Government has notified the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“Act”) after it received the assent of the President on 29.09.2020. The Bill was passed by the Parliament in September 2020.
Introduction
The Act aims to provide relief from various compliances under certain ‘specified Acts’ including Income Tax Act, 1961 and further provides relaxation in the payment of interest due to delay in the payment of taxes. It further provides for immunity from penalty and prosecution if there is any delay in the payment of taxes for the specified period if the same is paid within the prescribed date.
This Act has replaced The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 which was promulgated on 31 March 2020 in order to ease the compliance burden on taxpayers due to outbreak of COVID-19 and further amends Income-tax Act, 1961, Central Goods and Services Tax Act, 2017, Finance Act, 2019, the Direct Tax Vivad se Vishwas Act, 2020 and the Finance Act, 2020.
Soon after the promulgation of Ordinance, further relaxation was provided in terms of all the compliances by issuing to Notifications- Notification No. 35/2020 dated 24.06.2020 (including a corrigendum Notification No. 39/20200 dated 29.06.2020) and Notification 56/2020 dated 29.07.2020.
This Act ratifies the extensions and reliefs provided through the Ordinance, Notifications and press announcements. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 does not provide any further relief or extension to taxpayers in relation to timelines for various compliances.
When the Monsoon session of the Parliament began on September 14, 2020, Finance Minister Nirmala Sitaraman introduced the Bill on 18-9-2020 in LokSabha which was subsequently passed in the LokSabha on 19-09-2020 after discussion. The Rajya Sabha passed the same on 22-09-2020 by a voice vote.
A 6-page Ordinance is now a 40-page Act mainly due to amendments in the Income Tax Act, 1961.
Chapters of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020
The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 has 8 Chapters as mentioned below-
The ordinance was necessary to defer various compliance deadlines under GST and Income Tax Act during the COVID-19 times. This article is limited to the relaxation and relief provided under the Income Tax Laws.
The Act has incorporated all the provisions of the Ordinance and the two notifications issued thereunder. Apart from the provisions of the Ordinance, the Act has also amended various other provisions of the Income Tax Act, 1961 including amending section 12AB - new registration procedure for Trusts and Institutions, faceless assessment and other various faceless proceedings.
Promulgation of Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020
On 31st March, 2020 the government has promulgated an Ordinance called ‘Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020’ to extend the various compliances due dates under the Income Tax Act, 1961 as well as last date for linking of PAN with Aadhaar.
As per the Ordinance, all the compliance due dates which fell in the period between 20-03-2020 to 29-06-2020 was extended to 30-06-2020.
It should be noted that there were relaxations for compliance due dates but there was no relaxation with respect to payment of any type of taxes. There was no extension of due dates with respect to payment of taxes including TDS/TCS. A partial relaxation was given even on the payment of interest due to delay in payment of taxes. This relaxation by way of reduced rate of interest was applicable only for the due date of tax payments which falls in the period from 20-03-2020 to 29-06-2020 and was paid by 30-06-2020. The normal interest rate of 1% or 1.5% or any other rate prescribed in the Income Tax Act was reduced to 0.75% p.m. even interest was payable for April and May 2020 - the months when the entire nation was under complete lockdown.
Soon after the promulgation of Ordinance, further relaxation was provided in terms of all the compliances by issuing to Notifications- Notification No. 35/2020 dated 24.06.2020 (including a corrigendum Notification No. 39/20200 dated 29.06.2020) and Notification 56/2020 dated 29.07.2020. Certain relaxations vide reduction of rate of TDS/TCS, extension of date for payment under DTVSV Act without additional amount, etc., were granted through Press Releases which are now incorporated in the Act.
It should be noted that there was only one common extended date of June 30, 2020 for all the compliances. However, NN 35/2020 had provided for different extended dates for different compliances. These two notifications were issued under the Ordinance which empowered the Central Government to issue the notification to extend the period of compliance and the extended due dates. NN 35/2020 had also enlarged the period of compliance from ‘20-03-2020 to June 29, 2020’ to 20-03-2020 to 31-12-2020. The extended compliance due dates has been extended to 31-03-2021 with certain exceptions.
Enactment of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020
When the Monsoon session of the Parliament was started on September 14, 2020, the Finance Minister Nirmala Sitaraman introduced the Bill on 18-9-2020 which was subsequently passed in Lok Sabha on 19-09-2020 after discussion. The Rajya Sabha passed the same on 22-09-2020 by a voice vote.
The President of India has given his assent on 29.09.2020 and finally, on the same day, it was notified to become Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020).
The Act has incorporated all the provisions of the Ordinance and the two notifications issued thereunder. It has also incorporated the relaxations so provided by Press Releases. Apart from the provisions of the Ordinance, the Act has also amended various other provisions of the Income Tax Act, 1961 including amending section 12AB - new registration procedure for Trusts and Institutions, faceless assessment and other various faceless proceedings.
Relaxation and the Amendments by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020
The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 covers the following 8 laws referred to as ‘specified Act’ for providing relaxation in compliances etc.-
In this article, we have confined the discussion related to relaxations from various compliances given under the Income Tax Act, 1961 and the Direct Tax Vivad se Vishwas Act, 2020.
No Extension of the time limit for payment of taxes including TDS
The provisions of section 3(2) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 is similar to the provisions of section 3(2) of the Ordinance as amended by Notification No. 35/2020 dated 24.06.2020 and Notification No. 56/2020 dated 29.07.2020.
As per section 3(2) of the Ordinance, 2020 as incorporated in this 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. No such notification was issued under this sub-section (2) of section 3 and hence the extended period up to 30th June 2020 allowed under the Ordinance/Act shall prevail.
This relaxation of delay payment of tax within June 30, 2020 with a reduced rate of interest (which has already happened now) is provided only for payment of any tax, cess or levy under the Income Tax Act, 1961 and or under any other specified Acts.
By virtue of this, TDS for March 2020, April 2020 and May 2020 needs to be paid by June 30, 2020 to avail the benefit of reduced interest liability of 0.75% p.m. instead of 1.5% p.m. Once the period of June 30 expires, all the normal provisions of the Income-tax Act shall apply.
Relaxation of Compliances by way of extension of time limit under the Income Tax Act
Section 3(1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 explicitly extends the time limit for specific compliance requirements under the Income Tax Act, 1961. Certain compliances have been relaxed by a general provision in the Act which needs proper interpretation to ascertain the applicability of extended time-limit in each particular compliance under the Income Tax Act.
Section 3(1) of the Act 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-
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-
The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 has the following provisions related to reliefs and relaxations from various compliances under the Income Tax Act, 1961-
Extension of the time period and due dates of various compliances
Refer this article for a comprehensive analysis of the extension of the due date of various compliances under the Income Tax Act, 1961 by the Ordinance of 2020 read with NN 35/2020 and NN 56/2020 as incorporated in the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
Reduction of TDS/TCS rates
CBDT, vide its press release dated May 13, 2020, reduced the rates for Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) by 25% for specified payments made to residents during the period from 14-05--2020 to 31-03-2021. It was then stated that necessary legislative amendments will be made in due course.
The Act has made the legislative amendments to reduce the TDS/TCS rates in the Income Tax Act with retrospective effect from 14th May 2020. The reduction in TDS/TCS rates has now been codified in the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
Reduced rate of TDS applicable from 14-05-2020 to 31-03-2021
Reduced rate of TCS applicable from 14-05-2020 to 31-03-2021
This reduction in the rates is not applicable if the deductee/buyer fails to provide his valid PAN to the deductor/collector.
Scope of Faceless Proceedings Expanded
The Act has legislated the Faceless Assessment Scheme, 2019 which was notified on 12-09-2019 as amended on 13th August 2020.
The Act further provides for faceless proceedings in the following 11 areas, of which one-Faceless Assessment Scheme has already been notified-
Apart from the above, the Income Tax Act already contains the provisions related to Faceless Appeals taking the count to 11 faceless proceedings.
Out of these 11 faceless proceedings, CBDT has already notified two faceless schemes - Faceless Assessment Scheme and Faceless Appeal Scheme.
This Act further provides for notifying the Scheme for the above mentioned faceless proceedings.
Deduction under section 80G for Donation to PM CARES FUND
In line with the provisions of the Ordinance, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 has amended the provisions of section 80G to provide for 100% deduction without any qualifying limit for making donations to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund or PM CARES Fund. This Fund was set up in March in the wake of the coronavirus pandemic and was a subject matter of heated debate in the Parliament when the bill was introduced in the Loksabha.
Exemption to the income of PM CARES Fund
Apart from allowing a deduction for donations made to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND), the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 has also provided an exemption to its income.
Deferment of provisions for new registration procedure of Charitable Trusts and Institutions u/s 12AB
Finance Act, 2020 has prescribed a new registration procedure for Charitable Trusts and Institutions under section 12AB. Existing registered trusts or institutions were required to migrate to the new registration regime u/s 12AB from 01-06-2020 to 31-08-2020. However, due to the outbreak of COVID-19 and the subsequent nation-wide lockdowns, the date of applicability of section 12AB was extended to 01-10-2020 instead of 01-06-2020.
It was further provided that provisions of section 12AA shall not apply from 01-06-2020. This amendment is now withdrawn from the Finance Act, 2020 and made applicable from 01-04-2021.
The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 has, however, withdrawn the amendments introduced by the Finance Act, 2020 and re-introduced the same and made it applicable from 01-4-2021. Hence, all the provisions as was applicable to the Trusts and institutions before the amendment by the Finance Act, 2020 were restored and will continue till 31-03-2021. In other words, the old regime of registration procedure will continue till 31-03-2021.
Consequently, references of section 12AB to section 115TD and section 56 have been omitted and is introduced from 01-04-2021.
Furnishing statement of donations under section 80G postponed
The Taxation Act has amended section 80G to insert a new clause (viii) to sub-section (5) of section 80G to provide for furnishing a statement of donations received from the donees to the income-tax authority in the prescribed form and within the prescribed time limit. This amendment shall now take effect from 01-04-2021. Further, such trust or institutions has to furnish certificates to the donors in the prescribed manner w.e.f. 01-04-2021 as against 01-06-2020.
This amendment was originally introduced by the Finance Act, 2020 but now has been deferred till 01-04-2021. Consequently, the penalty provisions have also been deferred till next year.
Rationalization of provisions of ‘Deemed Resident’
Finance Act, 2020 has introduced the concept of ‘deemed resident’ in respect of an Individual who is a citizen of India. It is now clarified that the provisions of the deemed resident shall not apply to an Individual who is a citizen of India who is a resident. Thus, only a non-resident can be treated as a deemed resident.
The definition of “Income from Foreign Sources” has been clarified further to state that income from foreign sources" means income which is not deemed to accrue or arise in India. Accordingly, for the purpose of calculating the threshold total income of Rs. 15 Lakh of “Income from Foreign Sources”, the income accruing or arising in India and deemed to accrue or arise in India shall be included.
Rationalization of deduction of scientific expenditure under section 35
Deduction for any sum paid to a company to be used by it for scientific research under section 35(1)(iia) shall be allowed even where the approval to the company referred to in this clause is subsequently withdrawn has now been made applicable from 1.4.2021 as against 01.06.2020 amended by the Finance Act, 2020.
Further, the provisions related to the requirements of research associations, university colleges, scientific research companies and other institutions to make an intimation in the prescribed form and manner within 3 months from 01-06-2020 to keep the notification valid for a period of five assessment years has been deferred to 1st April 2021.
The requirement to deliver a statement to the income-tax authorities in the prescribed form and manner & furnish a certificate to the donor for such research associations, university colleges, scientific research companies and other institutions has been made effective from 01.04.2021 as against 01.06.2020. Consequently, the penalty provisions have also been deferred till next year.
Providing Tax Incentive for Category-III Alternative Investment Funds located in IFSC
The Act has provided tax incentive for Category-III Alternative Investment Funds located in the International Financial Services Centre (IFSC) to encourage relocation of foreign funds to the IFSC.
(a) The Act has amended the provisions of section 10(4D) to expand the tax exemption for Category III Alternative Investment Fund located in IFSC to include income from:
(i) transfer of securities (It does not include shares of rIndian resident company)
(ii) securities issued by a non-resident (not being a PE of the non-resident in India) and such income otherwise does not accrue or arise in India.
(iii) a securitization trust which is chargeable under the head business income.
The tax exemption shall be available only for such income which is attributable to units held by the non-resident (which is not the PE of the non-resident in India). The manner of such computation will be prescribed.
(b) Income including income by way of dividends received in respect of securities (other than units referred to in section 115AB) and long term capital gains on transfer of such securities is reduced to 10%. This shall apply only to the extent of income that is attributable to units held by non-resident (not being a permanent establishment of a non-resident in India) calculated in the prescribed manner.
(c) The provisions of Chapter XII-BA related to the provisions of Alternate Minimum Tax (AMT) are not applicable to Category-III Alternative Investment Funds located in the IFSC. The Act has suitably amended the provisions of section 115JEE.
(d) Tax exemption has also been granted to the unitholders of Category-III AIFs in respect of income
(i) from units of such Category-III AIFs or
(ii) on transfer of such units.
Exemption to a wholly-owned subsidiary of the Abu Dhabi Investment Authority
The exemption to certain income of a wholly-owned subsidiary of the Abu Dhabi Investment Authority is allowed subject to certain conditions. One of such conditions is that it makes an investment, directly or indirectly, out of the fund owned by the Government of the United Arab Emirates.
The Act has now restricted the funds owned by the Government of Abu Dhabi as against by the Government of the United Arab Emirates.
Capping of Surcharge on dividend income of FPIs
The Act has amended the Finance Act, 2020 to clarify that there shall be a cap of surcharge at 15 per cent on dividend income of the Foreign Portfolio Investor.
Power to withdraw an approval under section 35AC
The authority to withdraw approval to an association or institution for carrying out any eligible project or scheme has been granted to Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) [as against National Committee] w.e.f. 01.11.2020.
Amendment to Direct Tax Vivad Se Vishwas Act,2020
This Act has amended the Direct Tax Vivad se Vishwas Act, 2020 to extend the date for payment without 10% additional amount to 31-12-2020 in line with the relaxation provided in the Ordinance of 2020. It also empowers the Central Government to notify certain dates relating to filing of declaration and making of the payment.
Power to remove difficulties
Central Government is empowered to remove any difficulty up to a period of 2 years and provide for repeal and savings of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.
Read Also:
Govt Notifies Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020
Deduction under section 80G for Donation to PM CARES Fund
No Extension of Due Date of TDS payment for March 2020 onwards amid COVID-19
New reduced TDS Rate Chart for FY 2020-21 and Income Tax Relief Measures
CBDT further extends return filing due date and others from June 30
CBDT issues Corrigendum to Notification Extending Due Dates
Analysis of new extended due dates as per CBDT Notification under direct taxes
ITR Filing Due Date for AY 20-21 Extended but with Interest
Is there any Extension to TDS Return Due Date For Quarter 1 FY 2020-21
CBDT once again extended the Income Tax Return Filing Due Date for AY 2019-20 (FY 2018-19)
New reduced TDS Rate Chart for FY 2020-21 and Income Tax Relief Measures
 Act, 2020){kind=link}
0 Comments