disputed amount payable.
Investments / Payments / Donations for Tax Saving Purposes:
Investments/payments covered under Chapter VI-A under the heading ‘B – Deductions in respect of certain payments’ (such as investment in Public Provident Fund, Life Insurance payments, NSCs, etc.) or donation to avail deductions from income for FY 2019-20 was to be made till 31st March 2020. The relief has been provided that if such investments/payments are made till 30th June 2020, they shall be considered for deduction from income for FY 2019-20.
Similarly, exemptions from Long Term Capital Gains covered under section 54 to 54GB are available if the investments are made within the time limit prescribed from the date of transfer of the capital asset. Now any such investment which was due from 20th March 2020 to 29th June 2020 can be made up to 30th June 2020, subject to other conditions mentioned in the Income-tax Act, 1961 (‘the Act’) and shall be deemed to be eligible for taken into consideration while computing the Income of FY 2019-20.
Donations to PM CARES Fund:
The Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) has been set up by the Central Government. 100% deduction shall be allowed under section 80(G) for the donation made to PM CARES Fund. The restriction on deduction of 10% of adjusted total income shall not be applicable for such donations. Further such income will be exempt in the hands of recipient under Section 10(23C) of the Act.
The deduction can be claimed even by those Individuals and Corporates against their income of FY 2019-20, who are opting for concessional tax rates on income of FY 2020-21 under new tax regime. Their eligibility for opting New Tax Regime shall not be affected.
For claiming deduction in return for FY 2019-20, Donation to PM CARES Fund could be made till 30th June 2020.
Reduction of interest rates on various delayed payments:
The interest rates have been reduced to 9% from 12% / 18% per annum for various delayed payment of taxes. Therefore, the taxes due to be paid between 20th March to 30th June, which includes Advance Tax (first instalment due by 15th June 2020 for FY 2020-21), Tax Deducted at Source (TDS), Tax Collected at Source (TCS), Equalisation Levy, STT, CTT, and are paid by 30th June 2020 then the interest on delayed payment of such taxes will be levied at 0.75% per month (or part of the month) instead of 1% / 1.5% per month (or part of the month).
Further, no late fee or penalty shall be charged on account of these delayed tax payments during this period.
In a recent press note of Income Tax Department, it was declared that all pending income-tax refunds amounting up to Rs 5 lakh will be released expeditiously to provide immediate relief to individuals and business entities.
Relaxation in withdrawal from Employees’ Provident Fund (EPF):
On account of financial exigencies amid COVID-19, Government has allowed employees to obtain a non-refundable advance from their existing EPF accounts amounting to the 3 months’ Basic and Dearness Allowances or 75 per cent of the credit balance in EPF account, whichever is lower. It is also clarified that there will be no tax implication on such advance.
Extension in the validity of Nil or Lower TDS /TCS Certificates:
As per a recent order of CBDT, the taxpayers whose application for lower or nil deduction of TDS / TCS is pending for disposal or were not able to apply for FY 2020-21, but were issued such certificates for 2019-20, such certificates will remain valid till 30th June 2020 for FY 2020-21.
For the cases where the taxpayers have not applied for Nil or lower TDS/TCS certificate in the TRACES portal and do not have a certificate for FY 2019-20, the CBDT has prescribed a modified procedure for application and consequent handling by the assessing officer.
Considering the impact of COVID-19 on taxpayers at large, the routine compliance process under income tax could have been hampered at large. Therefore, the relief measures by the Government are a great aid at the time of need.