The Novel Coronavirus (COVID-19) has been declared a global pandemic by the World Health Organization (WHO) and its rapid spread is causing severe economic disruption. To contain the spread of COVID 19, India is in lockdown mode like many other countries and this has been impacting individual taxpayers. In response, the Government of India has come to the rescue of taxpayers by providing various relief measures. In this article, we shall cover the relief measures provided to individual taxpayers.
A belated tax return and revised tax return for Financial Year (FY) 2018-19 was to be filed on or before 31 March 2020. This due date is now extended to 30 June 2020.
Tax saving investments/ payments / donation
Specified investment / payments (such as investment in Public Provident Fund, Life Insurance payments etc.) or donation to avail deductions from income for FY 2019-20 was to be made till 31 March 2020. Now these investments / payments to avail deductions from income for FY 2019-20 can be made till 30 June 2020.
Similarly, exemptions from Long Term Capital Gains is available if certain investments are made within the prescribed time from the date of transfer of the capital asset. Now any such investment which are due from 20 March 2020 to 29 June 2020 can be made up to 30 June 2020, subject to other conditions mentioned in the Income tax Act, 1961 (‘the Act’).
With the aim of funding the various relief measures to manage COVID-19, the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) has been set up by the Central Government. An individual can claim 100 percent deduction for donation to PM CARES Fund. For claiming deduction in the return for FY 2019-20, Donation to PM CARES fund could be made till 30 June 2020.
Aadhaar-PAN linking
Aadhaar was to be linked with PAN by 31 March 2020. Else, PAN would have been inoperative. The due date to link Aadhaar and PAN is now extended to 30 June 2020.
Reduction of rate of interest on delayed payment of tax:
Where any taxes are due to be paid between 20 March to 29 June under the Act and if such taxes are paid by 30 June 2020 then the interest on delayed payment of such taxes will be levied at 0.75 percent per month (or part of the month) instead of 1 percent per month (or part of the month). Some examples of tax payments, for which this benefit could be availed by individuals are:
-Taxes Deducted at Source (TDS) that are due between 20 March and 29 June;
-First instalment of advance tax due by 15 June 2020 for FY 2020-21;
There shall be no penal consequences and prosecution on account of these delayed tax payments.
Lower / Nil withholding certificates:
-An individual is required to obtain certificate from the tax authorities for tax withholding on certain incomes at lower or NIL rate. The certificate needs to be obtained by making application to the tax department at the beginning of every FY. Considering the current situation, the certificates held for FY 2019-20 shall be valid till 30 June 2020 pending grant of approval by the tax department for a new certificate for FY 2020-21. If any taxpayer has not filed an application yet for FY 2020-21, he is expected to file the same at the earliest with the help of modified online process and email to the concerned assessing officer.
-The tax officers are instructed to dispose of the pending lower deduction application for FY 2019-20 by 27 April 2020. The applicant is required to intimate about pendency of the application to the concerned tax officer vide e-mail and the concerned officer shall communicate on the acceptance/rejection vide e-mail to the individual.
-The valid Form 15G and Form 15H submitted to the banks or financial institutions for lower or nil tax deduction on interest / income for FY 2019-20, will remain valid till 30 June 2020.
Withdrawal from Provident Fund (PF)
Withdrawal from PF while in service is restricted for employees. However, Employees Provident Fund Organisation (EPFO) has allowed employees to obtain a non-refundable advance from their existing PF balances while in service. The amount of advance shall be lower of 3 months’ Basic and Dearness Allowances or 75 percent of the balance in PF account. Also, it is clarified that this amount being advance, will not be taxable.
Issue of refund
In a press note on 8 April 2020, it was declared that to provide immediate relief to business and individuals, all pending income-tax refunds up to Rs.5 lakh shall be released immediately.
Vivad Se Vishwas Scheme (VSV Scheme)
The VSV Scheme is introduced to avoid the prolonged litigation for matters provided in the scheme by paying the disputed tax amount with immunity from payment of interest and penalty on the same. Earlier, the applicant under VSV Scheme was required to pay only the disputed taxes / specified percentage of disputed demands by 31 March 2020. However, an additional percentage of the disputed taxes was payable if the taxes are paid after 31 March but before 30 June 2020. As per the measures announced, even if the taxes are paid after 31 March but on or before 30 June 2020, no additional percentage of the disputed taxes is payable.