Highlights of Taxation & Other Laws (Relaxation & Amendment) Act, 2020

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Highlights of Taxation & Other Laws (Relaxation & Amendment) Act, 2020

The Background:

The Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 was introduced in Lok  Sabha on 18/09/2020 to replace the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance,  2020 as was introduced in March, 2020 which provided relaxation due Covid-19 pandemic. It was further amended on June 24th by providing certain more reliefs. It is passed by Lok sabha on 19/09/2020.

An overview of the Amendment:

It was expected that the provision related to section 20C(1G) & 206C(1H) relating to TCS on sale of goods, foreign remittance will be relaxed while making ordinance into Act. However, this has not been done. The said TCS provisions will be applicable from 1st October 2020.

However, the Act now passed contains the power to provide for number of changes, more particularly with regard to faceless assessment, charitable trust, etc  which are summarized hereunder:

Faceless Assessment  Scheme:
 It has been done by adding a few new Sections i.e., Sections 144B, 157A, 264A, 264B and also amending various existing sections like Sections 92CA(8), 253(8). It is provided that all functions like assessments, rectification, appeal filing, transfer pricing, appeal, reassessment, DRP, will be done in a faceless manner. The Act has empowers the central government to frame the faceless assessment scheme. It has added following sections.

  1. Section  130 to provide for Faceless jurisdiction of income-taxauthorities.
  2. Section 135A to provide for Faceless collection of information
  3. Section  142B to provide for Faceless inquiry orValuation.
  4. Sub-section (8) to Section 92CA to provide for Reference toTPO.
  5. Sub-section (14B) in Section 144C to provide for Reference toDRP
  6. Section 151A to provide for Faceless assessment of income escapingassessment
  7. Section 157A to provide for Faceless rectification, amendments and issuance of notice orintimation
  8. Section 231 to provide for Faceless collection and recovery oftax.
  9. Section 264A to provide for Faceless revision of orders
  10. Section 264B to provide for Faceless effect of orders
  11. Section 293D to provide for Faceless approval orregistration
  12. Section 253(8) to provide for Appeal to ITAT
  13. Section 279(4) to provide for Prosecution and Compounding ofOffenses
  14. The Act inserts new sub-section 3D to Section 143 providing that provisions of Section  143(3A) and (3B) shall not apply to the assessment made u/s. 143(3) & 144 on or after the 1st day of April, 2021.
  15. The Act inserted new Section 144B to administer the faceless assessment scheme notified on13th August 2020. The new section details the faceless assessment process through National Faceless Assessment Centre (NeAC) and Regional Faceless Assessment Centre (ReAC) as notified by CBDT vide Notificaito No. 60 & 61.
  16. The Act provides for the procedure for faceless assessment in transfer pricing cases where reference is made to DRP as per Clauses xxvii toxxxi. It provides that where the eligible assessee raises objections with the DRP, the National Faceless Assessment Centre  shall upon receipt of the directions issued by the DRP u/s.144C(5) forward such directions to the concerned assessment unit. Thereafter, the assessment unit shall in conformity of the directions issued by the DRP u/s.144C(5), prepare a draft assessment order in accordance with Section 144C(13) and send a copy of such order to the National Faceless Assessment Centre. National Faceless Assessment Centre shall on receipt of the draft assessment order as discussed above shall finalize the assessment within the time allowed Section 144C(13) and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment
  17. The Act now proposes to set up National Faceless Assessment Centre, Regional Faceless Assessment Centre and other units (Assessment Unit, Technical Unit, Verification Unit and Review Unit) underSection 144B(3). It provides that the propose units (Assessment Unit, Technical Unit, Verification Unit and Review Unit) shall have the following authorities:

(a) Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, as  the case may be;

(b) Deputy Commissioner or Deputy Director or Assistant Commissioner or Assistant Director, or Income-tax Officer, as the case may be;

(c) such other income-tax authority, ministerial staff, executive or consultant, as considered necessary by the Board.

  1. The Act also provides for the new mode of communication. It has proposed to introduce section 144B (7) which enumerates that any notice/order or any other communication shall be by way of
    a) Placing an authenticated copy thereof in the assessee’s registered account;or
    b) Sending an authenticated copy thereof to the registered email address of the assessee or his authorised representative; or
    c) uploading an authenticated copy on the assessee’s Mobile App and followed by a real time alert;

 

Apart from above amendment primarily with regard to faceless assessment, the Act proposes various other amendments also in the Income-tax Act as under:

  1. It proposes to amend the Direct Tax Vivad se Viswas Act, 2020 to extend the date for payment without additional amount to 31st December, 2020.
  2.  The Act empowers the Government to notify certain dates relating to uploading of declaration,  making of payment, etc in the Direct Tax Vivad se Viswas Act, 2020.
  3. New Act proposes to clarify regarding capping of surcharge at  15% on dividend income of theFPIs.
  4. This Act now amended Section 35 – Expenditure on Scientific Research. It provides for relaxation in respect of scientific research companies referred in section 35(1)(iia) of the Act that where the payment has been made to  such  companies, deduction should be allowed even where approval granted to them is subsequently withdrawn. I was earlier proposed to be effective from 1.6.2020 & now it has been made applicable from1.4.2021. Further, addition of the 5th and 6th proviso will now be effective from 1.4.2021 as against 1.6.2020 proposed earlier. It was requiring research associations, university colleges, scientific research companies and other institutions to make intimation in the prescribed manner within 3 months of such a provision coming into effect and that the notification will remain valid for a period of 5 Assessment Year commencing on/after 1 April 2022. Related amendment related to the requirement to deliver a statement to the income-tax authorities in the prescribed form and manner & furnish a certificate to the donor for such research associations, university colleges, scientific research companies and other institution is also now made to be effective from 1.4.2021 as against 1.6.2020 proposed earlier in the FA-2020 & ordinance thereafter.
  5. An amendment is proposed in section 35AC related to expenditure on eligible projects or schemes. Power of cancellation of the approval to specified association or institution / eligible project or scheme was granted to Principal Chief Commissioner of Income Tax (Exemption) or the Chief Commissioner of Income Tax (Exemption) as against National Committee w.e.f. 1 November 2020.
  6. One of the major relaxations by this Act is for charitable trust & institutions. The new date for fresh registration/provisional registration u/s 12AB shall be effective from 1.4.2021 as against 01.06.2020 proposed earlier. It means that the earlier system of registration will continue in the FY 2020-21. Similarly, earlier Section 80G(viii) stipulated the requirements of preparing  and filing of donations received by it in the prescribed form. This new requirements will also be effective from 1.4.2021 [as against1.6.2020]
  7. Section 115AD provides for Tax on income of Foreign Institutional Investors (FII) from securities or capital gains arising from their transfer. The rate income tax on income in respect of securities w.e.f. 1 April 2020 will be as follows: o 20% in case of FII; and 10% in case of specified fund. In case of specified fund, it has now been clarified that the provision will apply only to the extent of income that is attributable to units held by non-resident (not being a permanent establishment of a non-resident in India) calculated in the prescribed manner.
  8. The Act now proposes to introduce Section 197B and Section  206C(10A) so as to provide for reduction of TDS/TCS rates by 25% w.e.f 14th May 2020. Now, the TDS/TCS rate will be 75% of the normal rate from 14/05/2020 to 31/03/2020.
  9. The Act further proposes to remove Section 271K which provided for penalty for failure to furnish statements, etc. with effect from 1stJune 2020 and has introduced new Section 271J in replacement.

Highlights of Taxation & Other Laws (Relaxation & Amendment) Act, 2020

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