Date extension from 31st March 2020 to 30th June 2020 – What it means? What is missing? What could have been done? – CA Naresh Jakhotia

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Date extension from 31st March 2020 to 30th June 2020 – What it means? What is missing? What could have been done? – CA Naresh Jakhotia

The most commons question I have received after recent announcement by FM is whether it’s an extension of the financial year? There are lots of confusions as to the nature of benefit. It may be noted that the financial year closure is not extended but only the date of compliance which were required by 31st March 2020 either by the taxpayers or by the tax authorities has been deferred till 30th June 2020. There are lot many benefits which can be availed by the taxpayers as a result of extension of date from 31st March to 30th June.

The fake news about change in the financial year is getting circulated and it has created the chaos amongst the taxpayers that the present announcement is resulting in the extension of the financial year. (Readers may note that RBI financial year used to be from 1st July to 30th June and not normal from April to March. I have come to know about it only when we were the auditor for RBI. The RBI has now proposed to change it to normal FY of April to March from next year. For this, they will be beginning from July 2020 to March -2021. This news appears to have been wrongly drawn by the majority of the readers).

  I will try to cover it in this article. I will also try to cover one more issue with regard to what is not done in this relief package announced.

Other common queries raised by the taxpayers and tax professionals are as under:

  1. Whether the taxpayers who have not filed the income tax return for the FY 2018-19 can file the return now till 30th June 2020?
  2. Whether the persons who have filed the income tax return for the FY 2018-19 can now revised it?
  3. Whether the persons who have not made investment in PPF/LIC etc which are eligible for deduction u/s 80C can do it now?
  4. If the person pay the school fees of the child for the academic season 2020-21 i.e., the amount becomes due after April-2020, whether he can get deduction u/s 80C in the FY 2019-20 (AY 2020-21)?
    Or
    if the person pay the premium which is due in April  – 2020 and if he makes the payment o of the same before 30.06.2020 then whether he can get deduction u/s 80C in the FY 2019-20 (AY 2020-21)?  O
    Or
    If a person deposits the amount in April to June 2020 in housing loan account then whether the deduction u/s 80C would be eligible in FY 2019-20 (AY 2020-21)? Whether interest accrued between 1st April to 30th June 2020 will also be eligible for deduction u/s 24(b)?
  5. Whether the banking accounts would be categories as NPA if the interest / EMI is not paid by 31st March?
  6. Whether the trusts who are now eligible to seek the condo nation for delay in filing of audit report in Form No. 10B can seek such condonation by 30th June?
  7. Whether the person who have earned the LTCG and the 6 months period is falling within the March 2020 then whether it can be deferred till 30th June?
  8. There is a restrictions of Rs. 1.50 Lakh for deposits in the PPF A/c. If the person has not deposited any amount in the PPF Account till 31.03.2020 and if he deposits it in between April to June 2020 then whether he will be able to deposit it again after June 2020 for deduction u/s 80C in the FY 2020-21 (AY 2021-22)?
  9. Whether housing loan interest till 30th June 2020 will be eligible for deductions against income for the FY 2019-20?

Let us cover all above issue one by one.

10. Whether the taxpayers who have not filed the income tax return for the FY 2018-19 can file the return till 30.06.2020?

Yes, all taxpayers who have not filed the return of income of FY 2018-19 can file the return till 30th June 2020. In normal course, belated income tax return cannot be filed after the end of the relevant assessment year. However, due to lock down till 14th April, Government is allowing the filing of return of FY 2018-19 (AY 2020-21) till 30th June.

[Readers may noted that earlier there was a period of 2 years for filing of belated return which is reduced to 1 years earlier]

11. Whether the persons who have filed the income tax return for the FY 2018-19 can now revised it?

Yes, the persons who have already filed the income tax return for the FY 2018-19 can now revised it (AY 2020-21) till 30th June. In normal course, belated income tax return cannot be revised after the end of the relevant assessment year. However, due to lock down till 14th April, Government is allowing the filing of return of FY 2018-19 (AY 2020-21) till 30th June.

[Readers may noted that earlier there was a period of 2 years for revising the income tax return which is reduced to 1 years earlier]

12. Whether the persons who have not made investment in PPF/LIC etc which are eligible for deduction u/s 80C can do it now?

Yes, the persons who have not made investment in PPF/LIC etc which are eligible for deduction u/s 80C can do it now. Even the person can invests in a) National Pension Scheme (NPS) for claiming an additional deduction of Rs. 50,000/- U/s 80CCD(1B). It is over an above deduction of Rs. 1.50 Lakh u/s 80C.
b) Mediclaim payment for claiming deduction u/s 80D.

 

  • If the person pay the school fees of the child for the academic season 2020-21 i.e., the amount becomes due after April-2020, whether he can get deduction u/s 80C in the FY 2019-20 (AY 2020-21)?
    Or
    if the person pay the premium which is due in April  – 2020 and if he makes the payment o of the same before 30.06.2020 then whether he can get deduction u/s 80C in the FY 2019-20 (AY 2020-21)?
    Or
    If a person deposits the amount in housing loan A/c in April to June 2020 then whether the deduction u/s 80C would be eligible in FY 2019-20 (AY 2020-21)? Whether interest accrued between 1st April to 30th June 2020 will also be eligible for deduction u/s 24(b)?

 

It may be noted that Finance Minister has merely made an announced and declared its intention to relieve the taxpayers from the compliance burden of March 2020 in view of lockdown due to COVID 2019. The same is to be backed by necessary notification by the CBDT U/s 119(2)(b). The CBDT notification would be there within few days which will clarify all such issues. However, going by the logic & purpose for which the relief is proposed, in my view, following would be the exact nature of relief:

a)  If the person pay the school fees of the child for the academic season 2020-21 i.e., the amount becomes due after April-2020 then he may not be granted deduction u/s 80C in the FY 2019-20 (AY 2020-21) but would be eligible for deduction for FY 2020-21

b) if the person pay the premium which is due in April  – 2020 and if he makes the payment of the same before 30.06.2020 then he can get deduction u/s 80C in the FY 2019-20 (AY 2020-21). Only the payment of such policies which has become due before 31stMarch would be considered for deduction u/s 80C.

c) If a person deposits the amount in April to June 2020 in his housing loan account then he would be eligible for deduction u/s 80C subject to the condition that the amount is due till March  – 2020. It may be noted that interest on housing loan is eligible for deduction on accrual basis and not on payment basis. All interest which is due till 31stMarch only will be eligible for deduction. In short, interest accrued between 1st April to 30th June 2020 will also be eligible for deduction u/s 24(b). One can read my reply on housing loan interest benefit at – https://thetaxtalk.com/2019/07/19/whether-deduction-towards-housing-loan-interest-is-available-on-accrual-basis-or-deduction-is-available-only-if-it-is-paid/

 

  • Whether the banking accounts would be categories as NPA if the interest / EMI is not paid by 31st March?Technically, no relief was announced to the banks in recognition of NPA Norms. Till another stimulus package is announced, the banking accounts would be categories as NPA if the interest / EMI is not paid by 31st March. There is no extension in the payment of EMI or interest by the borrower. If the payment is not done till 31st March then it will continued to be categorized as per the existing norms of the bank. No relief to the borrower is provided as such.

 

 

  • Whether the trusts who are now eligible to seek the condo nation for delay in filing of audit report in Form No. 10B can seek such condonation by 30th June?CBDT has empowered to CIT (Exemption) to condone the trust if there is a delay in filing of the Audit Report in Form No. 10B. It may be noted that the CBDT has specially empowered it for specific financial year and it is to condone the delay in uploading / submitting the audit report.

 

Recent announcement by FM don’t extend the power of the CBDT till 30th June 2020 which means that the condonation after 31st March 2020 may not be possible without CBDT specially coming out with a new direction on this.

CBDT has to specifically issue a notification enabling CIT (Exemption) to condone the delay in uploading of audit report in Form No. 10B.

 

13. Whether the person who have earned the LTCG and the 6 months period is falling within the March 2020 then whether it can be deferred till 30th June?

As of now, there is a time limit of 6 months for claiming Long Term Capital Gain (LTCG) exemption u/s 54EC. The wording of the press release conveys that the time limit has been extended to 30th June in all such cases. However, in my view, the exemption u/s 54EC is extended only in cases where the 6 months period is expiring on or after 20th March when the Government has announced the preventive measure against COVID 2019. In respect of all the LTCG wherein 6 months has expired till 20th March may not be eligible to take the benefit of 30th June 2020. In short, all the capital gain which has arisen after 20th September will be eligible for capital gain exemption u/s 54EC as a result of recent announcement by FM.
[Readers may note that judiciary have taken a reasonable view while granting capital gain exemption in various exceptional cases. Even if the property is sold just few days prior to 20th September,  then the court may grant the benefit of above extension based on the merits of the case. Taxpayers may invests the amount with this in mind].

14. There is a restriction of Rs. 1.50 Lakh for deposits in the PPF A/c. If the person has not deposited any amount in the PPF Account till 31.03.2020 and if he deposits it in between April to June 2020 then whether he will be able to deposit it again after June 2020 for deduction u/s 80C in the FY 2020-21 (AY 2021-22)?

Yes, there is a restriction of Rs. 1.50 Lakh for deposits in the PPF A/c in one year. If the person has not deposited any amount in the PPF Account till 31.03.2020 and if he deposits it in between April to June 2020 then surely he will be eligible for deduction u/s 80C in the FY 2018-19. However, as per the present PPF rule, such person may not be able to invest again Rs. 1.50 Lakh for the FY 2020-21 as there is an yearly ceiling of Rs. 1.50 for deposit in the PPF Account. To take care of this situation, the Government need to amend the PPF rules to provide that Rs. 3 Lakh in aggregate can be invested for the FY 2019-20 & 2020-21.

  • Whether housing loan interest till 30th June 2020 will be eligible for deduction against income for the FY 2019-20?

 

As already discussed, housing loan interest is eligible for deduction on accrual basis and so only interest accrued till 31st March 2020 will be eligible for deduction.

Though lot of benefit has been reasonably granted by the FM still lot many need to be done for the benefit of the taxpayers. It may be worth here to recall that more than 90% of the Government revenue comes from Taxes from businessmen. Their problem and grievance deserves due consideration. However, it is always ignored for the obvious political reason that they constitutes just 4% of the voting power. They find it relevant to ignored 4% of the 90% revenue generator for the sake of 96%of the non tax-paying population. However, it will be worth to consider the interest of taxpaying population and it will be in the interest of the country to consider the following for the benefit of the taxpayers:

  1. All outstanding bill payment towards electricity of business, local authority taxes, etc should be deferred for a period of at least 6 months. All outstanding bill payments be allowed to be made in subsequent 12 equal monthly installment. Preferably, the payment may be allowed without any interest components.
  2. Interest service & EMI payment is getting adversely affected in the present scenario. The banks are after the recovery as non-payment would make the account as NPA. The banks need to be given concession in considering the account as NPA. The norms need to be relaxed to 6 months as against 3 months under present regime. All interest & EMI which are due between 1st January 2020 to 30th September 2020 be converted to a new term loan A/c to be repayable in next 12 months in equal installment.
  1. All recovery pressure by the tax officials be kept on hold for a period of around 1 years. No coercive measures should be taken by the tax officials or the banks during the period of one year.
  1. An instant OD facility to the extent of around 20% be provided to the borrower to meet the liquidity crunch prevailing in the economy. Similar facility has already been announced by the SBI to its customers.
  1. All EMI be it housing loan, vehicle loan, car loan, etc may be deferred for a period of 6 months without any penal consequences but subject to the capitalisaiton of the interest during the intervening period of 6 months.
  1. Govt. Department like Railways, MSEB etc. normally do not make payments for more than 6 months which ultimately have a cascading on their suppliers who suffer & the chain goes on. Banks normally do not consider debtors of above 90 days for calculation of DP limit. Hence Government department must be instructed to clar the bills within 30 to 45 days.
  2. There are various persons who have invested in the ULIP plan of Insurance Companies wherein investment can be done after the premium is due. Since the share market is also lacking in liquidity, the policy holder may be permitted to invest the amount up to 11 months prior to its due date also. As a result, the policy holder will be able to invest in the market as per his individual perception about the market and the share market can also get the required liquidity. Presently, due to IRDA regulation, insurance companies cannot accept payment prior to 30 days of its due date. The new relaxation of payment in advance may enable ULIP investor to get the better appreciation in their fund value.
  3. An additional deduction up to Rs. 1.50 Lakh for investment in the National Pension Scheme (NPS) for the period from 1st April 2020 to 30th September 2020 may be provided. The senior citizens who cannot be invests in the NPS may be given an option to invest in the equity mutual fund.
  4. The present limit of Rs. 50 Lakh against long term capital gain for investment in the specified bonds issued by NHAI / REC may be enhanced to Rs. 1 Crore. This additional deduction of Rs.50 Lakh may be allowed exclusively for investment in the equity mutual funds.
  1. The buy backs norms may kindly be relaxed so that the coroporate with liquidity can buy back its shares resulting in a better value or price for the other shareholders.
  2. The compliance with the provision of Reverse Charge Mechanism (RCM) be scrapped forever. There is no benefit to the Government Treasury as a result of RCM as the buyer/ service recipient as it is eligible for its set off. It will relieve the business from the unnecessary compliance burden which is not yielding any revenue to the Treasury as well.
  3. The 10% restrictions rule for GST ITC credit under Section 36(4) of the CGST Act need to be removed from the monthly compliance requirements. If required, the same may be imposed at the time of filing annual return only. As a result, there will not be any loss to the Government Treasury and also the businessmen would be having better ease of business.
  4. There are various purchases wherein the GST credit is blocked pursuant to Section 17(5). It is against the very basic concept of “seamless credit” in the GST.  The same need to be abolished and GST paid on all expenses / investment in the course of business be allowed as credit to the buyer.
  1. Till 31stDecember 2020, the GST return payment date may kindly be extended to Quarterly payment and return filing mode.
  2. There is a new TCS provision introduced by recent Union Budget – 2020 in the form of section206C(1H). It now requires every seller having turnover exceeding Rs. 10 Crore in the preceding financial year to collect Tax at Source @ 0.10% if the value or aggregate value of sale to any buyer during the year exceeds Rs. 50 Lakh. This proposal to impose TCS will neither result in widening the tax base nor in deepening the revenue collection as all such businessmen are duly covered by GST registration mechanism wherein bill-wise details is already available with the Government. We strongly appeal that TCS u/s 206(1H) must be scrapped so that industry can focus on innovation & business and not on unnecessary compliances. Business houses may kindly be encouraged to do constructive activities rather than clerical & non revenue generating activities. It will result in better revenue collections, employment & growth.
  1. Industry is already incurring CSR expenditure towards the noble cause & welfare of the society. However, the same is not eligible for deduction as of now. It is requested that the expenditure of CSR may be allowed as deduction. Further, the amount incurred over and above the minimum stipulated sum of 2% be granted a weighted deduction of 150% of such expenditure.
  1. Late fee under section 234E for delay in filing of TDS return of earlier quarter of the current financial year may also be waived off under the prevailing economic scnerio.
  1. Salary and wages payment during the period of lock down may be given an additional weighted deduction of say 150% as the payment during such time is down without any other benefits to the industry.

None of the above is a demand is “free or subsidies” but just a “concessions”. Taxpayers need time for business. Compliances are supplementary and should not be primary activities for India to be the five Trillion economy.

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