March 2020 / India

March 23 2020

The Direct Tax Vivad se Vishwas Act, 2020 – key provisions

On 1 February 2020, the Finance Minister announced the dispute settlement scheme ("Vivad se Vishwas" Scheme) in Parliament. Following the announcement, the Direct Tax Vivad se Vishwas Bill, 2020 (the Bill) was introduced. The Bill was subsequently revised to widen the scope and reduce the compliance burden for taxpayers, and was passed by the Lok Sabha (Lower House of Parliament) on 4 March 2020 and by the Rajya Sabha (Upper House of Parliament) on 13 March 2020. The revised Bill received the President's assent on 17 March 2020. Some of the key provisions of the Act are given below.

  • The scope of the Act has been expanded to cover the following:
    • orders for which the time limit for filing an appeal had not expired as at 31 January 2020;
    • cases pending before the Dispute Resolution Panel (DRP) as at 31 January 2020, including cases where the DRP had issued directions on or before 31 January 2020, but no order had been passed;
    • a revision petition pending before the Commissioner of Income-tax (CIT) under section 264 of the Income-tax Act, 1961 on 31 January 2020; and
    • search cases where the disputed demand is less than INR 50 million, computed year-wise.
  • Payment terms under the Scheme:
    • Appeals filed by the assessee
    • Appeals filed by the Department or where the Department has lost an issue earlier
Cases Where payment is made up to 31 March 2020 Where payment is made after 31 March 2020
search cases involving dispute relating to tax, interest, penalty, etc. payment of 125% of disputed tax waiver of interest and penalty payment of 135% of disputed tax waiver of interest and penalty
other than search cases where dispute involves tax, interest, penalty, etc. payment of 100% of disputed tax waiver of interest and penalty payment of 110% of disputed tax waiver of interest and penalty
where dispute relates to only interest, penalty or levy payment of 25% of disputed interest, penalty or fee waiver of balance 75% payment of 30% of disputed interest, penalty or fee waiver of balance 70%
Cases Where payment is made up to 31 March 2020 Where payment is made after 31 March 2020
search cases involving dispute relating to tax, interest, penalty, etc. payment of 62.5% of disputed tax waiver of interest and penalty payment of 67.5% of disputed tax waiver of interest and penalty
other than search cases where dispute involves tax, interest, penalty, etc. payment of 50% of disputed tax waiver of interest and penalty payment of 55% of disputed tax waiver of interest and penalty
where dispute relates to only interest, penalty or levy payment of 12.5% of disputed interest, penalty or fee waiver of balance 87.5% payment of 15% of disputed interest, penalty or fee waiver of balance 85%
  • Provision of refund of excess tax paid by the taxpayer before filing declaration over the amount payable under the Scheme.
  • The revised Scheme will not set any precedence for any other proceedings and does not allow filing of declaration issue-wise.
  • Proof of withdrawal of appeal and/or writ would be intimation of payment before the issuance of final certificate for settling dispute and not the declaration. Appeals by the Department also to be withdrawn before the issuance of final certificate for settling dispute.
  • Mechanism for carry forward and/or set off of losses: In case where the returned loss is reduced as a result of additions (this would apply for reduction in Minimum Alternate Tax (MAT) credit also.), the taxpayer would have the following options:
    • pay the notional tax on the amount by which the loss has been reduced and carry forward the claimed loss without reduction; or
    • accept the reduced carry forward of loss without making any payment.
  • Settling of disputes regarding transfer pricing adjustment would not have any effect on the secondary adjustment.
  • Cases outside the ambit of the Scheme:
    • Search cases where disputed tax is more than INR 50 million;
    • prosecution cases;
    • cases involving undisclosed foreign income and/or assets;
    • proceedings based on information received from other countries;
    • cases covered under certain laws such as Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, the Prohibition of Benami Property Transactions Act, 1988;
    • proceedings under the provisions of the Indian Penal Code; and
    • cases relating to persons notified under section 3 of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992.
March 25 2020

COVID-19 pandemic: emergency tax measures announced

On 24 March 2020, the Finance Minister addressed the media on the various statutory and regulatory compliance issues amid a complete shutdown of almost the entire country to control the spread of COVID-19. The key announcements are summarized below.

Income tax

The due date for filing the income tax return for FY 2018/19 extended from 31 March 2020 to 30 June 2020.

  • Aadhar – PAN linking date to be extended from 31 March 2020 to 30 June 2020.
  • Vivad Se Vishwas Scheme extended from 31 March 2020 to 30 June 2020 with no additional 10% payment if such payment is made by 30 June 2020.
  • No extension of the date for deposit of tax deducted at source (TDS). However, interest on delayed payments reduced from 18% per annum to 9% per annum.
  • Reduction of the interest rate from 12% to 9% on delayed payments of advance tax, self-assessment tax, regular tax, TDS, tax collected at source (TCS), securities transaction tax (STT), and commodities transaction tax (CTT) made between 20 March 2020 and 30 June 2020.
  • No fee / penalty to be charged for delay relating to the period from 31 March 2020 to 30 June 2020.
  • Due dates for the issue of notices, intimation, approval order, sanction order, filing of appeals, furnishing returns, statements, applications, reports, any other document including investment in savings or investment on roll-over benefits under the following acts where time limit is expiring between 20 March 2020 to 29 June 2020 to be extended to 30 June 2020:
    • Income-tax Act;
    • Wealth Tax Act;
    • Prohibition of Benami Property Transaction Act;
    • Black Money Act;
    • STT Law;
    • CTT Law;
    • Equalization Levy; and
    • Vivad Se Vishwas Scheme.

Goods and services tax (GST)

  • Last date for filing GST returns for March, April and May 2020 extended to 30 June 2020 for those having aggregate annual turnover less than INR 50 million. No interest, late fees or penalty to be charged.
  • No late fees or penalties for companies with turnover of INR 50 million or more if complied before 30 June 2020. However, reduced interest at 9% (from 18%) will be charged.
  • Date for opting for composition scheme and filing of composition returns for FY 2019/20 extended until the last week of June 2020.
  • Due date for filing GST annual returns for FY 2018/19 extended from 31 March 2020 to the last week of June 2020.
  • Payment date under Sabka Vishwas Scheme extended to 30 June 2020 with no interest.
  • Due dates for issue of notices, intimation, approval order, sanction order, filing of appeals, furnishing returns, statements, applications, reports, and any other document where time limit under the GST laws is expiring between 20 March 2020 to 29 June 2020 to be extended to 30 June 2020.

Customs

  • Customs clearance to operate 24/7 as an essential service until 30 June 2020.
  • Due dates for issue of notices, intimation, approval order, sanction order, filing of appeals, furnishing returns, statements, applications, reports, and any other document where time limit under the Customs and Allied Laws is expiring between 20 March 2020 to 29 June 2020 to be extended to 30 June 2020.
March 26 2020

Union Budget 2020: Finance Bill 2020 passed by Lok Sabha – key amendments

On 23 March 2020, the Lok Sabha (Lower House of Parliament) passed the Finance Bill 2020 (the Bill) with amendments. The key amendments are summarized below.

Income tax

  • The following provisions relate to residence status:
    • the concession for the period of stay in India for an Indian citizen and a person of Indian origin will be reduced from 182 days to 120 days; and
    • an Indian citizen will be deemed to be resident in India only if his total income, other than income from foreign sources, exceeded INR 1.5 million in the previous year.
  • The tax deducted at source (TDS) rate on payment of dividend to a foreign company, non-resident Indian or other non-resident person will be 20% with effect from 1 October 2020. However, this is subject to the provisions included in the relevant tax treaties that India has concluded with other countries.
  • Dividend received on or after 1 April 2020 will not be taxable as income of the shareholder if tax has already been paid on such dividend under section 115-O or section 115BBDA of the Income-tax Act, 1961, (amendment to section 10(34) of the Income-tax Act, 1961).
  • An amendment will be made to section 194N of the Income-tax Act, 1961 with effect from 1 July 2020 as follows:
    • tax on cash withdrawals of over INR 2 million will be 2% if the tax return has not been filed for 3 years; and
    • tax on cash withdrawals of over INR 10 million will be 5% if the tax return has not been filed for 3 years.
  • No tax is levied on income arising from e-commerce supply on which equalization levy is chargeable (amendment to section 10(50) of the Income-tax Act, 1961).
  • The tax collected at source (TCS) on Liberalized Remittance Scheme (LRS) will be relaxed as follows:
    • no tax will be levied in respect of export or import of goods;
    • tax will be levied at 5% only on the amount in excess of INR 700,000, except where a remittance has been made for overseas tour program package;
    • a lower rate of 0.5% applies where the amount is being remitted out of India as a loan, obtained from a banking company, banking institution, financial institutions notified under section 80E of the Income-tax Act, 1961 for the purposes of education; and
    • applicability of the amendments made to TCS provisions will be deferred from 1 April 2020 to 1 October 2020.
  • Royalties in respect of the exhibition of cinematographic films will be subject to TDS at a rate of 2% under section 194J of the Income-tax Act, 1961.
  • No TDS will be levied, under section 194K of the Income-tax Act, 1961 from capital gains arising on the transfer of units of mutual funds.
  • The scope of section 80M of the Income-tax Act, 1961 will be expanded to include dividend received from a foreign company and business trust. Companies opting for the new tax regime will be eligible for deduction under the said section from assessment year 2021-22.
  • To ensure that section 10(23) institutions do not avail dual benefit (exemption of income as well as application of income), corpus donations by a fund or trust or institutions to another such fund will not be considered application of income.
  • The concessional tax regime can be opted by taxpayers having income from a profession as well, similar to the option available to taxpayers earning income from business (amendment to section 115BAC of the Income-tax Act, 1961).
  • No exemption will be available to a unit holder of business trust in respect of a dividend received from a special purpose vehicle (SPV) if such SPV has not exercised the option of section 115BAA of the Income-tax Act, 1961 (amendment to section 115BAA of the Income-tax Act, 1961).
  • The tax exemption for sovereign wealth funds is extended to pension funds with regard to infrastructure investment (amendment to section 10(23FE) of the Income-tax Act, 1961).

Transfer pricing

'Safe harbour' for the purposes of section 92CB of the Income-tax Act, 1961 will cover the transfer price or income, deemed to accrue or arise under section 9(1)(i), declared by the assessee.

Equalization levy

  • The equalization levy of 2% is chargeable on non-resident e-commerce supply, except in the following cases:
    • for e-commerce operators with a permanent establishment in India;
    • for online advertisement service covered under section 165 of the Finance Act, 2016; and
    • if the consideration is less than the threshold limit of INR 20 million (aggregate and not buyer specific).

The Finance Bill will be enacted into law when it is passed by the Rajya Sabha (Upper House of Parliament) and assent is given by the President.