In India, the tax year begins on 1 April and ends on 31 March.
Accounts for tax purposes must be made up to 31 March. For persons having business/professional income, the income tax return is required to be filed electronically on or before 31 October of the succeeding tax year. In case the transfer pricing provisions are applicable, the due date for filing of the tax return is on or before 30 November.
These due dates have been extended for FY 2019-20 such that persons having business/professional income, the income tax return is required to be filed electronically on or before 31 December 2020 (in case tax audit is not applicable). In case the transfer pricing provisions are applicable / tax audit report is required to be furnished, the due date for filing of the tax return is on or before 31 January 2021.
In case a taxpayer desires to revise its filed return of income, it would be eligible to do so only up to 31 March of the year following the tax year or before the completion of assessment, whichever is earlier.
A statement of financial transaction needs to be furnished electronically under Form 61A for the tax year on or before 31 May of the year following the tax year.
Further, in order to claim the tax incentives/deductions, taxpayers have to furnish their tax returns on or before the due date specified for filing the tax returns.
Quarterly WHT returns
Quarterly statements of taxes withheld are required to be filed electronically with the tax authorities on or before 31 July, 31 October, and 31 January for the first three quarters of the tax year and on or before 31 May following the last quarter of the tax year.
Obligation to submit tax return for assets located outside India
A resident taxpayer having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India is mandatorily required to furnish a tax return.
In cases where taxpayers have assets outside India, the extant time limits of four and six years for reopening tax assessments (where income has escaped assessment) has been increased to 16 years. In cases where a person is treated as an agent of a non-resident, the time limit for issuing reassessment notice has been extended from two years to six years.
Payment of tax
Tax is payable in advance (if tax payable for the year exceeds INR 10,000) in specified instalments for every quarter on or before 15 June, 15 September, and 15 December for the first three quarters of the tax year and on or before 15 March for the last quarter of the tax year. Any balance of tax due on the basis of the return must be paid on a self-assessment basis before the return is filed. A tax return will be treated as defective if the tax liability along with interest is not paid on or before the date of submission of the tax return. Interest levied for default in payment of advance tax is computed beginning from the first day of the year following the tax year to the date of the assessment order.
Tax audit process
Audit for income tax purposes
Persons carrying on business are required to get their books of account audited for income tax purposes if the business turnover exceeds INR 50 million, provided the aggregate of all receipts, including sales, turnover, and gross receipts, in cash do not exceed 5% of total receipts and all payments, including expenditure, in cash do not exceed 5% of total payments.
For persons opting for the presumptive taxation scheme, one shall not be required to get one’s accounts audited if the total turnover or gross receipts of the relevant previous year do not exceed INR 20 million. This has been effective from tax year 2017/18 onwards. For persons carrying on a profession, crossing the turnover threshold of INR 5 million would attract the requirement to have its books of accounts audited from 1 April 2017. The penalty for non-compliance with this audit requirement is INR 0.15 million, subject to 1% of total turnover/gross receipts.
Tax authorities, at any stage of proceedings, having regard to nature, complexity, and volume of accounts or doubts on correctness of accounts or other reasons, may, after taking necessary approval of the Chief Commissioner, direct a taxpayer to get its accounts audited and to furnish the report.
Statute of limitations
The statute of limitations under the Income-tax Act in the case of submission of returns is one year from the end of the relevant tax year, and for assessment of returns filed is 12 months (24 months in case transfer pricing provisions are applicable) from the end of the relevant tax year for which the return is filed. The statute of limitations for reassessment ranges from five years to 17 years from the end of the relevant tax year.
Topics of focus for tax authorities
With a view to roll out e-assessment across the country so as to impart greater transparency and accountability, the Central Government has been empowered to notify a new scheme for scrutiny assessments to achieve the desired purpose. This would enable the assessment to be carried out without any personal interface between the taxpayer and the revenue authorities. The scope of e-assessment has been extended to include best judgement assessment as well. Further, similar e-proceedings have been introduced in respect of:
- Proceedings before Commissioner (Appeals).
- Imposition of penalty under the Income-tax Act.
General Anti Avoidance Rule (GAAR)
GAAR provisions were introduced by the Finance Act, 2017 and have been applicable since 1 April 2017. These provisions empower the tax department to declare an ‘arrangement’, or any part or step thereof, entered into by a taxpayer with the main purpose of obtaining tax benefit to be an 'Impermissible Avoidance Agreement' (IAA), the consequence of which would be denial of tax benefit under the Income-tax Act or under the applicable tax treaty.
For GAAR provisions, an IAA means the main purpose of which is to obtain a tax benefit, and it:
- creates rights and obligations not at arm’s length
- results in abuse/misuse of provisions of this Income-tax Act (directly/indirectly)
- lacks/is deemed to lack commercial substance, or
- is carried out in a manner that is not ordinarily employed for bona fide purposes.
The following are consequences if an arrangement is regarded as an IAA:
- Disregard/re-characterise the arrangement.
- Disregard corporate structure.
- Deny treaty benefit.
- Reassign place of residence/situs of assets or transactions.
- Reallocate income, expenses, relief etc.
- Re-characterise equity-debt, income-expense, relief, etc.