Earlier, such registrations/approvals were granted without any specific expiry period unless specifically withdrawn by concerned tax authority. Under the new law introduced by Finance Act 2020 and effective from June 1, 2020, all such registrations/ approvals would now be issued with an expiry period of 5 years.
In a relief to religious trusts, educational institutions and other charitable institutions, the income tax department on Friday deferred by 4 months till October 1 the requirement of registration of these entities.
In a relief to religious trusts, educational institutions and other charitable institutions, the income tax department on Friday deferred by 4 months till October 1 the requirement of registration of these entities.
“In view of the unprecedented humanitarian and economic crisis, the CBDT has decided that the implementation of new procedure for approval/ registration/notification of certain entities shall be deferred to 1st October, 2020,” an official statement said.
Finance
Act 2020 prescribed substantial changes in law pertaining to
registration/approval of trusts and charitable institutions, whose
income are exempt under section 10(23C), Section 11 or for the purpose
of Section 80-G of the Act for tax deductible donations.
Earlier,
such registrations/approvals were granted without any specific expiry
period unless specifically withdrawn by concerned tax authority.
Under
the new law introduced by Finance Act 2020 and effective from June 1,
2020, all such registrations/ approvals would now be issued with an
expiry period of 5 years.
Further, all trusts/charitable institutions already having approval or registration were also supposed to file applications for renewal of there registration/approval within 3 months of new law coming into force, i.e. August 31, 2020.
Nangia
Andersen Consulting Shailesh Kumar said “in light of COVID-19 outbreak
and consequent lockdown, giving relief to the taxpayers, this timeline
has been deferred by 4 months. Thus, new law which was supposed to come
in effect from 01 June 2020 would now come in effect from 01st October
2020.
“All
existing trusts/ charitable institutions would now need to file
applications for renewal of their registrations/ approvals by December
31, 2020 instead of earlier August 31, 2020,” he added.
The
statement said various representations were received to the finance
ministry expressing concerns over the implementation of new procedure
from June 1, 2020 due to outbreak of coronavirus (COVID-19) and
consequent lockdown and there have been a number of requests to defer
the applicability of new procedure.
“This is a welcome move and provides expected relief in light of genuine hardships created by COVID-19. The entities benefited by this circular would be religious trusts, hospitals, educational institutions or other public charitable institutions created for welfare of public and allows exemption from income tax on account of their activities and charitable purpose,” Kumar added.
Consulting
firm AKM Global Tax Partner Amit Maheshwari said, “This is a welcome
clarification as in the absence of this extension, it was extremely
difficult to comply with these procedures. Several representations had
been made on this matter and this is indeed a welcome move.”
• An employee can change the option of tax structure at the time of filing the ITR • TDS will get adjusted accordingly
The Central Board of Direct Tax (CBDT) recently came out with a circular, offering clarifications for tax-paying employees on how they can migrate to the new concessional tax regime, which was announced in this year’s Union Budget.
The lower income tax rates under the new regime came to effect from April 1, 2020. However, there were many concerns raised on how employees can choose to opt between the old and regime.
In an April 13 release, the CBDT said employees, who do not have any income from a business, can opt for the new concessional tax slabs or the old regime by intimating the deductor (employer) through a declaration form.
The declaration will also help employers determine whether to deduct TDS as per the old regime or the new concessional rates.
Employees have an option to choose between the new tax regime and the old one. Experts have already said that each employee/taxpayer may opt for any of the two, based on investments.
Coming to the new slabs under the concessional tax regime, those earning Rs 2.5 lakh will have to pay no tax while people earning Rs 2.5-5 lakh will have to pay 5 per cent tax.
Individuals in the income bracket of Rs 7.5-10 lakh will pay 15 per cent tax. People earning over Rs 10-12.5 lakh will be taxed at 20 per cent and those earning Rs 12.5-15 lakh will pay 25 per cent taxes. Finally, people earning above Rs 15 lakh will pay 30 per cent tax under the concessional tax regime.
To sum up the clarifications: 1) Employees, who do not have any income from a business, can choose to inform their employer through a declaration if they want to opt for the new tax regime for deducting tax at source on TDS from salaries.
However, employees who do not submit any declaration to the employer will continue to be charged under the old regime as earlier.
2) The IT department also clarified that an employee can change the tax structure at the time of filing income tax and that the amount of TDS will be adjusted accordingly.
“The deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section IISBAC of the Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 11SBAC of the Act,” the CBDT notification said.
3) Another important clarification by the tax department was related to TDS. Once employees make their intention clear to opt for the concessional rates, it will remain the same for TDS purpose for the year without any scope of modification.
“It is also clarified that the intimation so made to the deductor (employee) shall be only for the purposes of TDS during the previous year and cannot be modified during that year,” it said.
“However, the intimation would not amount to exercising an option in terms of sub-section (5) of section 115BAC of the Act and the person shall be required to do so along with the return to be furnished under sub-section (1) of section 139 of the Act for that previous year. Thus, option at the time of filing of return of income under sub-section (1) of Section 139 of the Act could be different from the intimation made by such employee to the employer for that previous year.”
The Ministry of Finance said that, IT Department to release all pending income tax refunds up to Rs 5 lakhs immediately. Around 14 lakh taxpayers to benefit.
In the context of the COVID-19 situation and with a view to providing immediate relief to the business entities and individuals, it has been decided to issue all the pending income-tax refunds up to Rs. 5 lakh, immediately.
This would benefit around 14 lakh taxpayers.
It has also been decided to issue all pending GST and Custom refunds which would provide benefit to around 1 lakh business entities, including MSME.
Thus, the total refund granted will be approximately Rs. 18,000 crore.
The finance minister heads the Economic Task Force that was set up by the Prime Minister.
Finance minister Nirmala Sitharaman announced a slew of measures for extension of statutory and regulatory compliances in view of the corona virus pandemic spreading its wings and impacting the economy.
Allaying fears that there is no economic emergency in the country, FM said that the Economic Task Force will soon announce an economic relief package to deal with the impact of the corona virus pandemic on the economy.
These are largely in the area of ease of doing business, by providing reliefs in extension of due dates for compliances and reliefs from late fee and penalties, in view of the lock downs announced in several states and districts.
Income Tax
The last date for filing income tax returns for Financial Year 2018-19, extended from 31st March, 2020 to 30th June, 2020.
Aadhaar-PAN linking date extended from 31st March, 2020 to 30th June, 2020.
Vivad se Vishwas scheme – no additional 10% amount, if payment made by June 30, 2020.
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 extended to 30th June 2020.
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.
Necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be issued in due course.
GST/Indirect Tax
Last date for filing GSTR-3B in March, April and May 2020 extended till the last week of 30th June, 2020 for those having aggregate annual turnover less than Rs. 5 Crore. No interest, late fee, and penalty to be charged.
For any delayed payment made between 20th March 2020 and 30th June 2020 reduced rate of interest @9 % per annum ( current interest rate is 18 % per annum) will be charged. No late fee and penalty to be charged, if complied before till 30th June 2020.
Date for opting for composition scheme is extended till the last week of June, 2020. Further, the last date for making payments for the quarter ending 31st March, 2020 and filing of return for 2019-20 by the composition dealers will be extended till the last week of June, 2020.
Date for filing GST annual returns of FY 18-19, which is due on 31st March, 2020 is extended till the last week of June 2020.
Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws where the time limit is expiring between 20th March 2020 to 29th June 2020 extended to 30th June 2020.
Necessary legal circulars and legislative amendments to give effect to the aforesaid GST relief shall follow with the approval of GST Council.
Payment date under Sabka Vishwas Scheme extended to 30th June, 2020. No interest for this period shall be charged if paid by 30th June, 2020.
Customs
Custom clearance will operate 24X7 till June 30, 2020.
Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied Laws where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.
Financial Services
Relaxations for 3 months
Debit cardholders to withdraw cash for free from any other banks’ ATM for 3 months
Waiver of minimum balance fee
Reduced bank charges for digital trade transactions for all trade finance consumers
Corporate Affairs
No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’;
The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Companies Act (120 days), 2013, shall be extended by a period of 60 days till next two quarters i.e., till 30th September;
Applicability of Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of from 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the year 2019-20.
As per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the year 2019-20, if the IDs of a company have not been able to hold even one meeting, the same shall not be viewed as a violation.
Requirement to create a Deposit reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020.
Requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April 2020, may be done so before 30th June 2020.
Newly incorporated companies are required to submit commencement of Business certificate within 6 months of incorporation. This is now extended to 12 months.
Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Companies Act, shall not be treated as a violation.
Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to Rs 1 crore (from the existing threshold of Rs 1 lakh). This will by and large prevent triggering of insolvency proceedings against MSMEs. If the current situation continues beyond 30th of April 2020, we may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.
Detailed notifications/circulars in this regard shall be issued by the Ministry of Corporate Affairs separately.
Department of Commerce
Extension of timelines for various compliance and procedures will be given. Detailed notifications will be issued by Ministry of Commerce.
In the union budget 2020, the following section 115BAC shall be inserted in the Income Tax Act, with effect from the 1st day of April, 2021, with new income tax slabs and lower rates. These income tax rates are optional and are available to those who are willing to forego some exemptions and some deductions.
Direct Taxes
1. Tax rate reduced for new companies to 22% and for manufacturing companies 15%
2. New simplified personal tax regime for Individual tax payers. The revised slab can be availed if they do not claim deductions and certain exemptions.
For income :
Upto 5,00,000 nil
Rs 5,00,000 -7,50,000: 10%
Rs 7,50,000 – 10,00,000 : 15%
Rs10,00,000 – Rs 12,50,000 20%
Rs 12,50,000- Rs 15,00,000 : 25%
More than Rs 15,00,000 : 30%
3. Companies not required to deduct dividend distribution tax and will be taxed only in the hands of the recipient. Parent company to be allowed deduction of dividend received subsidiary
4. Concessional tax rate of 15% extended to power generation companies
5. Investment made in Infrastructure and other specified sectors
6. Tax rate of 194LC at 5% for interest payment to non resident in respect of money borrowed or bond issued upto June 30,2023 and for 194LD at 5% for interest on borrowing from foreign institutional or qualified investor and municipal bonds
7. Interest payment on bonds listed on exchange by ILFS – 4%
8. Option to Cooperative societies to pay tax at 22% with no exemption or deduction. Exempt from alternative minimum tax
9. Affordable housing tax breaks extended by one year. Additional 1.5 lakhs tax benefit on interest paid on affordable housing loans to March 2021
10. Turnover threshold for tax audit raised to Rs 5 crore from Rs 1 crore
11. 100% tax concession to sovereign wealth funds on investment in infra projects
12. Income from Charitable institutions fully exempt from taxation. Donation to such institution allowed as deduction.
13. Registration of charity institutions to be made completely electronic, donations made to be pre-filled in IT return form to claim exemptions for donations easily.
14. Faceless appeals against tax orders on lines of faceless assessments
15. For tax payers who have appeals pending only disputed tax is to be paid by tax payer and no interest or penalty if the same is paid within March 31,2020. Post March 31,2020 certain amount levied uptill June 30,2020
16. Startup ESOP taxes deferred by 5 years Other Areas
1. New scheme to provide subordinate debt to MSME
2. Decriminalise some norm violations in Companies Act
3. Increase the bank deposit insurance from Rs 1 lakh to Rs 5 lakh
4. New system for instant allotment of PAN
5. A new scheme NIRVIK to be launched this year itself for exporters
6. A debt ETF consisting of government securities will be launched.
7. For NBFCs and HFCs, liqduity constraints will be addressed.
8. FPI Limit in corporate bonds will be raised to 15% from 9%.
9. LIC to be listed at stock exchanges
Two important changes in Income tax (TDS/TCS)
— TCS to be collected by seller whose turnover exceeds Rs. 10 cr. In previous year from each buyer on amount exceeding 50 lacs @0.1% for sale of goods.
-TDS rate u/s 194J for technical payment changed from 10% to 2% to avoid litigations in respect of 194J Vs 194C
The changes in this year’s ITR forms are significant because it is seeking more disclosures.
More disclosures are aimed at improving income tax compliances & e-assessments.
In AY 2018-19, 58.7 million returns were filed, out of which about 23.7 million people filed returns with no tax liability
While it may be commonplace in Uncle Sam’s country, India is slowly getting used to the idea of disclosing more information to the taxman. In the last five years, income tax return (ITR) forms have started asking for more details to ensure that your spending patterns match your tax return profile.
However, the department seeking details of a valid passport or foreign travel with spends of over ₹2 lakh has left many with a feeling of discomfort as it further complicates the filing process. Many experts also worry about the privacy and security issues. “Data protection law for individuals in our country is not like that in developed countries such as the US. Also, given that the Personal Data Protection Bill 2019 is under consideration, many people are worried and skeptical when it comes to divulging so much information,” said Divya Baweja, partner, Deloitte Haskins and Sells LLP, an accounting firm.
Whether asking for more information will bear fruit and result in better tax compliance continues to be a question mark. The fact remains that you need to provide additional details, for which you have to be on top of many things, including your spending patterns. Now, if you have spent more than ₹2 lakh on foreign travel or ₹1 lakh on electric bills in the current financial year (FY), you will need to furnish these details. The new ITR forms notified by Central Board of Direct Taxes (CBDT), for the upcoming assessment year (AY) 2020-21, require you to disclose such information. If your spending patterns don’t line up with your tax declarations, it may land you in hot water.
The objective is to gather more and more information and make the process of selecting cases for scrutiny easier.
New ITR Forms: ITR-1 & ITR4
ITR-1 which is also known as “Sahaj” can be used by an individual whose incomes primarily include salary income and whose total income does not exceed Rs.50 lakh during the FY. On the other hand ITR-4 can be used to file returns by resident individuals, Hindu Undivided Family (HUFs) and firms (other than LLP) having a total income of up to Rs.50 lakh from business and profession and filing return under presumptive taxation scheme.
There are two major changes in the ITR Forms – first, an individual taxpayer cannot file return either in ITR-1 or ITR4 if he is a joint-owner in house property, second, ITR-1 form is not valid for those individuals who have deposited more than Rs.1 crore in bank account or has incurred Rs2 lakh or Rs1 lakh on foreign travel or electricity respectively.
Additional info
So far, the government has notified ITR-1 and ITR-4 forms for tax filing for FY 2019-20 or AY 2020-21. However, you will have to wait to file returns as online utilities are not yet updated. The new ITR forms ask you to provide a valid passport number, if you have one; and details of your employer like name, nature of business, address and TAN.
The objective is to gather more and more information about an individual, which will help the tax department carry out specific enquries and make the process of selecting cases for scrutiny easier. “These alterations may be happening because the government is slowly moving towards e-assessments and is thus seeking greater clarification from taxpayers in the return itself to save time and costs,” said Shailesh Kumar, director, Nangia Andersen Consulting Pvt. Ltd, a business tax advisory firm.
Other experts echo the thought. “The changes reflects the continuing journey of the government towards simplification and automation. It has already started providing pre-filled return forms. These disclosures will help capture the complete details of taxpayers and the validation of their financial information, wherever such information is available from more than one source,” said Kuldip Kumar, partner and leader, personal tax, PwC, an accountancy firm.
Data is the new oil
In a computerised environment, tax returns are now filed online and data is something that the government wants to be best friends with to tackle the problem of tax evasion. At the front-end, it is seen as asking for more information from you, the tax payer. However, this isn’t the first time the ITR forms have been amended. Every year, CBDT notifies the forms carrying amendments in accordance with the Finance Act. The aim is to increase the tax base as only a tiny percentage of the population files returns. Also, among the people who file returns, about 40% show that they have no tax liability.
At the back-end, the government is taking steps to strengthen the compliance ecosystem. For instance, in 2004, as a measure to widen the tax base, the concept of Annual Information Return (AIR) filing was introduced. AIR is a statutory requirement where mutual funds, institutions issuing bonds and registrars or sub-registrars, and so on are required to record and report high-value financial transactions of individuals to the tax department.
In 2006, a project for enabling e-filing of ITR was launched. Further, in 2007, the government launched integrated taxpayer data management system (ITDMS). Under this system, data from multiple sources is collected in a complex process for drawing a complete profile of the taxpayer. A non-filers monitoring system (NMS), focusing mainly on non-filers with potential tax liabilities, was also initiated by the department. The system assimilates and analyses in-house information as well as transactional data received from various sources like ITR and AIR filed by third parties and other departments to identify people who had undertaken high value financial transactions but did not file their returns.
Taking it further, in the year 2017, the tax department initiated “project insight” to strengthen the non-intrusive information-driven approach for improving tax compliance and effectively utilizing information in tax administration. Under this project, an integrated data warehousing and business intelligence platform, which includes Income Tax Transaction Analysis Centre (INTRAC) and Compliance Management Centralized Processing Centre (CMCPC), has been set up. According to the department’s website, INTRAC leverages data analytics in tax administration and performs tasks related to data integration, compliance management, enterprise reporting and research support. CMCPC uses campaign management approach (consisting of emails, SMS, reminders, outbound calls and letters) to support voluntary compliance.
Will disclosures help?
The government wants you to divulge more information for better scrutiny. However, some experts feel that this will only increase the burden on the tax payers, who are already struggling with a very complicated system of tax filing. “This is overreach and intrusion, and it’s a wasteful exercise. For instance, many people from India go to gulf countries for labour work; if such people get notices, they won’t know how to respond. There is a lot of duplication. The department has already acquired most of this information through AIR filed by different entities,” said Himanshu Sinha, partner, Trilegal, a law firm.
While giving out more information makes things more difficult, such information will be able to trace non-filers and is intended to bring more compliances.
Taxpayers get one more chance to clear their tax dues.
The CBDT has extended till January 31 the last date for taxpayers to avail a “one-time” facility to apply for compounding of income tax offences, an order issued on Friday said.
The earlier deadline was December 31, 2019.
In I-T parlance, compounding means that the taxman does not file a prosecution case against the offender or tax evader in court in lieu of payment of due taxes and surcharges.
The decision to extend the last date was taken “in view of references received from field formations, including requests made by ICAI (Institute of Chartered Accountants of India) chapters wherein it has been brought to the notice of the CBDT that the taxpayers could not avail the benefit of the one-time relaxation window due to genuine hardships,” the order issued by the Central Board of Direct Taxation (CBDT) said.
The order was accessed by PTI.
Final opportunity
Hence, the order stated, the date has been extended to give a final opportunity to such taxpayers and reduce the pendency of existing prosecution cases before the courts.
Applications, as per the procedure of the scheme, are to be filed before the appropriate competent authority that is either a principal chief commissioner or a chief commissioner or a principal director general or director general of the Income-Tax Department “on or before” January 31, 2020.
The CBDT, while launching the scheme in September last year, had said that this “one-time measure” is being undertaken to mitigate unintended hardship to taxpayers in deserving cases and to reduce the pendency of existing prosecution cases before the courts.
“Cases have been brought to the notice of CBDT where the taxpayers could not apply for compounding of the offence as the compounding application was filed beyond 12 months,” it had said.
The riders
The relaxation, however, shall not be available in respect of an offence which is generally or normally not compoundable, indicating instances of serious tax evasion, financial crime, terror financing, money laundering, possession of illegal foreign assets, benami properties or conviction by a court in the past.
The CBDT circular added that application for compounding of an income tax offence can be filed in cases where: Prosecution proceedings are pending before any court of law for more than 12 months or any compounding application for an offence filed previously was withdrawn by the applicant solely for the reason that such application was filed beyond 12 months or any compounding application for an offence had been rejected previously solely for technical reasons.
The CBDT, which frames policy for the tax department, had earlier said that compounding of offences is “not a matter of right” and the department can extend such a relief only in certain cases.
This will be done keeping in view factors like “conduct of the person, the nature and magnitude of the offence on the context of the facts and circumstances of each case,” it had said.
Further, all trusts/charitable institutions already having approval or registration were also supposed to file applications for renewal of there registration/approval within 3 months of new law coming into force, i.e. August 31, 2020.
In the union budget 2020, the following section 