Major income tax compliance reliefs announced by the government in view of the pandemic
New Delhi: Due to the resurgence of COVID-19, all sectors were grappling with a slew of unpredicted challenges. Furthermore, on June 6, 2021, a number of technological flaws were uncovered, making it impossible for taxpayers to complete a number of compliances. As a result of the recognised and reported concerns, and in order to make things simpler for taxpayers, the government has proposed two relief measures: extending compliance timelines and providing people different tax exemptions.
All possible timelines have been extended by the government repeatedly in order to ease the burden of compliance. The approaching timelines for filing tax returns for all categories of taxpayers now stand extended and the revised timelines for the same to be pondered are;
1. Taxpayers who are not required to get their books of accounts audited are now required to file their tax returns on or before December 31, 2021.
2. Taxpayers who are required to get books of accounts audited and are not having any international or specified domestic transactions can now file their returns up to February 15, 2022.
3. Taxpayers having any international or specified domestic transaction i.e., who are required to submit a report u/s 92E (transfer pricing) needs to make tax return compliance by February 28, 2022.
4. The due date of submission of the tax audit report u/s 44AB for AY 2021-22 is January 15, 2022. (for category 2 taxpayers stated above).
5. The due date of furnishing a report from an accountant u/s 92E (Transfer Pricing Audit Report) is January 31, 2022. (for category 3 taxpayers stated above).
However, the extended timelines for filing tax returns will attract interest u/s 234A @ 1% p.m., if the tax liability exceeds INR 1 lakh and return is filed as per the extended timelines and not as per originally prescribed timelines under the Income tax Act.
In addition to relaxed timelines of compliance as discussed above, key tax exemptions worth noting while filing tax returns are chalked out below:
1. The Government vide press release dated June 25, 2021 has made a thoughtful decision of providing income-tax exemption on financial help received by employees from their employer for COVID-19 treatment in FY 2019-20 as well as in any subsequent years.
2. Financial aid received by family members of the deceased person due to covid in FY 2019-20 and subsequent years,to cope up with their financial challenges, is made tax free by Government subject to below limit:
If such financial assistance is received from the employer of the deceased person, then ex-gratia payment is fully tax-free to the family member; if any other person makes such an ex-gratia payment, then the exemption is limited to INR 10 lakhs.
3. Capital gains earned by taxpayers are exempted from tax provided investments in a certain manner are made within the time prescribed u/s 54 to 54GB of the Act. The Government has extended these timelines which were falling between April 01, 2021 to September 29, 2021 for making an investment, acquisition, deposit, payment, purchase, construction or such other actions upto September 30, 2021.
4. The dispute resolution scheme namely “Vivaad se Vishwas” was launched by the Government on January 31, 2020 with the intention to reduce prolonged pending litigations. This is done by providing immediate disposal of matter by making payment of tax on disputed issues. The scheme also provides for a complete waiver of interest and penalty, if such tax payment is made upto March 31, 2020. Further, tax with an additional 10% cost was required to be paid upto June 30, 2020. Due to the onset of Covid-19, the intended timelines were difficult to be achieved and thus the government with an intention to allow taxpayers to gain maximum benefit from the scheme and allow taxpayers sufficient time to make tax payments as per the scheme without burden of any additional cost, has generously extended these timelines on several occasions.
Currently, deadlines for making payment under the scheme (without additional amount) stands extended to August 31, 2021 and that for making payment with an additional cost of 10%to October 31, 2021.
Other reliefs granted include extension for the mandatory linking of PAN card and Aadhaar card by all the Taxpayers which will otherwise attract a penalty of INR 1,000/- by three months i.e., upto September 30, 2021.
Apar from the tax relief measures announced, the ministry of corporate affairs (MCA) took a significant step in March 2020 by clarifying that spending on COVID-19 would be considered an eligible Corporate Social Responsibility (CSR) activity for corporate entities and that the coronavirus outbreak would be treated as a notified disaster. Further in January 2021, the MCA has allowed corporates to use their CSR funds for carrying out awareness campaigns/programs or public outreach campaigns on Covid and in April 2021, they clarified that setting up of makeshift hospitals and temporary Covid-care facilities is an eligible CSR activity.
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