Taxation And Other Laws (Relaxation Of Certain Provisions) Ordinance, 2020.

Introduction:

The Novel Corona Virus (COVID-19) across many countries has caused immense loss to the lives of people, and it has been termed as pandemic by the WHO and various Governments including Government of India. As the only weapon to face this is social distancing and lockdown in order to contain the spread of the virus, these steps will have a direct impact on the people and economy which sequentially lead to various complications and cause economic distress in the country and India happens to be a rich country inhabited by very poor people, India’s economic growth could take a hit of up to half a percentage point in FY2021 because of this pandemic, to face this challenge the ministry of finance had announced various relief measures linked with statutory and regulatory compliance matters across various sectors in the country and has brought in an Ordinance on 31.03.2020. under Article 123 of the constitution which grants ordinance making power to The President of India.

Finance Minister Nirmala Sitaraman on March 24 had announced the easing of various compliance and statutory requirements like :

• Income tax-related matters,
• Compliance and deadlines related to the GST,
• Extension of time limits under the Taxation and Benami Acts,
• Extension of time for Linking PAN with biometric identity Aadhaar,
• Customs,
• Central excise-related compliance and regulations,
• 100% tax exemptions on donations to the PM CARES fund, and among many others.

SALIENT FEATURES & SIGNIFICANCE OF THIS ORDINANCE:

Salient features and their significance are

explained according to their classification  i.e.,          [1] Direct Tax & Benami benefits,

                                                                                      [2]Indirect Tax,

[1] Direct Tax  Benefits :

Income tax is a direct tax which is directly attributable to the income of the person. Income which is generated from the various head of income like Salary, Business, House Property, Capital Gain and Income from other sources.

(A) PM-CARES Fund

Section 80G of the Indian Income Tax Act allows you tax deduction on donations made to any charitable organization, The Ordinance also amended the provisions of the Income-tax Act to provide the same tax treatment to PM CARES Fund as available to Prime Minister National Relief Fund. The fund was announced by Prime Minister Narendra Modi and it invites individual contributions. Donations towards the newly established PM-CARES Fund eligible for 100 per cent tax deduction.

Critical Analysis

Providing such tax benefits will definitely encourage individuals to donate towards this crisis but interestingly there is no need for the government to create new trust in the name of PM-CARES fund as there is existing Prime minister Disaster management fund which rules and Expenditure is completely transparent. Hence, to make sure transparency, accountability efficiency, and audit in the manner in which these funds are utilized and spent proper guidelines are to be made.

Discriminatory treatment meted out to donations to PM-CARES Fund and Chief Minister’s Relief Funds. This controversy should be solved, as a person who wants to donate to CMRF cant avail the tax benefit.

(B) Extension of various deadlines

Various deadlines under direct tax were extended amid the crisis which will definitely have a huge impact on the economy and government to cope up

1. Income tax returns for (FY 18-19) from 31st March to 30th June, 2020.

It’s the biggest relief for the individual tax payers amid the crisis as appeals could be seen all over the twitter before this to extend the date. Extension of Original as well as revised income tax returns were extended to 30^th June. delayed payment for tax payments have been reduced from 12% to 9%  In case any tax is still payable for FY 2018-19, interest will be charged at 9 per cent instead of 12 per cent for the period starting from March 20, 2020 until the date of payment of tax or June 30, whichever is earlier.

1. Linking of Aadhar with PAN.

There are individuals having multiple PAN cards. However, since Aadhaar is linked to your unique biometric identification, the problem of multiple PAN cards will automatically get resolved. Hence, the government will be able to track all the transactions, asset purchases and expenses incurred by an individual through this process. This will helps to plug evasion of taxes as most of your key transactions will be tracked through this mechanism by government of India.

The deadline to link PAN with Aadhaar has been extended to June 30, from march,31^st,2020.
For those who are yet to link their PAN with Aadhaar, this extension will come as a relief as not linking the two will lead to the PAN becoming inoperative.

1. Vivad se Vishwas Scheme.

It was announced to provide taxpayers a lucrative opportunity to settle direct tax disputes by waiving interest and penalty on their pending taxes in the Union budget 2020. Its main objectives are to reduce income tax pending litigations, Generate timely revenues for the government and help taxpayers to end their tax disputes with the department by paying disputed tax and get waiver from payment of interest and penalty.

The deadline for this scheme is also extended till 30^th June, 2020.

1. Deduction under Chapter VI A of Income tax act.

There are a lot of deductions available under various sections to help you bring down the taxable income even though you are accountable to pay tax, by the mode of investments in various schemes which are provided as under guidelines such as LIC, Medical Insurance, Interest payments on Home loan, Senior Citizen Saving Scheme, Contribution to Public Provident Fund, Sukanya Samriddhi Yojana etc, Investments in these will will help in tax reduction.

The investment/payment can be made up to 30.06.2020 for claiming the deduction

• Capital gain benefits.

Investment/construction/purchase for claiming roll over benefit/deduction in respect of capital gains under sections 54 to 54GB of the Income Tax Act.

This date is also extended till June 30, 2020.

• Special Economic Zone Units.

SEZs are the undertakings formed to promote exports and foreign investments in India. Income tax benefit or deduction is available to SEZ units and the provisions for the same are contained under section 10AA of the Income Tax Act.

Deduction under 10AA of the IT Act has also extended to 30.06.2020 for the units which received necessary approval by 31.03.2020.

Critical analysis

The extension of deadlines will certainly help tax payers but, if we look at the economy in the present scenario, the condition is GDP is quiet stooping down, at this junction extension of deadlines will make the reserves empty as there can be wilful delay of tax filings which is the main source of revenue to the government, further adding to this the interest rates were decreased for the delayed payments, rather increasing the rates would have helped the economy as this benefit seems of no significance. Moreover the deadline for the capital gain benefit was unnecessarily extended as new capital assets trade is practically not possible at this time roll over benefits is not necessary, Section 80C investments, when the deadline for filing income tax returns is a good 4 months far? When one can buy or construct a new capital asset on or before the due date of filing income tax return in order to get exemption under Section 54, there is no reason why the same latitude cannot be given under Section 80C. Deduction under Chapter VI A of Income tax act, is definitely beneficiary for the government in the long term and tax payers in the short term, but, the Non-vigilant tax payers who are not aware of this change will definitely miss the chance as there is no gold mine of advertisement in this crisis either by the government and media. While the government has extended the timeline, it may pose certain practical challenges. Banks may have to set systems to accept deposits for a previous financial year. 

[2] Indirect Tax Benefit  :

Indirect taxes are defined by contrasting/Comparing with direct taxes. Indirect taxes can be defined as taxation on a person or entity, which is ultimately paid for by another person. The person/body that collects the tax will then finally remit it to the government.

(A) Extention of various deadlines

1. Sabka Vishwas legal dispute resolution scheme

It is a scheme proposed in the Union Budget, 2019, and is made to resolve all disputes relating to the erstwhile Service Tax and Central Excise Acts, which are now directly under GST, as well as 26 other Indirect Tax enactments. The scheme will be for taxpayers who wish to solve their pending disputes, with a substantial relief provided by the Indian government.

It has been extended to 30th June, thus giving more time to taxpayers to get their disputes resolved under this scheme

1. Central Excise return
2. Last date of furnishing of the Central Excise returns due in March, April and May 2020 has been extended to 30th June, 2020.
3. Wherever the last date for filing of appeal, refund applications etc., under the Central Excise Act, 1944 and rules made there under is from 20th March 2020 to 29th June 2020, the same has been extended to 30th June 2020.

1. GST-related compliances 

The Ordinance amends the Central Goods and Services Tax Act, 2017 to allow the central government to notify an extension to the time limits for various GST-related compliances and actions under the Act.  Such extensions would be given based on the recommendations of the GST Council.  This will be done only in the case of actions which cannot be completed or complied with due to force majeure

CONCLUSION

Firstly, it’s important to understand that there is no change in the Financial Year. FY 2019-20 has ended on March 31st, 2020. However, certain tax-saving investments can be made by taxpayers between April 1st, 2020 and June 30th, 2020. Such investments shall be eligible for inclusion in the tax calculation for FY 2019-20. Secondly, the ordinance extends dates set by the Income Tax Act for begetting tax benefits to June 30, with the hint that it could be further extended if the crisis does not abate. Lastly this warming up in the attitude and deadlines is so convenient that one is tempted for its permanent institutionalisation. To wit, why should one be expected to rush before the financial year ends.

Author: K.S. SAI PAVAN, UNIVERSITY COLLEGE OF LAW, OU.

BA.LLB (5YDC), Email: mrpavankasturi@gmail.com