Under COVID-19 shadow, Finance Minister Nirmala Sitharaman announced various tax related measures by the government to extend relief to taxpayers and companies to stand tall against hardships amid COVID-19 lockdown. Under Aatma Nirbhar Bharat Abhiyaan, Prime Minister Narendra Modi has announced a 20 lakh crore package in order to rejuvenate the economy. Finance Minister Sitharaman said that with a mission to build India a self-reliant nation, the central point of this initiative would be on land, law, liquidity, and labor.
Direct Tax Related Amendments- Tax Relief Measures by the government
- The anticipated date for filing income tax returns for the financial year will be extended from 31st July 2020 to 30th November 2020. In the same way, the due date for filing of tax audit form gets extended from 30th September to 31st October in the year 2020. Post lockdown, taxpayers would get enough time to compile their data needed in the process of income tax preparation.
- There will be a reduction in Tax Deduction at Source rates for all non-salaried payment to residents and TCS rate of 25% of the specified rates in the financial year 2020-21. It would help in releasing Rs 50,000 crore liquidity.
- This reduction would impact payments of professional fees, contract fees, commissions, interest, dividends, rent, etc. However, it won’t bring any reduction in taxes applied at source to salaries.
- Under the “Vivad se Vishwas scheme“, the date of payment excluding additional amount will be extended to 31st December, 2020.
- Among other measures, the government has declared that all pending tax refunds of charitable organizations, small business ventures, and professions would get issued in no time.
Tax Relief Measures by the Government- Clarification on TDS, TCS Reduction
- Revenue Secretary Ajay Bhushan Pandey spoke in a press conference that TDS rates got reduced on 23 items like payment to professionals, bank accounts, securities, etc. Along with this, there was a reduction in TCS on 23 items. He added that 25% reductions were made on the rates at which TDS and TCS on various transactions were cut.
- The CBDT has declared that the applicability of revised rates will be from 14th May, 2020, to 31st March, 2021. On 13th March, 2020, Finance Minister Nirmala Sitharaman had affirmed that the TDS/TCS rate reduction would release up to 50,000 crores in the people’s hand.
- As per the CBDT notification, no reduction in the TDS or TCS rate will be available where the requirement would be of collection or deduction of tax at a tremendous rate as a consequence of non-furnishing of Aadhaar/PAN.
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Highlights of CBDT Notification concerning TDS, TCS Cut
- The reduction was in store for the rates of TCS on sale of timber, tendu leaves, coal, iron ore, and forest products.
- There was a reduction in the tax on professional fees from 2% to 1.5%.
- TDS on e-commerce participants also went on being reduced from 1% to 0.75%.
- The CBDT asserted that tax deducted on rent, insurance policy, immovable property acquisition, and dividend payment had been cut by 25%.
- There is a cut in the TDS on the motor vehicle sale whose cost is more than ten lakhs from 1% to 0.75%, earlier. Besides this, there is a reduction in TDS on 23 items.
- Initially, the rent payment by HUF or an individual was 5%; after getting cut, it became 7.5%.
- On life insurance policy payment, the reduced percentage in TDS is from 5% to 3.75%.
- From 10% to 7.5%, TDS on dividend payment by a mutual fund got reduced.
- Under the National Savings Scheme, TDS on payments regarding deposits got reduced from 10% to 7.5%.
- For re-purchase of units by mutual funds, TDS on payments got reduced from 20% to 15%.
EPF Assistance for Businesses and Workers
- Amid the CCOVID-19 crisis, businesses are suffering to a great extent. All that they are expecting from the government side is financial relief and assistance. Observing the situation, the government has decided to come forward and extend support to businesses and workers via EPF[1] contributions for the next three months.
- Announcement of relief measure was made in the April month to fund EPF contributions from the month of March till May. This contribution will be all about a total of 24% of the wages of the employee and the employer. Eligibility for this relief assumes the employees to work with less than 100 workers in an establishment.
- Talking more about this scheme, it got extended till the month of August in 2020, and it will also provide liquidity relief of Rs 2500 crore to more than 72 lakh employees and not less than 3.5 lakh businesses throughout India.
Reduction in EPF Contribution
- The government has made a call for a reduction in both employers as well as an employee contribution to the EPF account of an employee from 12% of the salary of an employee to 10% for the upcoming three months.
- Applicability of this scheme will be only for those employees who are left uncovered under the plan of 24% EPF support.
- More than 6 lakh businesses and more than four crore employees would get relief due to this scheme.
Conclusion
The speech delivered by Finance Minister Nirmala Sitharaman and PM Narendra Modi has emphasized tax related measures by the government and EPF support. Looking at India’s economic predicament during the COVID-19 outbreak, one thing is evident that the government is yet to do a lot more on the economic front in the days to come.
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