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. Further, the Government has issued a notification on 24 June 2020, 26 July 2020 and 29 October 2020 further extending certain compliance deadlines. These relief measures announced are effective for the period mentioned below and normal due dates discussed in the ensuing sections apply post the notification ceases to have effect. These measures 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 November 2020.
- The last date for filing income-tax returns in case of taxpayers required to file tax audit report / transfer pricing reports or partner of firms who are required to get audited under the Act is extended to 31 January 2021. However, interest under section 234A of the Indian Income-tax Act shall be applicable if the tax payable is more than INR 100,000 (net of advance tax and pre-paid taxes) and the income-tax return is filed after the normal due date applicable to the taxpayer. For instance, if the due date of a taxpayer is 30 September 2020 and there is tax payable more than INR 100,000 (net of advance tax and pre-paid taxes) and the taxpayer files the return on 31 January 2021, then interest under section 234A @ 1% of the tax payable shall be applicable for the period of delay.
- The last date for filing of income tax return for FY 2019-20 in case of taxpayers not covered above is 31 December 2020.
- Taxpayers/ applicants can file applications for APA to cover tax year 2020/21 even upto 31 March 2021 as the first year of the APA and this would be regarded as having been filed as on 31 March 2020 (i.e. within the tax year 2020/21).
- The last date for furnishing an audit report under the provisions of the Indian Income-tax Act, (tax audit under section 44AB, transfer pricing audit report under section 92E, etc.) has been extended to 31 October 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 to 31 December 2020, and no additional 10% amount is to be paid if taxes are paid by 31 March 2021.
- For individuals, the Aadhaar-Permanent Account Number linking date has been extended from 31 March 2020 to 31 March 2021.
- Due date of tax deducted at source/ tax collected at source returns for the month of February 2020, March 2020 or for the quarter ended 31 March 2020 shall be extended to 31 July 2020.
- Furnishing of certificate in Form 16 with respect to tax deducted at source on salary payments for the FY 2019-20 shall be extended to 15 August 2020.
- The due date of filing any appeal, reply, application, or furnishing of any report, document, return, statement, etc. (other than mentioned above), that becomes due between 20 March 2020 and 31 December 2020 has been extended to 31 March 2021.
- 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, where the time limit expires between 20 March 2020 to 31 December 2020, shall be extended to 31 March 2021.
- Due date of making investments/ payments to claim benefits under section 54 to 54GB of the Indian Income-tax Act relating to capital gains for the FY 2019/20 has been extended from 31 March 2020 to 30 September 2020.
- Due date for making investments/ payments to claim benefits under Chapter VI-A under the heading "B - Deductions in respect of certain payments" for the FY 2019/20 has been extended from 31 March 2020 to 31 July 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 31 December 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 normal rate of withholding tax (TDS) has been reduced by 25% in case of payments between 14 May 2020 to 31 March 2021 under specified sections to residents.
- The date for commencement of operation of Special Economic Zone (SEZ) units in order to claim the tax holiday benefit has been extended to 31 March 2021, 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. Similar relaxation has been made for March 2021 and April 2021 Form GSTR-3B tax payment and filing.
- The due date of filing March and April Form GSTR-1 (outward supply return) have been extended.
- For the month of April 2021 the input tax credit (ITC) restriction may now be applied cumulatively in the return for the month of May 2021.
- 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.
- Similarly, the due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, and any other documents for any compliance under the GST laws where the time limit is expiring between 15 April 2021 and 30 May 2021 has been extended 31 May 2021.
The time-limit for issuance of an order in pursuance to the issuance of a notice for rejection of a refund claim, which falls due during the period 15 April 2021 to 30 May 2021, shall stand extended to 15 days after the receipt of reply to the notice from the registered person or up to 31 May 2021, whichever is later.
 Notification No. 14/2021-Central Tax dated 1 May 2021
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 31 March 2021.
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 31 March 2021 for settling the dispute. If the payment is made on or before 31 March 2021, no additional tax of 10% (as provided earlier) is required to be paid in view of relief measures announced from time-to-time. 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.
Mutual Agreement Procedure (MAP)
India has the MAP process in place as a Dispute Resolution Mechanism under the Double Tax Avoidance Agreements for many years now. There are specific provisions within the Indian Tax law for the same. With a view to align the MAP process with the OECD BEPS Action 14 Minimum Standard and provide more clarity around the MAP process, the Indian government amended the MAP rules in May 2020 with specific procedures for filing MAPs and notification to the Foreign Competent Authority, along with an aim to resolve the MAP cases within an average timeline of 24 months. Further, in August 2020, the CBDT issued detailed guidance around procedural and technical aspects, acceptance/ denial of MAPs, and the implementation of MAPs.