As the situation in view of COVID-19 is evolving, the Government of India has been announcing quite a few relaxations with respect to various income tax related provisions and compliances. In furtherance to the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (please see our ERGO dated 03 April 2020), some of the key relief measures provided for income taxes include:
Ø Relaxation on issuance of certificate for deduction and collection of tax at Nil or lower rate for FY 2020-21 (vide order dated 31 March 2020 and subsequent clarification dated 09 April 2020 made by Central Board of Direct Taxes (CBDT)):
o Where the taxpayer holds a certificate for deduction and collection of tax at Nil or lower rate (Certificate) for financial year (FY) 2019-20 and has not made an application for FY 2020-21 or the application made is pending disposal, the Certificate issued for FY 2019-20 would stand valid for the period mentioned therein and from 1 April 2020 to 30 June 2020 or till the date of disposal of application for FY 2020-21, whichever is earlier. The monetary threshold mentioned in the Certificate for FY 2019-20 shall apply afresh for the period from 1 April 2020 to 30 June 2020.
o Taxpayer who does not have a Certificate for FY 2019-20 but has made an application for FY 2020-21 which is pending disposal would need to deduct tax at source at the rate of 10% (including surcharge and cess) from any payment made to a non-resident having a permanent establishment in India, up to 30 June 2020 or until the disposal of their application, whichever is earlier.
o Taxpayer who do not have a Certificate for FY 2019-20 or where the taxpayer wants the applicable tax rate to be revised downwards, can make an application for FY 2020-21 as per the modified procedure through email.
Ø Extending validity of Form 15G/15H declarations to 30 June 2020 (vide order dated 03 April 2020 passed by CBDT): Where the taxpayer is unable to file the declaration in Form 15G/15H to banks or other institutions for FY 2020-21 for receiving the interest income without any deduction of tax at source, the validity of Form 15G/15H submitted by the taxpayer for FY 2019-20 would be extended for interest income received till 30 June 2020.
Ø Issue of pending income-tax refunds (vide press note dated 08 April 2020 issued by Ministry of Finance): Ministry of finance has directed issuance of all pending income tax refunds up to INR 5 Lakhs immediately.
Ø Employees entitled to claim section 80G deductions for donations to PM CARES FUND (vide clarification dated 09 April 2020 issued by CBDT): Instances where donation to PM CARES FUND (Fund) has been made by employee through his/her employer in the form of a consolidated payment, pursuant to which no certificate is issued by the Fund to such employee, he/she will be eligible to claim deduction of such donations under Section 80G of the Income Tax Act 1961 on the basis of Form 16 issued by employer in this regard.
The additional measures would ease compliance burden on taxpayers and help in managing the cash flows. The mechanism of making applications electronically seeks to ensure that the applications are made smoothly, and appropriate Certificates are issued. With a requirement to deduct tax at source at 10%, the cash flow impact for foreign companies having a permanent establishment including branch office or project office, in India, would need to be evaluated.
- Vinita Krishnan (Director), Rahul Jain (Senior Associate) and Ujjval Gangwal (Associate)
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