A lot of welcome measures are being announced by hon’ble Finance minister, yet there are certain areas which require immediate attention of the finance ministry. Amongst others, following majors seems to be necessary to safeguard possible exposures of taxpayers.
- Residential Status
Residential status of a person is considered based on the number of days a person stays in a country. Even the taxability of the person’s world income or the income in the country depends on the residential status of the person. Now, lockdown imposed by the Central Government and ban on international travel has forced certain persons to stay in the country out of compulsion. It may be possible that the additional period of stay due to the forced circumstance may amount to change of residency status of a person. The question here is that should the period of residency due to the ban on travel be waived while considering the residential status. This may amount to huge tax implications to persons who are regular fliers and plan their taxes based on such travel dates.
- Interest u/s 234B
Under section 234B, interest is applicable on self-assessment tax if the amount of self-assessment is more than Rs. 10,000/- or the amount of tax payable is more than 10 % of the amount of total tax payable after adjustment of TDS. Such tax is applicable @ 1% per month beginning from the 1st April up to the date of payment of tax. According to point no. 5 of the press note, such amount of interest is reduced from 1 % p.m. to 0.75% p.m. This seems to be unfair. At a time when there is no scope of revenues to be generated by businesses, no relief on account of expenses in the form of salaries, rents, electricity and other may fixed expenses, payment of taxes may be a last option for assesses. In this scenario, the least the government should do is waive all or any interest payable u/s 234 B up to 30th June 2020. Â
- Relied for utilization of amounts invested in Capital gain Schemes
An assesse is required to utilize the amount of capital gain in the form of investment into a residential house property within 2 years after the date when such capital gain arises. Now, let us suppose that an assesse has earned an amount of Rs. 50,00,000/- and is required to invest it in a residential house property on or before 31st March 2020 by reason of claim of exemption under section 54F. In such a case the money would be deposited in the capital gain account with a bank. Now, by reason of the lockdown and the extraordinary circumstances in the country, if the assesse is not able to invest/spend the said amount, the amount gets taxable in the current year i.e. AY 2020-21. Relief on account of such ex tension has not been provided specifically. In such a scenario an extension for such investment should have been allowed up to 30th of June 2020 if not more.
- Relaxation in CSR
Section 135 of the Companies Act, 2013 is applicable to every company registered under the Act, and any other previous Companies Law, with a net worth of Rs 500 crore or more, or a turnover of over Rs 1,000 crore or a net profit exceeding Rs 5 crore in any financial year. By preview of this section every eligible company is required to spend a certain amount as Corporate Social Responsibility (CSR). Any default in fulfilling the CSR attracts heavy consequences in Companies Law and also in Income Tax Law. There is no relaxation provided specifically for this default on account of the lockdown. Most of the companies are able to allocate this fund towards the end of the financial year and a lockdown at this stage will definitely hinder the process. In such a scenario an extension of three month for spending such amounts up to 30th June 2020 is the least that could be provided.
- Non-Payment of ESI/PF
An assesse is required to deposit the amount of ESI/PF that is either deducted from the salaries of the employee or its own contribution up to 15th of the next month. In the current situation the contributions for the month of March 2020 is required to be deposited latest by the 15th of April 2020. In case of default the amount is required to be notified by an auditor in the annual audit report and the amounts become an ineligible expense for the year. No relief has been provided for such a situation. There must be some legislative changes provided for the current year to allow extension of time for deposit for such amounts at least up to 30th of June 2020.
- Advance Tax Instalments
Although advance tax instalment dates have already lapsed on 15th of March 2020, an assesse is eligible to deposit the tax as advance tax up to 31st of March in order to avoid late payment interest u/s 234B of the Income Tax Act. By way of point no. 5 of the press note, the government has allowed the amount of taxes to be paid up not 30th of June 2020 at a reduced rate of interest, however, such delayed payment of advance tax shall mean additional burden on assesse for payment of 1st instalment of advance tax for the next year i.e. Fy 2020-21 for which the due date is 15th of June. Such consideration should also be looked into by the government and some relaxations for further payment of taxes should also be announced.
- ITC Disallowances on Non-Payment to Vendors
This is an important point from the perspective of GST. Under the current provisions of S. 16 of CGST Act, a person is required to reverse the amount of input tax credit (ITC) if it fails to make the payment of amount within six months from the date of bill or availment of such ITC. Now, in the current situation when there are no business activities and no cash flows with businesses, the payment to debtors is not possible. Even if a person wants to make such payments, it is not possible due to the closure of banking activities. Such an issue should be considered, and relaxation must be provided in the form of certain amendments or special notification for waive of a period of the lockdown from the period of six months for making such payments.
