COVID-19: Relief measures
In view of the pandemic situation due to Novel Coronavirus (COVID-19) outbreak, some relief measures were announced by the government of India from a tax and regulatory perspective. To give immediate effect to the relief measures announced by the Finance Minister via a Press Release dated 24 March 2020, the President of India promulgated the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (Ordinance) on 31 March 2020. The relief measures announced are listed below.
- The last date for filing belated or revised income-tax returns for financial year (FY) 2018/19 has been extended from 31 March 2020 to 30 June 2020.
- Vivad se Vishwas Scheme (a scheme to settle direct tax disputes): The due date of declaration under the Vivad se Vishwas Scheme has been extended, and no additional 10% amount is to be paid if taxes are paid by 30 June 2020.
- For individuals, the Aadhaar-Permanent Account Number linking date has been extended from 31 March 2020 to 30 June 2020.
- The due date of filing any appeal, reply, application, or furnishing of any report, document, return, statement, etc. that becomes due between 20 March 2020 and 29 June 2020 has been extended to 30 June 2020.
- The due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, and any other documents, and the time limit for completion of proceedings by the authorities and any compliance by the taxpayer, including investment in saving instruments or investments for roll-over benefit of capital gains under various Acts, where the time limit expires between 20 March 2020 to 29 June 2020, shall be extended to 30 June 2020.
- For delayed payments of advance tax, self-assessment tax, regular tax, tax deducted at source, tax collected at source, equalisation levy, securities transaction tax, and commodity transaction tax made between 20 March 2020 and 29 June 2020, a reduced interest rate at 9% instead of 12%/18% per annum (i.e. 0.75% per month instead of 1/1.5% per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.
- The date for commencement of operation of Special Economic Zone (SEZ) units in order to claim the tax holiday benefit has been extended to 30 June 2020, provided such unit has received a Letter of Approval from the SEZ authorities on or before 31 March 2020.
- Any donation to the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) shall be eligible for 100% deduction. In addition, the limit on deduction of 10% of gross total income would not be applicable to such donations.
- The Central Board of Direct Taxes (CBDT) has issued an order extending the validity of lower deduction certificates issued for FY 2019/20 up to 30 June 2020 in the following cases where:
- an application has been filed by the taxpayer and is pending for disposal for FY 2020/21
- such application could not be filed, and
- the taxpayer files the application as per modified procedures laid down by the CBDT.
- Payments to non-residents (including foreign companies) having permanent establishment (PE) in India and not covered by lower/nil tax deducted at source/tax collected at source certificates will be subject to tax withheld at the rate of 10% plus surcharge and cess until 30 June 2020.
- Extension in the filing date of application for an advance pricing agreement (APA) during the tax year 2020/21 from 31 March 2020 to 30 June 2020.
Goods and services tax (GST) and customs
- The due date for payment of tax and filing Form GSTR 3B due in the months of March to May 2020 has been extended to 30 June 2020 for taxpayers having an aggregate turnover up to 50 million Indian rupees (INR); interest, late fee, and penalty has also been waived.
- For other taxpayers, a reduced rate of interest at 9% per annum would be charged 15 days after the due date of payment of tax and filing of Form GSTR 3B, although the applicable late fee and penalty would be waived.
- Due dates (under the Central GST Act, Customs Act, and other allied laws) falling between 20 March 2020 to 29 June 2020 have also been extended to 30 June 2020 for the following events:
- issue of notices, notifications, approval orders, sanction orders
- filing of appeals
- furnishing of returns, statements, applications, reports, and
- any other documents not specified above.
- The due date for payments under the Sabka Vishwas Scheme has been extended to 30 June 2020 from 31 March 2020. Interest on this period will be waived if payment is made by 30 June 2020.
- Customs clearances to be undertaken around the clock until 30 June 2020, for which a notification has already been issued.
- The due date for filing GST annual returns of FY 2018/19 has been extended to 30 June 2020 for which a notification has already been issued.
Abolishment of dividend distribution tax (DDT)
Until FY 2019/20, any company that distributed, declared, or paid dividends was liable to pay DDT at 15% (plus applicable surcharge and health and education cess). This rate is required to be grossed up; consequently, the effective rate of DDT is 20.54%. However, the Finance Act, 2020 has abolished levy of DDT with effect from 1 April 2020.
Accordingly, DDT is not required to be paid on any dividend distributed or paid on or after 1 April 2020. Further, such dividends on which DDT is not paid shall now be taxable in the hands of the shareholder receiving such dividends at applicable rates.
Vivad se Vishwas Scheme (a scheme to resolve pending direct tax litigation)
The Direct Tax Vivad se Vishwas Act, 2020 (Scheme) has been introduced with an intent to settle existing direct tax litigation. Under the Scheme, it is proposed that taxpayers would be required to pay the amount of the disputed taxes only. Further, there will be complete waiver of interest and penalty where payment of disputed taxes is made by 30 June 2020.
In cases where the dispute relates to penalty, or interest or fee not connected with the disputed tax, taxpayers would be required to pay only 25% of the same by 30 June 2020 for settling the dispute. In case payment is made after 30 June 2020, the taxpayer will be required to pay 110% of the disputed tax (the excess 10% shall be limited to the amount of related penalty and interest, if any) and 30% in case of penalty, interest, and fee. Rules and FAQs under the Scheme have been issued for effective implementation.
Equalisation levy scope extended to include e-commerce transactions
The Finance Act, 2020 has extended the scope of equalisation levy to cover within its scope the consideration received or receivable for e-commerce supply or services made or facilitated by an e-commerce operator. Equalisation levy at the rate of 2% shall be chargeable on the consideration received/receivable by the e-commerce operator from e-commerce supply/services provided/facilitated by it to a:
- Person resident in India.
- Non-resident in the following specified circumstances:
- Sale of advertisement that targets a customer who is resident in India or a customer who accesses the advertisement though an Internet Protocol (IP) address located in India.
- Sale of data collected from a person who is resident in India or from a person who uses an IP address located in India.
- Person who buys such goods/services (or both) using an IP address located in India.
Equalisation levy is not applicable in following cases:
- E-commerce operator has a PE in India and e-commerce supply/services are effectively connected with the PE in India.
- Equalisation levy is charged at 6% on specified services (i.e. the existing provisions).
- Sales/gross receipts/turnover of e-commerce operator from e-commerce supply or services is less than INR 20 million during the relevant financial year.
Exempting non-resident from filing tax returns in certain conditions
The Finance Act 2020 has granted a relief to non-resident taxpayers/foreign companies by exempting them from filing a return of income in India whose total income consists of royalty or fees for technical services (FTS). Earlier it was available only to non-residents whose total income consisted of only dividend or interest income.
With this amendment, non-resident taxpayer companies will not be required to furnish their tax returns in India if the following conditions are satisfied:
- Their total income consists only of dividend or interest, or royalty or FTS.
- Taxes have been deducted at the rates prescribed under the Income-tax Act from such incomes.
However, relief may not be available to non-residents whose taxes will be deducted at the beneficial rates provided under the respective tax treaties. The same will be effective from 1 April 2020 and will accordingly apply to tax year 2020/21 onward.