The government has promulgated Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 ("Ordinance") to give effect to various relief and relaxations announced by the Finance Minister on 24.03.2020 for the cease of work due to nationwide lockdown imposed in the wake of the pandemic COVID-19 outbreak.
Introduction
The reliefs and relaxations were not limited to direct taxes only but cover indirect taxes also. The newly introduced amnesty scheme Vivad Se Vishwas Scheme is also relaxed.
Mostly the intention of the government is to provide relaxation from the various compliances which fall due in the lockdown period so that any adverse consequences do not happen on the taxpayers. All the benefits and relaxation have been notified by an Ordinance of 2020.
The Ordinance, 2020 explicitly extends the relaxation in compliances etc only in respects of the following laws-
The Ordinance, 2020 is applicable for providing relaxation in compliances etc only in the provisions contained in the following 8 laws other than indirect Taxes-
(i) Wealth-tax Act, 1957
(ii) Income-tax Act, 1961
(iii) Prohibition of Benami Property Transactions Act, 1988
(iv) Chapter VII of the Finance (No. 2) Act, 2004 (Securities Transaction Tax)
(v) Chapter VII of the Finance Act, 2013 (Commodities Transaction Tax)
(vi) Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
(vii) Chapter VIII of the Finance Act, 2016 (Equalisation Levy)
(viii) Direct Tax Vivad se Vishwas Act, 2020
The provisions of the Ordinance,2020 are classified as under-
Related to Direct Taxes
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Nature of amendment
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Related Provisions
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Income Tax / Direct Tax
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Substantial Provisions
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Amending section 10 and 80G for PM CARES FUND
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Compliances related provisions
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Section 3
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Vivad Se Vishwas Scheme
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Extension of time limit
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Section 5
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Objective of the Ordinance
The objective of introducing the Ordinance,2020 is to provide relaxation in certain provisions in taxation and other laws specified in the Ordinance,2020 in view of the spread of pandemic COVID-19 across many countries of the world including India, causing immense loss to the lives of people. The relaxation is not limited to the extension of time limit but on other matters also.
The 6-page Ordinance,2020 contains VII chapters and 8 sections. Chapter I to Chapter IV (Sections 1 to 5) is related to the Direct Tax including Vivad Se Vishwas Scheme.
The Ordinance,2020 is promulgated with the objective of providing relaxation under the Income Tax Act, 1961 in the wake of COVID-19 outbreak in the country and the lockdown being imposed where all are restricted to stay inside their home which makes certain compliances impossible under the Income Tax Act, 1961 and certain other laws. In this way, this is a beneficial legislation.
The procedures related to Income Tax and Vivad Se Vishwas is discussed and elaborated here.
Extension of time-limit under Vivad Se Vishwas Scheme
First, we take Chapter-IV of the Ordinance,2020 which is related to Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act, 2020). The relevant provision of the Ordinance of 2020 is reproduced below-
CHAPTER IV
AMENDMENTS TO THE DIRECT TAX VIVAD SE VISHWAS ACT
Amendment of section 3 of Act 3 of 2020.
5. In section 3 of the Direct Tax Vivad Se Vishwas Act, 2020,-
(a) in third column, in the heading, for the figures, letters and words "31st day of March, 2020", the figures, letters and words "30th day of June, 2020"shall be substituted;
(b) in fourth column, in the heading, for the figures, letters and words "1st day of April, 2020", the figures, letters and words "1st day of July, 2020" shall be substituted.
Section 5 of the Ordinance,2020 amends section 3 of the DTVSV Act. Section 3 of the DTVSV Act, 2020 deals with the payment of the amount payable under the Act. Section 3 of the DTVSV Act, 2020 is reproduced below-
Sl No
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Nature of tax arrear
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Amount payable under this Act on or before the
30th day of June, 2020 |
Amount payable under this Act on or after the
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(a)
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where the tax arrear is the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax.
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amount of the disputed tax
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The aggregate of the amount of disputed tax and ten per cent. of disputed tax:
Provided that where the ten percent of disputed tax exceeds the aggregate amount of interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax, the excess shall be ignored for the purpose of computation of amount payable under this Act
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(b)
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where the tax arrear includes the tax, interest or penalty determined in any assessment on the basis of search under section 132 or section 132A of the Income-tax Act.
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The aggregate of the amount of disputed tax and twenty-five per cent. of the disputed tax:
Provided that where the twenty-five per cent. of disputed tax exceeds the aggregate amount of interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax, the excess shall be ignored for the purpose of computation of amount payable under this Act.
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The aggregate of the amount of disputed tax and thirty-five per cent. of disputed tax:
Provided that where the thirty-five per cent of disputed tax exceeds the aggregate amount of interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax, the excess shall be ignored for the purpose of computation of amount payable.
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(c)
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where the tax arrear relates to disputed interest or disputed penalty or disputed fee
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twenty-five per cent of disputed interest or disputed penalty or disputed fee.
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thirty per cent. of disputed interest or disputed penalty or disputed fee.
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Hence, the amount which is required to be paid under the Vivad Se Vishwas scheme can now be paid without any additional 10 per cent within June 30, 2020. Earlier, the time limit was 31st March, 2020. Similarly, the cut-off date for payment of the amount of tax under the Vivad Se Vishwas Scheme with an additional 10 per cent is modified from 1st April, 2020 to 1st July, 2020.
After the amendment, the position is that the due amount of disputed tax, disputed interest/penalty as determined u/s 5(1) of the DTVSV Act, 2020 can be paid by June 30, 2020, without any additional 10 per cent. In case the amount is paid after the specified date, i.e. from 1st July 2020 till the end date of the Vivad Se Vishwas Scheme, the 110 per cent of the amount so determined u/s 5(1).
In search cases, the amount payable is 125% of the disputed tax compared to 100% in non-search cases if paid by June 30, 2020. From 1st July onwards, the amount payable will be 135% of the amount determined.
In case the tax arrear relates to disputed interest or disputed penalty or disputed fee then 25 per cent of disputed interest or disputed penalty or disputed fee is payable by June 30, 2020. From July 1, 2020, the amount payable will be 35 per cent of disputed interest or disputed penalty or disputed fee.
In case the matter is decided in favour of the taxpayer, the payment of disputed tax is half of the normal rates.
Comments: Earlier it was expected that the scheme may end on June 30, 2020. Now it appears that the scheme will not end on that date. However, the end date of the scheme will be notified later as per the provisions of the DTVSV Act, 2020.
In this case, there is no provision to extend the date of June 30 by any notification.
Extension of the time limit for specific compliance requirements under the Income Tax Act, 1961 and other direct tax laws
Certain provisions explicitly extend the time limit for specific compliance requirements under the Income Tax Act, 1961. Certain compliances have been relaxed by a general provision in the Ordinance,2020 which needs proper interpretation to ascertain the applicability of extended time-limit in each particular compliance under the Income Tax Act.
As it is understood that the Ordinance,2020 was issued in a very short period of time and all the cases of compliances may not be possible to cover, hence the Ordinance,2020 empowers the government to issue appropriate notifications under the Ordinance,2020.
Section 3 of the Ordinance,2020 is relevant to the time extension and other compliance requirements. It states that where any time limit is-
specified in the specified Act (for eg., Income Tax Act, 1961), or
prescribed in the Rules made thereunder (for eg. Income Tax Rules), or
notified in any Notifications (for eg. The last date to link PAN-Aadhaar is notified by a Notification)
and such time-limit falls in the period between 20-03-2020 and 29-06-2020 (or a new notified date)
then the followings are provided under section 3 of the Ordinance,2020 and completion or compliance of action must be related to the followings-
then the followings are provided under section 3 of the Ordinance,2020 and completion or compliance of action must be related to the followings-
completion of any proceeding,
the passing of any order,
issuance of any notice, intimation, notification,
sanction or approval or such other action, by any authority, commission or tribunal,
filing of any appeal,
furnishing of any report, document, return, statement or such other records,
under the provisions of the specified Acts which includes Income Tax Act, 1961.
The followings are exclusively provided for the Income Tax Act, 1961-
Extension of the time-limit for investments or acquisition etc. for sections 54 to 54GB
Where there is any requirement of making any investment, deposit, payment, acquisition, purchase, construction or other similar actions for the purposes of claiming any deduction, exemption or allowance under sections 54 to 54GB from March 20, 2020 to June 29, 2020 and the same could not be completed within this time period then the same may be completed by June 30, 2020. This provision under the Ordinance,2020 has been given an overriding effect to the provisions of the Income Tax Act.
Section 54 to section 54GB deals with exemption from long term capital gains if the investment is made in the specified assets within the prescribed time limit. For example, to claim exemption from capital gains u/s 54EC, an assessee is required to invest the capital gains arising from the transfer of long term capital assets being land and or building or both within a period of six months from the date of transfer in the specified bonds. Now suppose if a person has transferred a house property on 30-09-2019, he is required to invest in the bonds by 31-03-2020. Since it falls within the specified period, the benefit of extension is available to him for investing in bonds till June 30, 2020 or extended time.
In this context, it is to be noted that the date of June 29, 2020 and June 30, 2020 is not made static but a dynamic one. It means these dates may be further extended by the government depending upon the situation of the country at that point of time. However, these dates can only be extended by the notification and cannot be reduced.
From the bare reading of the provisions, it appears that the new time limit is set keeping in mind the lockdown time limit of April 14, 2020. In case the lockdown amid COVID-19 threat is extended further, the government will further extend the time limit and that is why June 29/30, 2020 is kept as a variable or dynamic date and not a static one.
Extension of the time-limit for investments or acquisition etc for sections 80C, 80D, etc under Chapter VI-A
Similarly, where completion or compliance of any action is related to the making of investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purposes of claiming any deduction, exemption or allowance under any provisions of Chapter VI-A under the heading "B.-Deductions in respect of certain payments" and the same could not be completed within the time period of March 20 to June 29, 2020, then the same may be completed by June 30, 2020.
Read
more on Income Tax Deduction under Chapter VI-A
This provision under the Ordinance, 2020 has been given an overriding effect to the provisions of the Income Tax Act.
In this case also the date of June 29, 2020, and June 30, 2020 is not made static but a dynamic one. It means these dates may be further extended by the government depending upon the situation of the country at that point of time. However, these dates can only be extended by the notification and cannot be reduced.
Extension of the time-limit for investments etc. under any other provisions of the Income Tax Act
Similarly, where completion or compliance of any action is related to the making of investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purposes of claiming any deduction, exemption or allowance under any other provisions of the Income Tax Act and the same could not be completed within this time period then the same may be completed by June 30, 2020 subject to fulfilment of such conditions, as may be notified by the Central Government.
In this case also the date of June 29, 2020 and June 30, 2020 is not made static but a dynamic one. It means these dates may be further extended by the government depending upon the situation of the country at that point of time. However, these dates can only be extended by the notification and cannot be reduced.
Extension of the time-limit for payment of tax and levy under any specified Acts including the Income Tax Act
Where any due date is specified or prescribed or notified under any specified Acts including the Income Tax Act and such due date falls between the period of March 20 and June 29, 2020 then the tax or levy may be paid by June 30, 2020 or such extended date as may be notified later.
This provision under the Ordinance, 2020 has been given an overriding effect to the provisions of the Income Tax Act and other specified Acts.
In this case also the date of June 29, 2020, and June 30, 2020 is not made static but a dynamic one. It means these dates may be further extended by the government depending upon the situation of the country at that point of time.
In this case, it must be remembered that there is no complete immunity is given in respect of interest liability from delay in the of the due taxes. However, there is complete immunity given from imposition of penalty and prosecution for the delay in payment of due taxes.
Interest liability for delay in payment of due taxes in the extended time limit
Section 3(2) of the Ordinance, 2020 prescribes for the payment of interest in case of delay in the payment of the due taxes till June 30, 2020. In this context, it must be remembered that-
1. The provision of the Ordinance, 2020 shall prevail over the provisions of the respective laws under which the tax or levy is required to be paid. The provision of the Ordinance, 2020 has the overriding effect.
2. The rate of interest chargeable for the delay in the payment of the tax or levy is reduced to 0.75 per cent for every month or part thereof in all cases. Remember, the rate of interest is reduced and not the amount of interest.
In most cases under the Income Tax Act, 1961 the rate of interest prescribed is 1%. Hence, in those cases, there is a waiver of 25 per cent of the interest liability for the delay in the payment of the due taxes and levy.
However, in case of delay in deposit of TDS where tax is deducted, the rate of interest is 1.5% for every month or part thereof. In this case, the waiver in the rate of interest is 50%.
One may argue that why one should pay the interest even at a reduced rate when there is a delay for no fault of the assessee. This a point of debate but here I am discussing the provision that is provided in the Ordinance,2020.
In most cases under the Income Tax Act, 1961 the rate of interest prescribed is 1%. Hence, in those cases, there is a waiver of 25 per cent of the interest liability for the delay in the payment of the due taxes and levy.
However, in case of delay in deposit of TDS where tax is deducted, the rate of interest is 1.5% for every month or part thereof. In this case, the waiver in the rate of interest is 50%.
One may argue that why one should pay the interest even at a reduced rate when there is a delay for no fault of the assessee. This a point of debate but here I am discussing the provision that is provided in the Ordinance,2020.
3. As per the Ordinance,2020, the period of interest shall be computed from the due date till the date of payment. This period is termed as 'period of delay' in the Ordinance,2020. Even if the respective laws provide otherwise to compute the interest otherwise, the same shall be ignored and shall be computed from the due date of payment of taxes till the date of actual payment of the taxes or levy.
As per the Ordinance,2020, the "period of delay" means the period between the due date and the date on which the amount has been paid.
The reduced rate of interest is specified for every month or part thereof which means any part of a month is taken as a full month.
To explain the provision of interest computation let us take the example of payment of TDS under the Income Tax Act, 1961. Suppose, an assessee has deducted TDS on interest payment of Rs. 1,00,000 u/s 194A on 10th March, 2020. The amount of TDS comes to Rs. 10,000 at the prescribed rate of TDS of 10%.
The normal due date to pay the liability of TDS in the month of March is April, 30, 2020 which falls between March 20 to June 29. In normal circumstances, if the TDS is paid on May 20, 2020 then the deductor has to pay interest @ 1.5 % from March 2020 to May 2020 or 3 months. Thus the total interest comes to Rs. 450. Further, the deductor is subject to penal and prosecution provisions.
Under the amended provisions, the rate of interest shall be reduced to 0.75% (instead of 1.50%) for every month or part thereof and shall be computed between April 30 and May 20. Hence, the interest is computed for 2 months for April 2020 and May 2020. The amount of interest payable on delay payment of TDS of Rs. 10,000 comes to Rs. 150. Further, the deductor is given immunity from penal and prosecution provisions.
Read Also on Extension of TDS payment Due Date March 2020
A Clarification required on the computation of the period of delay:
The period of delay is defined as the period between the due date and the date on which the amount has been paid. Hence, whether the period of delay is counted from the due date or the date immediately after the due date. This is important because a single day of a month will be counted as one full month.
In the example given above, if the period of delay is counted from the due date i.e. April 30, the period of delay comes to 2 months as computed in the given example. But if the period of delay is counted from the next day of the due date i.e. May 1 then the period of delay will be 1 month only. Hence, CBDT should clarify the date from which the computation of the period of delay shall be reckoned.
4. The provisions of reduced rate of interest and the immunity from penalty and provision are applicable only where the due date of tax payment falls between March 20 and June 29, 2020. In case the due date falls outside this period then there will be no benefit under this Ordinance,2020 and the full rate of interest and penal and prosecution provisions under the respective laws shall apply.
Suppose, the TDS of February 2020 remains unpaid by March 7, 2020 (due date). The deductor must have planned to pay by March 31 (and assuming he had valid reasonable cause for the delay). But due to the lockdown situation, he cannot pay by March 31 and finally pays on June 30, 2020. He will not get any immunity under the Ordinance, 2020 and the normal provisions of the Income Tax Act shall apply to him for such delay. In this case, he has to pay interest @ 1.5% from February 2020 to June 2020.
Actually in such a case also the period from March 20 till the lockdown continues shall be excluded from computing the periods of delay. It is requested to the government to look in the matter and shall issue an appropriate notification or carry out suitable amendment to exclude the period of lockdown from the computation of interest payable.
Amendment of section 10(23C) and section 80G for PM CARES FUND
As we know, a special fund namely “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 Coronavirus. Prime Minister Shri Narendra Modi appealed to the citizens of the country to donate generously to the PM CARES Fund.
Chapter-III of the Ordinance,2020 has also amended two provisions of the Income Tax Act, 1961.
Section 4(i) of the Ordinance,2020 provides that the income of Prime Minister’s Citizen Assistance and Relief Emergency Situation Situations Fund (PM CARES FUND) shall be exempt from income tax under section 10(23C).
Section 4(ii) of the Ordinance,2020 provides for the insertion of Prime Minister’s Citizen Assistance and Relief Emergency Situation Situations Fund (PM CARES FUND) in section 80G(2) of the Income Tax Act, 1961.
Donation to a fund prescribed in section 80G(2) qualifies for 100 per cent deduction from the Gross Total Income of the assessee without any limit of 10% of adjusted Gross Total Income.
Section 4(i) of the Ordinance,2020 provides that the income of Prime Minister’s Citizen Assistance and Relief Emergency Situation Situations Fund (PM CARES FUND) shall be exempt from income tax under section 10(23C).
Section 4(ii) of the Ordinance,2020 provides for the insertion of Prime Minister’s Citizen Assistance and Relief Emergency Situation Situations Fund (PM CARES FUND) in section 80G(2) of the Income Tax Act, 1961.
Donation to a fund prescribed in section 80G(2) qualifies for 100 per cent deduction from the Gross Total Income of the assessee without any limit of 10% of adjusted Gross Total Income.
With this amendment in section 80G, a donation made to the PM CARES Fund shall be eligible for 100% deduction under section 80G of the Income Tax Act. Further, the limit on the deduction of 10% of gross income shall also not be applicable for donation made to PM CARES Fund.
The limit of deduction amount is, however, subject to gross total income. In other words, the deduction under section 80G cannot exceed the gross total income of the assessee.
Section 80G falls under Part-B of Chapter VI-A of the Income Tax Act, 1961. In the appeal press note released, it is stated that the donations to PM CARES Fund will be exempt from income tax under section 80(G) without providing any further detail on the quantum of deduction.
With the present amendment, the tax benefit of exemption/deduction for donation/contribution to the PM CARES FUND is given at par treatment as available for PM National Relief Fund (PMNRF).
With the present amendment, the tax benefit of exemption/deduction for donation/contribution to the PM CARES FUND is given at par treatment as available for PM National Relief Fund (PMNRF).
The Ordinance,2020 amended the provisions of the Income-tax Act to provide the same tax treatment to PM CARES Fund as available to Prime Minister National Relief Fund (PMNRF). Therefore, the donation made to the PM CARES Fund shall be eligible for 100% deduction under section 80G of the Income Tax Act. Further, the limit on the deduction of 10% of gross income shall also not be applicable for donation made to PM CARES Fund.
The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 has relaxed certain provisions of the Income Tax Act. In respect of savings and investments, the date is extended up to 30.06.2020. In other words, any exemption or deduction can be claimed in the FY 2019-20 itself even if the same is paid or invested after 31st March 2020 but within 30.06.2020.
The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 has relaxed certain provisions of the Income Tax Act. In respect of savings and investments, the date is extended up to 30.06.2020. In other words, any exemption or deduction can be claimed in the FY 2019-20 itself even if the same is paid or invested after 31st March 2020 but within 30.06.2020.
It may be noted that the end date of June 30, 2020 is subject to change. The government may notify a further date which will depend upon the circumstances and status of lockdown in the country at that time. However, these dates can only be extended by the notification and cannot be reduced.
The date for claiming an exemption for donation under section 80G in FY 2019-20 also gets extended to 30.06.2020.
The expression used in section 3(1)(c) of the Ordinance,2020, "under any provisions of Chapter VI-A under the heading "B.-Deductions in respect of certain payments" thereof" and "and where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Act, stand extended to the 30th day of June, 2020, or such other date after the 30th day of June, 2020, as the Central Government may, by notification, specify in this behalf" provides for benefit of deduction u/s 80G in the FY 2019-20 itself, as stated above.
The expression used in section 3(1)(c) of the Ordinance,2020, "under any provisions of Chapter VI-A under the heading "B.-Deductions in respect of certain payments" thereof" and "and where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Act, stand extended to the 30th day of June, 2020, or such other date after the 30th day of June, 2020, as the Central Government may, by notification, specify in this behalf" provides for benefit of deduction u/s 80G in the FY 2019-20 itself, as stated above.
Some points to ponder for deduction and exemption under Chapter VI-A and other provisions
1. The prescribed time period from March 20, 2020, to June 29, 2020, covers two financial years 2019-20 and 2020-21 without any intervening break-in period as on March 31, 2020.
2. There is no extension of the financial year 2019-20. Only the period of investment or the time limit of compliance etc has been extended till June 30, 2020, and the benefits thereof can be availed in FY 2019-20 even though such actions has been actually carried on in FY 2020-21. under normal circumstances, such action would have fallen in FY 2020-21.
3. The section provides for the extension of the time limit which is prescribed in the specified Acts including Income Tax Act and not the extension of any due date. For example, for claiming deduction u/s 80C of Income Tax Act for AY 2020-21, the time limit to invest in PPF starts from April 1, 2019 and ends on March 31, 2020. Therefore, an individual can deposit into his PPF account till March 31, 2020. In another case, an Individual is required to his life insurance premium on March 28, 2020, which is the due date of payment of the insurance premium.
Both the cases are covered by the benefit of extension of the time limit given by the Ordinance, 2020.
4. As stated above, the Ordinance, 2020 has extended the time limit for the period from March 20, 2020, to June 29, 2020, without any intervening break-in period as on March 31, 2020. This time period covers two financial years 2019-20 and 2020-21. Now it is not clear how an investment made after March 31, 2020 is allocated between the two financial years. Understand this with two examples.
Suppose, a person investing Rs 1,50,000 in his PPF account on April 20, 2020 will be available for claiming deduction u/s 80C for FY 2019-20 - as per the amended provision, assuming the person could not invest in FY 2019-20 by March 31, 2020.
In another case, a person invests Rs. 1,50,000 in his PPF account for Rs. 1,50,000 on the same day April 20, 2020. He has completed his investment of Rs. 1,50,000 for the FY 2019-20 by 1st March 2020. So he will not claim the investment in PPF account made on 20-04-2020 in FY 2019-20. He will normally claim the same for FY 2020-21.
One question that arises how the tax authorities will determine or allow the deduction made on the same day after March 31, 2020 in the FY 2019-20 or FY 2020-21. If no check is imposed it is vulnerable to misuse as the same investment will be claimed in FY 2019-20 and FY 2020-21.
One may argue to defer the investment in PPF after June 30, 2020 (or extended date). This will bring certainty on the matter.
One must not forget that from AY 2021-22, the new tax regime of paying tax at concessional rates under section 115BAC (for individuals and HUF) is coming. Under this, no deduction is allowed under Chapter VI-A (section 80C etc.). If one opts for the new tax regime, he will have no confusion for allowability in AY 2021-22. This will be a problem who is opting for the old regime of taxation. The government might be thinking from the new tax regime perspective.
The Ordinance,2020 fails to answer this question. A suitable clarification in this regard is highly appreciable. The department may bring certain changes in the ITR forms to declare investments with dates and the year of claim just like TDS credit. However, CBDT has already notified ITR Forms - ITR 1 and ITR 4 for the AY 2020-21. If this method is to be used then the notified forms will require amendment.
One argument is that any investment made till June 30 shall be considered for FY 2019-20 since the provisions of the Ordinance,2020 overrides the provisions of Income Tax Act.
Section 80C (for the sake of brevity one section is considered) allows a deduction for investment in PPF, payment of life insurance premium, etc., made during the previous year from the Gross Total Income of the previous year. The previous year is defined to be the year beginning from April 1 and ending on March 31 of the next calendar year. Now this March 31, 2020 (when the previous year begins on April 1, 2019) is extended for the purpose of section 80C etc. to June 30, 2020. If this view is adopted then any payment, investment etc. after March 31, 2020 but on or before June 30, 2020 (or extended date) shall be deemed to be investment, payments etc. made during the previous year 2019-20. This follows from the provision contained in section 3(1) of the Ordinance of 2020 which is reproduced below for ready reference-
"where completion or compliance of such action has not been made within such time, then, the time limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Act, stand extended to the 30th day of June, 2020, or such other date after the 30th day of June, 2020, as the Central Government may, by notification, specify in this behalf."
The expression 'such time' refers to the period from March 20, 2020 to June 29, 2020. Hence the previous year ending on March 31, 2020 - which falls in the mentioned period, gets extended till June 30, 2020 for the limited purpose of claiming deduction under section 80C etc.
If this interpretation is adopted then consider a case of payment of life insurance premium which falls due on April 20 of every year. Investment in PPF is voluntary and can be deferred with loss of interest only. However, a person who has paid the insurance premium on 20-04-2019 and again on 20-04-2020 will qualify for a deduction for FY 2019-20. Suppose the premium is itself Rs. 1,50,000 then the person cannot claim any deduction for FY 2020-21. This interpretation is also not free from flaws.
Further, in the case of PPF and other small savings account like Senior Citizens Savings Scheme, Sukanya Samriddhi Account, etc. have a maximum limit of investment in a financial year. For eg., in a PPF account, maximum of Rs. 1,50,000 can be invested per financial year. How one can invest Rs. 3,00,000 in a financial year for claiming deduction of Rs. 1,50,000 in FY 2019-20 and another Rs. 1,50,000 in FY 2020-21 (assuming he opts for old tax regime in AY 2021-22). It must be remembered that till date no such corresponding amendment is made in the PPF Act/Rules to allow investment of more than Rs. 1,50,000 per financial year.
Further, in the case of PPF and other small savings account like Senior Citizens Savings Scheme, Sukanya Samriddhi Account, etc. have a maximum limit of investment in a financial year. For eg., in a PPF account, maximum of Rs. 1,50,000 can be invested per financial year. How one can invest Rs. 3,00,000 in a financial year for claiming deduction of Rs. 1,50,000 in FY 2019-20 and another Rs. 1,50,000 in FY 2020-21 (assuming he opts for old tax regime in AY 2021-22). It must be remembered that till date no such corresponding amendment is made in the PPF Act/Rules to allow investment of more than Rs. 1,50,000 per financial year.
Hence a suitable amendment or a proper clarification is highly required in this case. At this juncture, in my view, it is not possible to clarify anything on the matter since such clarification can be given once the situation improves and normalcy returns. It is not clear how long it will take time to return normalcy.
5. No extension of time limit for income or accrual of income- It must be remembered that extension is given for the issue of notices, completion of the assessment, passing of the order, investment or payment etc for claiming deduction or exemption but not for accrual of income. Income accrued or arisen up to 31st March, 2020 shall constitute the income for the previous year 2019-20. Any income accrued or arising after March 31,2020 or on and from April 1, 2020 shall be the income for the previous year 2020-21.
6. Claim for other exemption or deduction like for House rent payments- Section 54 to 54GB and Part-B of Chapter VI-A are exclusively covered in the Ordinance,2020. Section 3(1) of the Ordinance,2020 also provides a residual provision under which deduction or exemption available under other provisions of the Income Tax Act, 1961 are also available but that is subject to the fulfilment of such conditions as may be specified by the central government in the notification. Other deductions or exemptions which are commonly available on payment basis to an Individual are-
(i) Deduction for municipal taxes etc from rental income under 'Income from house property',
(ii) Deduction for interest on home loan,
(iii) Exemption from House Rent Allowance for payment of rent
(iv) Payment of brokerages or legal fees on transfer of property and so on.
Remember, if no House rent is received then the deduction for payment of rent is available under section 80GG which falls under Chapter VI-A for which the Ordinance, 2020 provides the conditions for availing the benefit of the extended time limit. But for a salaried individual who receives HRA from his employer then the exemption is available u/s 10(13A) which is outside the score of Chapter VI-A and hence can be availed only if notified by the government.
7. Donation to PM CARES FUND: With the amendment in section 80G, a donation made to the PM CARES Fund shall be eligible for 100% deduction under section 80G of the Income Tax Act. Further, the limit on the deduction of 10% of gross income shall also not be applicable for donation made to PM CARES Fund.
In this context, it must be remembered that PM CARES FUND was launched on 28th March 2020. Hence, assessees did not get much time and opportunity to donate in the fund by March 31. Thus, one can avail the benefit of time-extension for getting the deduction under section 80G even donated in the fund after 31.03.2020 in the FY 2019-20 itself.
As the date for claiming deduction u/s 80G under the Income Tax Act has been extended up to 30.06.2020, the donation made up to 30.06.2020 shall be eligible for deduction from income of FY 2019-20. Hence, any person can make a donation to PM CARES Fund up to 30.06.2020 and can claim deduction u/s 80G against income of FY 2019-20.
Other time extensions under the Income Tax Act based on actions for compliances, etc.
The time limit for deductions and exemptions under sections 54 to 54GB and Chapter VI-A and other provisions under the Income Tax Act are exclusively dealt with by the Ordinance, 2020.
Other than the deduction or exemptions, time limit is also extended for certain actions under the Income Tax Act and other specified Acts.
The Ordinance, 2020 did not expressly mention any specific instance of action but covered every specified action under the specified Acts including Income Tax Act which are-
Actions
|
Effect
|
Remarks
|
Completion of any proceedings
|
Any
type of proceedings which are getting time-barred on March 31 (more
specifically from March 20 to June 29) gets extended to June 30.
|
|
Passing
of any order
|
Where
the income tax authority etc is required to pass any order by March 31 (more
specifically from March 20 to June 29), the same can be passed by June 30
|
|
Issuance
of any notice, intimation, notification
|
Where
any notice etc is required to be issued by March 31, 2020 (more specifically
from March 20 to June 29) the same gets
extended to June 30 and can be issued by that date.
|
For
eg., the time limit to issue notice u/s 148 for the AY 2013-14 is getting time-barred on March 31, 2020. The same can now be issued upto June 30, 2020 and
such notice will be a valid notice.
|
Sanction
or approval or such other action, by any authority, commission or tribunal
|
||
Filing
of any appeal
|
Time
limit to file appeal gets extended to June 30 where it was getting barred on
March 31 (more specifically from March 20 to June 29).
|
Appeals
which were required to be filed by March 31(more specifically from March 20
to June 29) before any appellate forum, can be filed by June 30 without any
condonation.
|
Furnishing
of any report, document, return, statement or any other records
|
Where
any return, statement etc. is required to be filed between March 20 and June
29, the same can be filed by June 30 without any adverse consequences.
|
The
TDS return for the 4th quarter ending on March 31 is required to be filed by May 31. Any delay attracts late fees of Rs. 200 per day u/s 234E.
Now the same can be filed by June 30 without any late fees since the due date
is extended from May 31 to June 30.
Similarly,
belated return of income (ITR) for FY 2018-19 can be filed by March 31, 2020.
Now the same can be filed upto June 30, 2020 but lates fees of Rs 10,000 or
Rs 1,000 as the case may be, u/s 234F shall apply in this case.
|
Extension of time limit for PAN-Aadhaar Linking date
Section 139AA mandatorily requires linking of PAN with the Aadhaar of the assessee within the notified date failing which the PAN shall become inoperative.
CBDT vide Notification No. 107/2019 dated 30.12.2019 notified the last date to link PAN-Aadhaar is 31-03-2020. Vide Notification No. 11/2020 dated 13.02.2020, Rule 114AAA is enshrined in the Income Tax Rules, 1962 to determine the manner of making the PAN inoperative in case of non-linking of the PAN with Aadhaar by March 31, 2020.
Read
more on PAN-Aadhaar linking: The Saga of PAN and Aadhaar Linking in Income Tax
The Ordinance has extended the date of linking PAN-Aadhaar from March 31, 2020 to June 30, 2020. However, Rule 114AAA has not been amended. However, Rule 114AAA is a consequential provision related to PAN-Aadhaar linking. If the date of linking is extended from March 31, 2020 to June 30, 2020 the PAN will not become inoperative after March 31, 2020 since the compliance under the mother or main provision is extended beyond March, 31.
Extension of date for commencement of operation for the SEZ units
The date for commencement of operation for the SEZ units for claiming deduction under section 10AA of the Income Tax Act has been extended to 30.06.2020 for the units which received necessary approval by 31.03.2020.
Some operational issues discussed
1. No extension of the due date to pay taxes - The Ordinance, 2020 has extended the time limit to pay the due taxes and levy without any penal consequences but interest needs to be paid. Hence actually, it is not an extension of the time limit of the due date, it is merely a relief to pay taxes belatedly without any penalty. So the relief is with the penalty and prosecution only.
2. Reduced rate of interest - Section 3(2) of the Ordinance, 2020 specifies the rate of interest shall not exceed 0.75% per month or part thereof irrespective of the prescribed interest rate. Where the rate of interest per month is prescribed at 1%, the waiver comes to 25% of the normal rate of interest (75% of 12% = 9%). But there are certain provisions (for eg, delay in payment of TDS) where the rate of interest is 1.5% per month. In this case, the waiver comes to 50% of the normal rate of interest (50% of 18% = 9%).
The benefit of the reduction in the rate of interest shall be available if the due taxes are paid by 30.06.2020. If the due taxes are paid after 30-06-2020 then the normal rate of interest shall apply without any benefit of reduction in the normal rate of interest.
3. Marginal relief from interest for the shortfall in Advance Tax - The last instalment of advance tax was required to be paid by March 15, 2020 for the FY 2019-20 (AY 2020-21). However, the Ordinance, 2020 covers the period from March 20 to June 29. For the purpose of section 234B, if any Advance Tax is paid by March 31, the same is regarded as Advance Tax for the relevant previous year. In this case, if Advance Tax is paid by June 30, 2020 the same will be considered as the advance tax for the FY 2019-20. Hence, one may escape the interest u/s 234B but not from section 234C.
Further, the due date for 1st instalment of Advance Tax for FY 2020-21 is extended to June 30 since the due date falls on 15th June 2020 and is covered by the period of March 20 to June 29 of the Ordinance, 2020.
4. Liquidity problem - A firm or an assessee may face a liquidity crunch on June 30. Due to the disruptions being caused by the COVID-19, everyone's receipt or flow of funds is paused. Suddenly on June 30, a person needs to pay the -
Advance Tax for 1st Quarter of FY 2020-21,
Advance Tax for 4th Quarter of FY 2019-20,
TDS for March 2020, April 2020 and May 2020,
GST for these three months,
all of them, apart from operational expenses, needs to be paid by June 30, 2020 which may put a strain on the firms' fund flow and paying capacity.5. Deduction under Chapter VI-A - Though the law allows to invest or pay for the savings instruments by June 30 for claiming the same in FY 2019-20, one must be alert that-
PPF and other small savings scheme like Sukanya Samriddhi Account (SSA), Senior Citizens Savings Scheme (SCSS) etc. restrict the maximum amount of investment per financial year. Since there is no change in the Financial Year, the investments made in the first quarter of FY 2019-20 will be counted as an investment for the FY 2020-21 under the respective investment/savings laws or schemes.
One cannot defer the insurance payment for more than a month (grace period) else the policy may lapse. This is valid for both life insurance and mediclaim policies. Though life insurance policies can be revived even after the grace period, the same does not hold good for a mediclaim policy. A mediclaim or health insurance policy once lapsed can't be revived and thereafter only a new policy will be issued which will cover the forthcoming period and not the past period. The forthcoming period will be FY 2020-21 only. Premium paid for such lapsed health care policy can not be claimed for FY 2019-20.
6. Employer may not consider the investment in the extended period - The employer might have paid the salary for the month of March 2020 and eventually for the FY 2019-20. Hence, the employer cannot consider the investments made by the employee in the quarter-1 of FY 2020-21. In this case, the income tax might have been excess deducted by the employer and the employee has to claim the refund in his ITR.
7. Problem for Employers in considering the extended period Investments - The new financial year 2020-21 commences from 1st April, 2020. How the employer will satisfy itself whether the investment documents which bears the date of 1st quarter of FY 2020-21 is for FY 2020-21 and that the employee has not claimed the same in his ITR of FY 2019-20.
8. Any Donation u/s 80G: Any donation made during first quarter of 2020-21 up to 30.06.2020 can be claimed as a deduction in FY 2019-20. It is not limited only to PM CARES Fund. Donation to Chief Minister Relief Fund, PMNRF are also eligible. Even donation to charitable trusts is eligible for deduction in FY 2019-20 under similar circumstances.
9. Different dates for different actions: The government has the power to notify different dates for completion or compliance of different actions. However, there is no power to specify different dates for different States for particular compliance. The date so notified shall apply uniformly throughout the nation.
These are some of the issues which are so far identified and discussed. In case readers have some issue they most post the same in the comments section. Once new issues are identified the same will be updated here. So please stay tuned with this article.
Announcements in Press Conference and enshrinement in law
The Finance Minister has announced several relief measures related to compliances under the Income Tax Act and Vivid se Vishwas Scheme on 24.03.2020. The corresponding legal effect given in the Ordinance, 2020 are discussed below-
Relief measures announced
|
Corresponding provision in the Ordinance, 2020
|
Extend
last date for income tax returns for (FY 18-19).
|
Section
3(1)
|
Aadhaar-PAN
linking date to be extended
|
Section
3(1)
|
Vivad se
Vishwas scheme – no additional 10%
amount, if payment made by June 30, 2020.
|
Section
5
|
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
including investment in saving instruments or investments for roll over
benefit of capital gains under Income
Tax Act, Wealth Tax Act, Prohibition
of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law
where the time limit is expiring between 20th March 2020 to 29th June 2020
|
Section
3(1) and section 5 for Vivad se Vishwas
Scheme
|
For
delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT
made between 20th March 2020
and 30th June 2020, reduced interest rate at 9%
instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5
percent per month) will be charged for
this period. No late fee/penalty shall
be charged for delay relating to this period.
|
Section 3(2) |
A press note was released by the Finance Ministry after the promulgation of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 which highlights the provisions introduced by the promulgated Ordinance of 2020 related to direct taxes-
Read
the complete Press Note of the Finance Ministry
Direct Taxes & Benami:
1. Extension of last date of filing of original as well as revised income-tax returns for the FY 2018-19 (AY 2019-20) to 30th June, 2020.
2. Extension of Aadhaar-PAN linking date to 30th June, 2020.
3. The date for making various investment/payment for claiming deduction under Chapter-VIA-B of IT Act which includes Section 80C (LIC, PPF, NSC etc.), 80D (Mediclaim), 80G (Donations), etc. has been extended to 30th June, 2020. Hence the investment/payment can be made up to 30.06.2020 for claiming the deduction under these sections for FY 2019-20.
4. The date for making investment/construction/purchase for claiming roll over benefit/deduction in respect of capital gains under sections 54 to 54GB of the IT Act has also been extended to 30th June 2020. Therefore, the investment/ construction/ purchase made up to 30.06.2020 shall be eligible for claiming deduction from capital gains arising during FY 2019-20.
5. The date for commencement of operation for the SEZ units for claiming deduction under deduction 10AA of the IT Act has also extended to 30.06.2020 for the units which received necessary approval by 31.03.2020.
6. The date for passing of order or issuance of notice by the authorities under various direct taxes& Benami Law has also been extended to 30.06.2020.
7. It has provided that reduced rate of interest of 9% shall be charged for non-payment of Income-tax (e.g. advance tax, TDS, TCS) Equalization Levy, Securities Transaction Tax (STT), Commodities Transaction Tax (CTT) which are due for payment from 20.03.2020 to 29.06.2020 if they are paid by 30.06.2020. Further, no penalty/ prosecution shall be initiated for these non-payments.
8. Under Vivad se Vishwas Scheme, the date has also been extended up to 30.06.2020. Hence, declaration and payment under the Scheme can be made up to 30.06.2020 without additional payment.
Section-wise Summary of the relief measures on Statutory and Regulatory compliance matters
Summary of the relief measures on Statutory and Regulatory compliance matters under Direct Taxes Laws including Income Tax Act, 1961 under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020
Relaxation on Time limit [Section
3(1) of the Ordinance of 2020]
|
|||
Particulars/Actions
|
Due Date / Cut-off
Date under the Income Tax Act, 1961
|
Extended date by the Ordinance,
2020 or
New Due Date
|
|
Original
as well as Revised Income tax returns for
FY 18-19 (AY 2019-20)
|
31-03-2020
|
30-06-2020
|
|
Section
139(4)
|
Belated
return for AY 2019-20
|
||
Section
139(5)
|
Revised
return for AY 2019-20
|
||
PAN-Aadhaar
linking
|
31-03-2020
|
30-06-2020
|
|
Time
Limit for-
completion
of any proceeding,
passing
of any order,
issuance
of any notice, intimation, notification,
sanction
or approval or such other action,
by
any authority, commission or tribunal,
filing
of any appeal,
furnishing
of any report, document, return, statement or any other records, (Any
Compliances by the assessee)
Under
the following Laws-
(i)
Wealth-tax Act, 1957
(ii)
Income-tax Act, 1961
(iii)
Prohibition of Benami Property Transactions Act, 1988
(iv)
Securities Transaction Tax
(v)
Commodities Transaction Tax
(vi)
Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax
Act, 2015
(vii)
Equalisation Levy
(viii)
DTVSV Act, 2020
|
Where
the time limit falls between 20th
March 2020 to 29th June 2020
|
30-06-2020
|
|
Section
143(1)
|
Intimation
after processing of Income Tax Return (ITR), if ITR is filed during FY
2018-19 u/s 139 or u/s 142(1)
|
31-03-2020
|
30-06-2020
|
Section
149
|
Issue
of Notice u/s 148-
AY
2015-16 (4 years case)
AY
2013-14 (6 years case)
AY
2003-04 (16 years for foreign income, etc)
|
31-03-2020
|
30-06-2020
|
Section
200 and Rule 31A
|
e-TDS
return for Qtr-4 of FY 2019-20 (Form 24Q (salary), Form 26Q (Non Salary) and
Form 27Q (Non-resident)
|
31-05-2020
|
30-06-2020
|
TDS
challan-cum-return in Form 26QB (Sec. 194-IA)/26QC (Sec. 194-IB)/26QD (Sec.
194M) for-
|
|||
February
2020
|
30-03-2020
|
30-06-2020
|
|
March
2020
|
30-04-2020
|
30-06-2020
|
|
April
2020
|
30-05-2020
|
30-06-2020
|
|
Section 203
and Rule 31
|
Issue
of TDS Certificate – Form 16 (for FY 2019-20)
Form
16A (for Q-4 of FY 2019-20)
|
15-06-2020
|
30-06-2020
|
Form
16B/16C/16D - Sec. 194-IA/194-IB/194M for-
|
|||
February
2020
|
14-04-2020
|
30-06-2020
|
|
March
2020
|
15-05-2020
|
30-06-2020
|
|
April
2020
|
14-06-2020
|
30-06-2020
|
|
Section
206C and Rule 31AA
|
e-TCS
return for Qtr-4 of FY 2019-20
|
15-05-2020
|
30-06-2020
|
Issue
of TCS Certificate for Qtr-4 of FY 2019-20
|
30-05-2020
|
30-06-2020
|
|
Section
200A / Section 206CB
|
Processing
of TDS/TCS returns filed during the Financial Year 2018-19
|
31-03-2020
|
30-06-2020
|
Section
139A
|
Application
for allotment of PAN
|
31-05-2020
|
30-06-2020
|
Section
285BA and Rule 114E
|
Statement
of Financial Transactions (SFT) for the Financial Year 2019-20
|
31-05-2020
|
30-06-2020
|
Section
285BA and Rule 114B
|
e-filing
Form No. 61 for the period from October 1, 2019 to March 31, 2020
|
30-04-2020
|
30-06-2020
|
Section
197A and Rule 29C
|
Uploading
of declarations received from recipients in Form 15G/15H during the quarter
ending March, 2020
|
30-04-2020
|
30-06-2020
|
Various
investment/payment for claiming deduction under Chapter-VIA-Part B [Section
80C (LIC, PPF, NSC etc.), 80D (Mediclaim), 80G (Donations)]
|
31-03-2020
|
30-06-2020
|
|
Investment/construction/purchase
for claiming roll over benefit/deduction in respect of capital gains under
sections 54 to 54GB
|
31-03-2020
|
30-06-2020
|
|
Date
for commencement of operation for the SEZ units for claiming deduction under
deduction 10AA for the units which received necessary approval by 31.03.2020
|
31-03-2020
|
30-06-2020
|
|
Tax Payments [Section 3(2)]
|
|||
Interest
payable for delay in payment of-
Income-tax
(e.g. advance tax, TDS, TCS)
Equalization
Levy,
Securities Transaction Tax (STT),
Commodities
Transaction Tax (CTT)
|
Due
for payment from 20.03.2020 to 29.06.2020
|
30-06-2020
Rate
of interest shall be 75% of the normal interest rate
|
|
Section
208/ 211
|
Payment
of Advance Tax for FY 2019-20
|
31-03-2020
|
30-06-2020
|
Payment
of 1st Instalment Advance Tax for FY 2020-21
|
15-06-2020
|
30-06-2020
|
|
Section
200 and Rule 30
|
Payment of TDS from Salary and Non-Salary for-
|
||
March
2020
|
30-04-2020
|
30-06-2020
|
|
April
2020
|
07-05-2020
|
30-06-2020
|
|
May
2020
|
07-06-2020
|
30-06-2020
|
|
Section
166 of Finance Act, 2016 (Chapter VIII)
|
Payment
of Equalisation Levy for -
|
||
March
2020
|
07-04-2020
|
30-06-2020
|
|
April
2020
|
07-05-2020
|
30-06-2020
|
|
May
2020
|
07-06-2020
|
30-06-2020
|
|
30-06-2020
|
|||
Notes:
In the above cases,
the dates being June 29 and June 30
may be extended.
Different dates for
different actions may be prescribed.
|
|||
Vivad se Vishwas Scheme, 2020
[Section 5]
|
|||
Declaration
and payment of disputed tax under Vivad
se Vishwas Scheme, 2020 without 10% additional payment
|
31-03-2020
|
30-06-2020
|
|
 Ordinance, 2020){kind=link}
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