Income-tax and other Liquidity Measures for Individuals: COVID-19

Taxation and Other laws (relaxation of certain provisions) Ordinance, 2020

For the AY 2019-20 (pertaining to FY 2018-19), the time for tax filing was expiring on 31 March 2020. An extended period of three months is allowed to file the return up to 30 June 2020. Further, the interest rate for the delay in payment of tax is reduced to 9% p.a. from 12% p.a. However, there is no waiver of the penalty payable for delayed filing of an income tax return. Similarly, taxpayers also get an extended time to file revised returns up to 30 June 2020.

The time allowed for making tax-saving investments for FY 2019-20 was expiring on 31 March 2020. Taxpayers are allowed to make the tax-saving investments for FY 2019-20 in an extended time up to 30 June 2020. The tax-saving investments and payments include mutual fund ELSS, deposits into NSC, PPF, SSY, payment of LIC premium, and so on. Similarly, medical insurance premium, donations, interest on education loan paid until 30 June 2020 will also be eligible for a tax deduction for FY 2019-20

Taxpayers who wish to claim capital gains exemption and in whose case the time limit for making the new investment was expiring on 31 March 2020, can make the investment up to 30 June 2020. The new investment will include purchase or construction of a new house or investment in notified bonds and so on. Such investments are eligible for tax exemption while filing the income tax return for FY 2019-20.

The Government of India has constituted a relief fund for COVID-19 named PM CARES Fund. Donations made to the fund will be eligible for 100% deduction under section 80G. The government had extended the benefit of deduction to FY 2019-20 for donations made from 1 April 2020 to 30 June 2020. However, in case a taxpayer wants to claim the tax deduction for FY 2020-21, the deduction can be claimed in FY 2020-21 instead of FY 2019-20. Further, the deduction is also allowed under the new optional tax regime in FY 2020-21.

The last date for linking of Aadhaar and PAN is extended to 30 June 2020. Earlier, the last date was 31 March 2020.

In case of delay in tax payments made up to 30 June 2020, the taxpayer will not be liable for penalty or prosecution under the income tax law. In case of pending income-tax assessment and matters where a notice had to be issued by 31 March 2020, the time available has been extended up to 30 June 2020.

With a view to providing liquidity to taxpayers, all pending income-tax refunds up to Rs 5 lakh will be released immediately to individuals and business entities.

The new financial year began on 1 April for FY 2020-21. The budget 2020 announced for the financial year allows an individual to opt for the benefit of a new tax regime. The regime taxes at lower tax rates but removes most tax deductions and exemptions for an individual taxpayer. The choice for the regime needs to be exercised at the time of filing of the income-tax return due in July 2021. However, a salaried individual desiring to take benefit of the new regime cannot make a declaration of intention to their employer at the beginning of the financial year in April 2020.

The government has hence allowed the individual intending to opt for the new tax regime to intimate their employer at the beginning of the year. Thus, a taxpayer is saved from higher TDS under the existing tax regime and the difficulty of obtaining a refund of high TDS deducted from their salaries.

Taxpayers below 60 years of age who do not have an annual income exceeding basic exemption limit of Rs 2.5 lakh can furnish a declaration in Form 15G for nil TDS to banks or other institutions paying them income. The declaration needs to be made at the beginning of FY 2020-21 failing which TDS will be deducted by the paying bank or institution.

The government has relaxed the submission of the Form 15G up to 30 June 2020. Also, the form 15G submitted for FY 2019-20 will apply for the first quarter ending 30 June 2020. Similarly, the government has relaxed the submission of Form 15H for senior citizens (60 years and above) whose tax payable is nil. Form 15H submitted for FY 2019-20 will apply for the first quarter ending 30 June 2020.

Individuals who subscribe to various small saving schemes of the government have to make a minimum subscription each year to avoid penalty. The government has announced extended time for the subscription until 30 June 2020 without penalty. Small savings schemes such as Public Provident Fund (PPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY) and so on require a minimum subscription to keep the account running. The account holders of PPF and SSY schemes have to make a minimum deposit of Rs 500 and Rs 250 respectively.

The Reserve Bank of India has announced a three-month deferment of bank loan EMI and payment of interest on credit facilities. The deferment applies to all loans and credit facilities existing as on 1 March 2020. The deferment is optional for the bank customer and is governed by the regulations of each bank. The RBI has also lowered the repo rate lowering the lending rates for banks. Thus, loans will be available at low-interest rates for customers. The RBI has also expanded liquidity available with banks for onward lending to meet emergency fund requirements of customers.

The RBI has also extended the digital banking facilities round the clock to encourage social distancing and minimise handling of cash. The non-cash options for payment such as NEFT, IMPS, UPI and BBPS are made available round- the- clock for fund transfers, paying utility bills and for purchase of goods and services. People can also use BBPS (Bharat Bill Payment System) which facilitates payment of repetitive bills such as electricity, gas, water, telephone, and so on.

Employees can obtain an advance from their EPF balance up to three months’ salary or wages plus dearness allowance, or 75% of the balance standing in their account, whichever is less. The EPF Scheme 1952 provides for the grant of advance to members when a disaster or epidemic has been declared by the government. The advance is allowed in view the declaration of COVID-19 as a pandemic. The advance will help employees meet their financial needs during the lockdown period.