“Whether Financial Year has been changed to June 2020 or merely Date is extended till June 2020?”

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Confusion of 31st March 2020 vs 30th June: Frequently Asked Question (FAQ)

CA Naresh Jakhotia

There are lots of confusions as to 31st March vs. 30th June 2020 extension by the announcement of Finance Minister Smt. Nirmala Sitharam.

Here is a FAQ clarifying some of the doubts:

  1. Whether the financial year is changed to June 2020 closing?

  2.  No, the financial year closure is not extended. Only the date of compliance which were required by 31stMarch 2020 either by the taxpayers or by the tax authorities has been deferred till 30thJune 2020.

ii. 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.

iii. The fake news about change in the financial year is getting circulated and it has created the chaos amongst the taxpayers. The present announcement by FM is not resulting in the extension of the financial year.

  1. Whether belated returns or revised return of FY 2018-19 can be filed now till 30.06.2020?

Yes, all taxpayers who have not filed the return of income of FY 2018-19 can file or revise 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 or revising the return which is reduced to 1 years earlier.

  1. Whether deduction u/s 80C  can be claimed by making investment in PPF/LIC etc till 30.06.2020?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.

 

  • Maximum of Rs. 1.50 Lakh only can be deposited in the PPF A/c. If the person has not deposited any amount till 31.03.2020 & if he wish to deposits it 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.

  1. Whether the person who has incurred loss in the month of April or May will be eligible for setting off while filing the income tax return for the FY 2019-20?It may be noted that only the date of certain compliance has been extended to 30th June 2020. The closure of books of accounts will be on 31st March 2020 only. The loss incurred in the month of April or May or June will not be eligible for set off against income of the FY 2019-20 wherein income till 31st March 2020 will only be considered.
  2. Whether the PPF / NPS Account opened after 31ST March 2020 but before 30th June 2020 will be eligible for deduction under chapter VI-A?Yes, all investment, even in account opened before March 2020 but before June 2020 will be eligible for deduction u/s 80C. Rather, its an opportunity for the taxpayers who have not invested in NPS to invest it immediately after the lockdown is over to claim an addiotnal deduction of Rs. 50,000/- u/s 80CCD(1B) which is in addition to deduction of Rs. 1.50 Lakh u/s 80C.
  1. Whether trust would be eligible for expenditure incurred after 31st March 2020 till 30th June 2020 as “application of income” u/s 11?It is a very interesting issue. Unless and until the suitable clarification is incorporated by the CBDT, expenditure incurred after 31st March 2020 till 30th June 2020 may not qualify as “application of income” u/s 11.
  1. Whether income earned in between 1st April 2020 to 30th June 2020 will be taxable in the FY 2019-20?No. Not at all. Only income earned in between 1st April 2020 to 30th June 2020 will be taxable in the FY 2019-20. The income of the FY 2019-20 (i.e., till 31st March 2020) will be taxable for the FY 2019-20. Only few
  1. 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 30thJune?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.

 

  1. 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 30thJune?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].
  2. 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 1stApril 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/

Relief by Finance Minister by extending due date of compliance from 31st March to 30th June 2020

There are lot many reliefs and concession has been granted to the businessmen & taxpayers of the country.  However, there are lot 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. Let us know the exact nature of announcements by the recent announcements.

The Union Finance & Corporate Affairs Minister Smt. Niramla Sitharaman announced several important relief measures taken by the Government of India in view of COVID-19 outbreak, especially on statutory and regulatory compliance matters related to several sectors.

Relief package include relief with respect to compliances in the areas of

  1. Income Tax
  2. GST
  3. Customs & Central Excise
  4. Corporate Affairs
  5. Insolvency & Bankruptcy Code (IBC)
  6. Fisheries
  7. Banking Sector and
  8. Commerce.

Here is a compilation of the exact announcement done by the Government on various front

  1. Income Tax
  2. The due date of filing income tax returns for (FY 18-19) from 31st March, 2020  to  30th June, 2020. It may be noted that the date of financial year is not extended. The year will be required to be closed on 31st March only and not 30th June.
  3. The last date for linking of Aadhaar with PAN was 31st March. Non linking was liable for penalty of Rs. 10,000/-. The date of linking is now extended from 31st March, 2020 to 30th June, 2020.
  4. Vivad se Vishwas  scheme which was offering relief from interest and penalty proceeding in respect of all pending appeals is also relaxed slightly. Now, no additional 10% amount, if payment made by June 30, 2020. It may be noted that the filing date of application for opting this scheme was 31st March only. The same has also been relaxed now. An applciaiton for opting this scheme can now be filed by 30th June.
  5. The Due dates for  issue  of all notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains   under Income Tax Act,  Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act,  STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas  law  where the time limit is expiring between 20th March 2020  to 29th June 2020 shall be extended to 30th June 2020.
  6. Importantly, there is no relaxation from payment of tax. However, concessional rate of interest is provided for such delayed payment. For delayed payments of advanced tax, self-assessment tax,  regular tax, TDS, TCS, equalization levy,  STT, CTT  made between 20th March 2020  and  30th June 2020,  reduced interest rate  at 9%   instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged  for this period.  No late fee/penalty shall be charged for delay relating to this period.

It may be noted that there is no amendment and notification ahs been issued for such announcements. It is expected that necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be issued in due course.

GST/Indirect Tax:

 

The painful compliances from GST & other Indirect Tax has been put on hold till 30th June. More importantly,

  1. Those having aggregate annual turnover less than Rs. 5 Crore, Last date can file GSTR-3B due in March, April and May 2020  by the last week of  June, 2020. No interest, late fee, and penalty to be charged. Interestingly, in such cases, even interest is waived off.
  2. Others with aggregate annual turnover exceeding Rs. 5 Crore, can file returns due in March, April and May 2020 by last week of June 2020  but the same would attract reduced rate of interest @9 % per annum from  15 days after due date (current interest rate is  18 % per annum). No late fee and penalty to be charged, if complied before till 30th June 2020.
  3. Date for opting for composition scheme is extended till the last week of   June, 2020.  Further, the last date for making payments for the quarter ending 31st March, 2020 and filing of return for 2019-20 by the composition dealers  will be extended  till the last week of June, 2020.
  4. GST Annual Return Date also Extended:
    Date for filing GST annual returns of FY 18-19, which is due on 31st March, 2020 is extended till the last week of  June 2020.
  5. The Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws where the time limit is expiring between 20th March 2020  to 29th June 2020 shall be extended to 30th June 2020.
  6. More importantly, Payment date for dues under the Sabka Vishwas Scheme shall be extended to 30th June, 2020. All the more important, no interest for this period shall be charged if paid by 30th June, 2020.

 

Customs

  1. 24X7 Custom clearance till end of 30th June, 2020
  2. Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied Laws where the time limit is expiring between 20th March 2020  to 29th June 2020 shall be extended to 30th June 2020.

Here also, no amendment and notification ahs been issued for such announcements. It is expected that necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be done by the GST Council in its next meeting.

Financial Services

On the financial front, following relaxations for 3 months have been provided:

  1. Debit cardholders to withdraw cash for free from any other banks’ ATM for 3 months
  2. Waiver of minimum balance fee charging by the bank during this period.
  3. Reduced bank charges for digital trade transactions for all trade finance consumers.

 

Corporate Affairs:

 Few important changes have been carried out in the compliance of Company Law. The same are as under:

  1. No additional fees shall be charged for late filing during a moratorium period from 1st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date. It will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’;
  2. The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Companies Act (120 days), 2013, shall be extended by a period of 60 days till next two quarters i.e., till 30th September. It means that the companies can approve its annual accounts after 30th September which is the due date of filing income tax return.
  3. The new CARO – 2020 was made applicable earlier from FY 2019-20 which requires enormous reporting by the auditor. Now, Applicability of Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of from 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the year 2019-20. The biggest relief by this extension is to the auditor who  may continue to report under earlier CARO format.
  4. Independent directors are also given a relaxation. As per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the year 2019-20, if the IDs of a company have not been able to hold even one meeting, the same shall not be viewed as a violation.
  5. Requirement to create a Deposit reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020.
  6. Requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April 2020, may be done so before 30th June 2020.
  7. Newly incorporated companies are required to file a declaration for Commencement of Business within 6 months of incorporation. Now, an additional time of 6 more months shall be allowed for seeking commencement of business certificate.
  8. Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Companies Act, shall not be treated as a violation.
  9. The triggering of insolvency proceedings against MSMEs is also intended to be controlled due to the emerging financial distress faced by most companies. In view of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to Rs 1 crore (from the existing threshold of Rs 1 lakh).
    If the current situation continues beyond 30th of April 2020, we may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.

Here also, no final notification has been issued by MCA. It is expected that detailed notifications/circulars in this regard shall be issued by the Ministry of Corporate Affairs separately.

 

Department of Fisheries:

Few important reliefs has been granted by the Fisheries Department, as under:

  1. All Sanitary Permits (SIPs) for import of SPF Shrimp Broodstock and other Agriculture inputs expiring between 01.03.2020 to 15.04.2020 extended by 3 months
  2. Delay up to 1 month in arrival of consignments to be condoned.
  3. Rebooking of quarantine cubicles for cancelled consignments in Aquatic Quarantine Facility (AQF) Chennai without additional booking charges.
  4. The verification of documents and grant of NOC for Quarantine would be relaxed from 7 days to 3 days

Department of Commerce

Department of Commerce has extended the timelines for various compliance and procedures which will be given by way of detailed notifications to be issued by the Ministry of Commerce.

Conclusions:

Though all the relief has been given appropriately, it is more likely to create the painful compliances immediately after the situation is normalized. It will add to another set of compliances and the business would be forced with the pending compliance burden. In all probability, it looks that the due date of filing income tax return as well due date of audit may also be extended by around 2 months time.

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