Analysis of Income Tax Relief amidst COVID-19

The Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman announced some relief measures in view of the COVID-19 outbreak for Income Taxpayers.

Following are the decisions with respect to statutory and regulatory compliance matters related to Income Tax : 

Analysis of reliefs and issues:

1. Filing of Return of income: Income-tax returns to be filed after due date as under section139(4) for the A.Y 2019-20 which would become time-barred in the normal course by 31st March 2020, could be filed up to 30th June 2020. The taxpayer who file the return post–lockdown can be entitled to revised the return before 30th June 2020 .

For A.Y 2020-21 the due date for  Income Tax Returns which is  31/07/2020 and for audit return is 30/09/2020 extended to  30/11/2020.

2. Deduction for investments: Taxpayers can claim deduction by making investments specified in section 80C in the extended period up to 30th June, 2020. This claim would get reflected in the books of account of subsequent year i.e. of the period commencing from 1st April  2020 in the case of persons maintaining books of account. Where no such books of account are maintained, producing proof of investment by the taxpayer is adequate for being allowable.

 The taxpayers have to ensure that there is no double claim of deduction of the same investment once in A.Y. 2020-21 and again in A.Y. 2021-22. If any such claim is made, the penal consequence under section 270A would follow for the later assessment year.

3. Aadhaar-Pan Linking: The last date for linking Aadhaar and Permanent Account Number (PAN) is extended from the earlier date of 31st March, 2020 to 30th June, 2020. Going by the instalments of lock down, the last date may have to be extended further in an appropriate manner

4. Advance tax instalment: When the due date of instalment is 15th March, 2020 the taxpayer cannot avail the benefit by making payment after that date. The Ordinance does not consider cases where the taxpayer can remit advance tax up to 31st March of 2020 and hence any advance tax payment after 31st March, 2020 would be of no avail as interest under section 234B would get triggered from 1st April of 2020 and till the date of completion of regular assessment. Though the interest @9% per annum is leviable for the period from 1st April, 2020 to 30th June, 2020taxpayers making bulk advance tax payments who might have voluntarily postponed the advance tax payment to fag end of the year are put to peril as the Ordinance does not insulate them from such levy under section 234B. Further, such taxpayers have to pay interest under section 234C @1% for the month of March, 2020.

Also, in the case of persons opting to admit income under section 44AD or section 44ADA the time limit for paying advance tax is available up to 31st March of the previous year. Since the cutoff date for paying advance tax by such persons is available up to 31st March, 2020 the taxpayers can pay advance tax up to the extended time of 30th June, 2020. However, interest@ 9% per annum is payable for the delayed remittance of advance tax due to COVID 19 lockdown.

5. TDS & TCS return for Q4 of FY 2019-20: Taxpayers are required to file Q4 return of TDS by 30th April, 2020 and by 15th May, 2020 for Q4 TCS return of the previous year 2019-20. These dates have been extended up to 30th June, 2020. Thus the taxpayers are given reprieve from fee leviable under section 234E for the period up to 30th June, 2020. Any delay beyond that date would only attract fee under section 234E for those delayed days. For example, if a taxpayer files Q4 TDS/TCS return on 10th July, 2020 the fee payable would be @ Rs. 200 per day for 10 days being Rs.2,000.

6. TDS & TCS remittance of March, 2020: There is no extension of time for remitting the TDS/TCS amounts of the month of March, 2020. The due date continues to be 30th April for remitting TDS amount and 7th April for TCS amount relating to March, 2020. When there is lockdown across the country, how is it possible to remit the amount within the specified dates unless the taxpayer has facility to remit tax amounts through online. In rural areas, the taxpayers may not have the facility due to lack of knowledge to operate the banks account(s) online and are generally dependent on tax counsels to remit the TDS/TCS amounts. Thus, non-extension of time for remitting TDS/TCS of March, 2020 could cost the taxpayers to pay interest under section 201(1A).

Luckily, for the delayed remittance, interest under section 201(1A) is @9% per annum instead of the original rate of 18% per annum. This concessional rate of interest however will be applicable only up to 30th June, 2020. To ease the pain on taxpayers, the interest could be waived for delayed remittance up to 30th June, 2020.

7. TDS & TCS remittance of April, 2020: The due date for remittance of TDS/TCS of the month of April, 2020 is the same i.e. 7th May, 2020. There is no extension of time for remittance. Considering the phase-3 of the lock down which is continued in most places with very marginal relief, it would be ideal and justified to extend the due date for remittance to 30th June, 2020 to provide some comfort to the taxpayers.

8. Time limit for assessment proceedings of A.Y. 2019-20: When a return of income for assessment year 2019-20 is filed before 31st March, 2020 the time limit for selecting the same for scrutiny assessment by issuing notice under section 143(2) is 6 months from the end of the relevant assessment year i.e.30th September, 2020. Now, when the return is filed in the extended time, whether the time limit for selection of the case for scrutiny assessment would remain the same i.e. up to 30th September, 2020 or would may get extended by 3 months, is not clear. The time limit for completion of assessment under further proviso to section 153(1) however would expire by 31st March, 2020. It remains to be seen whether the due date for completion of regular assessment in respect of such cases would get extended time by invoking the provisions contained in the Ordinance.

9. Time limit for completion of assessment proceedings of A.Y. 2018-19: The time limit for completion of assessment under section 143(3) for the assessment year 2018-19 would expire by 30th September, 2020 as per proviso to section 153(1). The time limit  may need further to get extended  upto 31st  December 2020.

10. Advance tax instalment: The due date for remitting the first instalment of advance tax of the financial year 2020-21 remains unchanged at 15th June, 2020. Fortunately, the Central Government has the power by virtue of Ordinance to extend the date for remittance or even club the June, 2020 instalment with September, 2020 instalment to help the taxpayers who are grappling with dreaded pandemic i.e. coronavirus.

11. Pending reassessment proceedings: There could be reassessment proceedings pending just before 'janata curfew' which was observed on 22nd March, 2020 consequent to announcement made by the Hon'ble Prime Minister. The reassessment could relate to any assessment year with the earliest year being assessment year 2012-13 where the income escaping assessment is less than Rs.50 lakhs. The time limit for completing the reassessment proceedings would get automatically extended up to 30th June, 2020.

Also, for service of notice under section 148 for the assessment year 2013-14, the time limit has expired by 31st March, 2020. If notices were not served by that date, the time limit would get extended to 30th June, 2020. The time limit for completion of those assessments whether would get extended time limit, remains to be seen.

12. Relief from penalty and prosecution: The Ordinance gives relief from penalty and prosecution for the delayed payment of tax by way of TDS/TCS and it reads as under "no penalty shall be levied and no prosecution shall be sanctioned in respect of such amount for the period of delay" as per details given under.

13. Time for applying registration and approval of trust and charitable institutions(sec12AB) : The Finance Act, 2020 has mandated the charitable trusts and institutions to apply for registration afresh on or after 1st June, 2020 but before 31st August, 2020. The time limit is not a specific date but has bandwidth of 3 months.

Due to lockdown the Government Push backed  the time for 4 months. Now  the time is from 1st October, 2020 to 31st December,2020 for giving relaxation owing to hardship caused by covid 19 pandemic.

Thank you for reading this article is meant for understanding purposes only

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