Direct Tax relaxations for tackling COVID-19

Various relaxations have been announced in the Income Tax Act, 1961 (“IT Act”) to provide some relief to businesses in the current situation. The relaxations proposed by the Finance Minister on 24th March 2020 have been given effect by way of Ordinance promulgated by the President on 31st March 2020. Central Board of Direct Taxes (“CBDT”) has also provided some relaxations by an order u/s 119 of the IT Act. These relaxations have been discussed below.

A. Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020

1. Time limits for compliance or completion of certain actions[1] under the specified acts[2] (as defined in the Ordinance) whose time limits fall during the period from 20th March 2020 to 29th June 2020[3] has been extended to 30th June 2020[4]. Certain actions whose time limit has been extended are as follows:


1.1. Completion of any proceedings or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action by any authority, commission or tribunal under the provisions of the specified act;


1.2. Filing of an appeal, reply or application or furnishing of any report, document, return, statement or such other record under the provisions of the specified Act;


1.3. The following specific actions under the IT Act:


1.3.1. Making of investment, deposit, payment, acquisition, purchase or construction or any such other action for the purposes of claiming any deduction, exemption or allowance under the following provisions:


¾ Sections 54 to 54GB of the IT Act;


¾ Chapter VI-A of the IT Act under the heading “B – Deductions in respect of certain payments”; and


¾ Such other provisions of the IT Act as the Central Government may notify.


1.3.2. Beginning of manufacture or production of articles or thins or providing any services referred to in section 10AA of the IT Act, in a case where the letter of approval has been issued on or before 31st March 2020 in accordance with the provisions of Special Economic Zones Act, 2005 (“SEZ Act”).


Accordingly, the date of the following compliances under the IT Act, as listed in Table-I, has been extended:

 

Table – I
S. No. Relevant sections under the IT Act Compliance
  i.  Section 139(4) Filing of belated return for the Assessment Year (“AY”) 2019-20
  ii.   Section 139(5) Filing of revised return for the AY 2019-20
  iii.   Section 143(1) Sending an intimation after processing of return of income (ITR), if the return is filed:  a) During Financial Year (“FY”) 2018-19 under section 139;  b) During FY 2018-19 in response to a notice issued under section 142(1)
  iv.   Section 149 Time-limit to issue a reassessment notice for the:  a) AY 2015-16 if escaped income is less than Rs. 1 lakh;  b) AY 2013-14 if escaped income is more than Rs. 1 lakh  c) AY 2003-04 if escaped income is related to any asset (including financial interest in any entity) located outside India  d) AY 2013-14, to a person who has been treated as an agent of a non-resident under section 163
  v.   Section 200 Furnishing of TDS Statement:  a) For the fourth quarter of the FY 2019-20  b) For the months of February, March and April 2020   
  vi.   Section 203 Issue of TDS certificate:
a) In respect tax deducted from the salary paid during the FY 2019-20;
b) In respect of tax deducted from payments other than salary for the quarter ending March 31, 2020;
c) In respect of tax deducted under section 194-IA/194-IB/194M during the month of March, 2020 and April, 2020;
  vii.   Section 206C a) Furnishing of TCS Statement for fourth quarter of the FY 2019-20  b) Issue of TCS certificate for the fourth quarter of the FY 2019-20
  viii.   Section 200A & Section 206CB Due date to send the intimation for processing of statement of TDS/TCS filed during the FY 2018-19
  ix.   Section 139A Application for allotment of PAN of non-individual resident person, which enters into a financial transaction of Rs. 2.5 lakhs or more during FY 2019-20 and hasn’t been allotted any PAN
   x.   Section 139AA Linking of Aadhaar number and PAN
   xi.   Section 139AA PAN to be treated as inoperative due to non-linking it with Aadhaar number
  xii.   Section 10AA Commencement of operation by the SEZ units for claiming deduction under section 10AA where necessary approval has been received under the provisions of SEZ Act on or before March 31, 2020
  xiii.   Section 54 to 54GB Making Investments or completing construction / purchase for claiming deduction from capital gains arising during the FY 2019-20.
   xiv.   Chapter VIA (Part B) Making various investments or payments (Section 80C to 80GGC) for the FY 2019-20 such as Section 80C (LIC, PPF, NSC etc.), 80D (Medical claim), 80G (Donations), etc.
  xv.   Section 285BA

Furnishing of Statement of Financial Transactions (SFT) for the FY 2019-20
  xvi.   Section 3 of Direct Tax Vivad se Vishwas Act, 2020 Non-payment of additional 10% payment of disputed tax

2. In case where any due date specified in, or prescribed or notified under, the specified act for payment of any amount towards tax or levy falls during the period from 20th March 2020 to 29th June 2020[5] and such amount has not been paid within such date but has been paid on or before 30th June 2020[6], the following relaxation has been provided:


2.1. Interest shall be charged only @ 0.75% per month in respect of such amount for the ‘period of delay’[7]; and


2.2. No interest shall be levied and no prosecution shall be sanctioned in respect of such amount for the ‘period of delay’.


Accordingly, interest shall be charged @ 0.75% per month for the following amounts, as listed in Table-II, if they are not paid within the due date but have been paid on or before 30th June 2020:

Table – II
  S. No. Relevant sections under the IT Act Amounts
  i.              234B Payment of advance tax for FY 2019-20
  ii.              234C Payment of first installment of advance tax for the FY 2020-21
  iii.              201 Deposit of tax deducted during the month of  March, April and May, 2020
  iv.              206C Deposit of tax collected during the month of March, April and May, 2020
  v.              Section 170 of Finance Act, 2016 Deposit of equalization levy deducted during the month of March, April and May, 2020 in respect of payment made to a non-resident for online advertisement services
  vi.              Section 104 of  Finance (No. 2) Act, 2004 Deposit of Securities Transaction tax (STT) collected during the month of March, April and May, 2020
  vii.              Section 123 of Finance Act, 2013 Deposit of Commodities Transaction tax (CTT) collected during the month of March, April and May, 2020
  viii.              115-O and 115R Payment of Dividend Distribution Tax (DDT) in respect of dividend declared, distributed or paid by any domestic or mutual fund (which is payable between 20-03-2020 and 31-03-2020)
  ix.              115QA Payment of additional income-tax in respect of buy-back of shares by the company (which is payable between 20-03-2020 and 29-06-2020)

3. The Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) has been included 80G, thereby making donations to this fund by taxpayers eligible for deduction in computation of the total income.

B. CBDT’s order u/s 119 of the IT Act
CBDT has issued following directions:

Directions with respect to following applications are provided in Table-III:


1.1. Applications of payees u/s 195 and 197 of the IT Act for lower or nil rate of deduction of TDS[8] for FY 2020-21; and


1.2. Applications of buyers/ licensees/ lessees u/s 206C (9) of the IT Act for lower or nil rate of collection of TCS[9] for FY 2020-21.

Table – III
Cases Particulars Direction
Case I a) Taxpayer has filed such application on the TRACES Portal for FY 2020-21;  b) The application is pending for disposal; and  c) Such taxpayer has been issued such certificate for FY 2019-20 Such certificate would be applicable till 30th June 2020 of the FY 2020-21 or disposal of their applications by the Assessing Officer (“AO”) whichever is earlier, in respect of the transactions and the deductor or collector for whom the certificate was issued for FY 2019-20. 
Case II a) Taxpayer could not file such application on the TRACES Portal for FY 2020-21;  b) But such taxpayer has been issued such certificate for FY 2019-20 Such certificate will be applicable till 30th June 2020 of the FY 2020-21. However, such taxpayer will need to apply to the TDS/TCS AO as per the prescribed procedure[1] as soon as normalcy is restored or 30th June 2020, whichever is earlier
Case III a) Taxpayer has not filed such application on the TRACES Portal for FY 2020-21; and  b) Such taxpayer hasn’t been issued such certificate for FY 2019-20 A modified procedure for application and consequent handling by the TDS/TCS Assessing Officer has been laid down[2].  The certificate shall be issued up to 30th June 2020 or earlier date as specified by AO.
Case IV a) Payments to Non-residents (including foreign companies) having Permanent Establishment in India; and  b) Such payment is not covered in Case I and II above Tax on payments made will be deducted @ 10% including surcharge and cess, on such payments till 30th June 2020 of F.Y. 2020-21, or disposal of their applications, whichever is earlier. 

2. Direction[12] with respect to following applications are provided in Table-IV:


2.1. applications of payees u/s 195 and 197 of the IT Act for lower or nil rate of deduction of TDS for FY 2019-20; and


2.2. applications of buyers/ licensees/ lessees u/s 206C (9) of the IT Act for lower or nil rate of collection of TCS for FY 2019-20.

Table – IV
Particulars Direction
a) Taxpayer has filed such application on the TRACES Portal for FY 2019-20; and  b) The application is pending for disposal;  The taxpayer shall intimate the pendency of such application for FY 2019-20 vide an email addressed to the AO along with the required documents and evidences in filing of such application at the TRACES Portal. The AO shall dispose of such application by 27th April 2020 and communicate to the taxpayer regarding the issuance/rejection of the certificate. Such certificate shall be applicable only for the amounts credited/debited during the FY 2019-20 after the date of making such application but remained unpaid till the date of issuance of such certificate by the AO.

3. Direction with respect to submission of Form 15G and 15H to banks, other institutions etc. by some eligible persons for FY 2020-21 is provided in Table-V:

Table – V
Particulars Direction
a) Taxpayer has not submitted Form 15G and 15H to bank and other institutions for FY 2020-21; and  b) Taxpayer had submitted Form 15G and 15H to such bank and other institutions for FY 2019-20. Such Form 15G and 15H will be valid[13] up to 30th June 2020 for FY 2020-21. 

4. Direction with respect to ‘residency’ for individuals u/s 6 of the IT Act


4.1. For FY 2019-20:

Table – VI
Cases Particulars Direction
Case I a) The ‘individual’ has come to India on a visit before 22nd March 2020; and  b)The ‘individual’ has been unable to leave India on or before 31st March 2020. The individual’s period of stay from 22nd March 2020 to 31st March 2020 shall not been taken into account in determination of his residential status u/s 6 of the IT Act.
Case II a) The ‘individual’ has come to India on a visit before 22nd March 2020;
b)The ‘individual’ has been quarantined in India due to Covid-19 on or after 1st March 2020; and
c) The ‘individual’ has either
     – departed on an evacuation flight on or before 31st March 2020, or     – been unable to leave India on or before 31st March 2020.
The individual’s period of stay from the beginning of his quarantine to his date of departure or 31st March 2020, as the case may be, shall not been taken into account in determination of his residential status u/s 6 of the IT Act.
Case III a) The ‘individual’ has come to India on a visit before 22nd March 2020; and
d) The ‘individual’ has departed on an evacuation flight on or before 31st March 2020
The individual’s period of stay from 22nd March 2020 to his date of departure shall not been taken into account in determination of his residential status u/s 6 of the IT Act.

4.2. For FY 2020-21:


The CBDT, in its press release, has provided that a circular shall be issued for excluding the period of stay of the ‘individual’ upto the date of normalization of international flight operations in India after the normalization thereof.

C. CBDT’s Interim Action Plan for First Quarter of FY 2020-21


The following directions, among others, have been issued by the CBDT to Income Tax Officers under the Interim Action Plan for the first quarter (April 2020 to June 2020) of the FY 2020-21:

  1. At the outset, it has been directed that no communication with the taxpayer having an “adverse effect” is to be done during this first quarter until the issuance of fresh guidelines by the CBDT.
  2. It has been directed to identify and be prepared for issuance of notice u/s 148 for ‘income escaping assessment’ by 30th June 2020. These notices will be issued to the taxpayers on receiving a fresh communication from the CBDT in this regard.
  3. It has been directed to be prepared for disposal of applications by the taxpayers u/s 154 (rectification of mistake).
  4. It has been directed to check all the pending demands for removal of all the duplicate demands.
  5. It has been directed to dispose of all the applications u/s 12AA or 80G of the IT Act (charitable trusts) for grant of registrations received up to 31st March 2020.
  6. It has further been directed to upload the manual orders u/s 147 (income escaping assessment) and 263 (revision of order prejudicial to revenue) of the IT Act.

[1] These actions do not include payment of any amount towards tax or levy whose due date falls during the period from 20th March 2020 to 29th June 2020 or such other date as the central government may specify by notification. This means that there has been no extension in the due date for payment of such amounts.


[2] It is defined as: (a) Wealth Tax Act, 1957; (b) The Income tax Act, 1961; (c) The Prohibition of Benami Property Transaction Act; (d) Chapter VII of the Finance (No.2) Act, 2004 (Securities Transaction Tax);

(e) Chapter VII of the Finance Act, 2013 (Commodities Transaction Tax);

(f) The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015; (g) Chapter VIII of the Finance Act 2016 (Equalization Levy); and (h) The Direct Tax Vivad Se Vishwas Act, 2020.

[3] The Central Government can extend this time period by a notification.

[4] The Central Government can further extend this date of completion or compliance period by notification. In this regard, the Central Government can specify different dates for completion or compliance of different actions for the purpose of this extension.


[5] The Central Government can extend this time period by a notification


[6] The Central Government can further extend this date for payment of such amount for the purposes of this relaxation.


[7] It means the period between the due date and the date on which the amount has been paid.


[8] Tax Deduction at Source.


[9] Tax Collection at Source.


[10] As laid down in Case III.

[11] Annexure to “Order u/s 119 of The Income Tax Act, 1961 on issue of certificates for lower/nil deduction/collection of TDS or TCS u/s 195, 197 and 206C (9)” dated 31st March 2020 (F.NO.275/25/2020-IT(8))

[12] This direction has been issued to alleviate the hardship caused to the payees and buyers/ licensees/ lessees who have raised invoices in FY 2019-20 but have not received the payment for the same since they were not able to intimate the rate of deduction/collection on such amount to the payer and seller/ licensor/ lessor due to pendency of such application.

[13] The payer, who will not deduct tax on the basis of such extended validity of forms, shall be required to report details of such payments/credits in the TDS statement for the quarter ending 30th June 202 in accordance with the provisions of the prescribed rules.

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