July 2021 / India

The Bill will provide relief to micro, small and medium enterprises and help them, ensuring a smoother capital cycle and healthier cash flow. The Rajya Sabha on Thursday passed the Factoring Regulation (Amendment) Bill that seeks to open up factoring business to non-bank lenders and thus address the capital needs of small businesses. The Bill was passed in Lok Sabha on Monday.

• The Factoring Regulation (Amendment) Bill, 2020 was introduced in Lok Sabha on September 14, 2020.  The Bill seeks to amend the Factoring Regulation Act, 2011 to widen the scope of entities which can engage in factoring business.

• Under the Factoring Regulation Act, 2011, factoring business is a business where an entity (referred as factor) acquires the receivables of another entity (referred as assignor) for an amount.   Receivables is the total amount that is owed or yet to be paid by the customers (referred as the debtors) to the assignor for the use of any goods, services or facility.   Factor can be a bank, a registered non-banking financial company or any company registered under the Companies Act.   Note that credit facilities provided by a bank against the security of receivables are not considered as factoring business.

• Change in the definition of receivables: The Act defines receivables as (all or part of or undivided interest in) the monetary sum which is the right of a person under a contract.   This right may be existing, arise in the future, or contingent arising from use of any service, facility or otherwise.   The Bill amends the definition of receivables to mean any money owed by a debtor to the assignor for toll or for the use of any facility or services.

• Change in the definition of assignment: The Act defines assignment to mean transfer (by agreement) of undivided interest of any assignor in any receivable due from the debtor, in favour of the factor.  The Bill amends the definition to add that such a transfer can be in whole or in part (of the undivided interest in the receivable dues).

• Change in the definition of factoring business: The Act defines a factoring business to mean the business of: (i) acquisition of receivables of an assignor by accepting assignment of such receivables, or (ii) financing against the security interests of any receivables through loans or advances. The Bill amends this to define factoring business as acquisition of receivables of an assignor by assignment for a consideration. The acquisition should be for the purpose of collection of the receivables or for financing against such assignment.

• Registration of factors: Under the Act, no company can engage in factoring business without registering with the Reserve Bank of India (RBI).  For a non-banking financial company (NBFC) to engage in a factoring business, its: (i) financial assets in the factoring business, and (ii) income from the factoring business should both be more than 50% (of the gross assets/net income) or more than a threshold as notified by the RBI. The Bill removes this threshold for NBFCs to engage in factoring business.

• Registration of transactions: Under the Act, factors are required to register the details of every transaction of assignment of receivables in their favour. These details should be recorded with the Central Registry setup under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 within a period of 30 days.  If they fail to do so, the company and each officer failing to comply may be punished with a fine of up to five thousand rupees per day till the default continues.  The Bill removes the 30 day time period. It states that the time period, manner of registration, and payment fee for late registration may be specified by the regulations.

• Further, the Bill states that where trade receivables are financed through Trade Receivables Discounting System (TReDS), the details regarding transactions should be filed with the Central Registry by the concerned TReDS, on behalf of the factor. Note that TReDS is an electronic platform for facilitating financing of trade receivables of Micro, Small and Medium Enterprises.

• RBI to make regulations: The Bill empowers RBI to make regulations for: (i) the manner of granting registration certificates to a factor, (ii) the manner of filing of transaction details with the Central Registry for transactions done through the TReDS, and (iii) any other matter as required.

RBI has announced the Digital Payments Index (RBI-DPI) for March 2021 which stands at 270.59.

The Reserve Bank of India had earlier announced the construction of a composite Reserve Bank of India – Digital Payments Index (RBI-DPI) with March 2018 as base to capture the extent of digitisation of payments across the country. The index for March 2021 stands at 270.59 as against 207.84 for March 2020, announced while launching the index on January 1, 2021. The RBI-DPI comprises of 5 broad parameters that enable measurement of deepening and penetration of digital payments in the country over different time periods. These parameters are – (i) Payment Enablers (weight 25%), (ii) Payment Infrastructure – Demand-side factors (10%), (iii) Payment Infrastructure – Supply-side factors (15%), (iv) Payment Performance (45%) and (v) Consumer Centricity (5%). Each of these parameters have sub-parameters which, in turn, consist of various measurable indicators.

Source: ETBFSI

   

The Central Board of Direct Taxes (CBDT) has announced a further extension of due dates under the Vivad Se Vishwas Act, 2020 (the Scheme) and the Income Tax Act, 1961 (the Act), and tax exemptions for certain payments to individuals due to the outbreak of COVID-19.

The key announcements are summarized below.

Extension of due dates under the Scheme

• The last date for payment under the Scheme without any additional amount has been extended further from 30 June 2021 to 31 August 2021.
• For applications under the Scheme with certain additional amounts, the last date for payment is 31 October 2021.

Extension of due dates under the Act

The due dates for the following actions or submission of certificates, statements, returns and other documents have been extended as follows:

• objections to the Dispute Resolution Panel (DRP) and assessing officer under section 144C due on 1 June 2021 or thereafter: extended to 31 August 2021;
• statement of deduction of tax for the last quarter of the financial year (FY) 2020/21: further extended from 30 June 2021 to 15 July 2021;
• certificate of tax deducted at source in Form No. 16: further extended from 15 July 2021 to 31 July 2021;
• statement of income paid or credited by an investment fund to its unit holder in Form No. 64C for FY 2020/21: further extended from 15 July 2021 to 31 July 2021;
• statement of income paid or credited by an investment fund to its unit holder in Form No. 64D for the FY 2020/21: further extended from 30 June 2021 to 15 July 2021;
• application under section 10(23C), section 12AB, section 35(1)(ii), section 35(1)(iia), section 35(1) (iii) and section 80G in Form 10A or Form 10AB: extended from 30 June 2021 to 31 August 2021;
• compliances for claiming any exemption under section 54 to section 54GB where the time limit falls between 1 April 2021 and 29 September 2021 (both days inclusive): extended to 30 September 2021;
• quarterly statement in Form No. 15CC: extended from 15 July 2021 to 31 July 2021;
• equalization levy statement in Form No. 1 for the FY 2020/21: extended from 30 June 2021 to 31 July 2021;
• annual statement to be furnished under section 9A(5) by an eligible investment fund in Form No. 3CEK for FY 2020/21: extended from 29 June 2021 to 31 July 2021;
• uploading of declaration in Form No. 15G/15H for the quarter ending 30 June 2021: extended from 15 July 2021 to 31 August 2021;
• exercise of option to withdraw pending applications filed before the Income Tax Settlement Commission under section 245M(1) in Form No. 34BB: extended from 27 June 2021 to 31 July 2021.
• last date of linkage of Aadhar with the permanent account number (PAN) under section 139AA: further extended from 30 June 2021 to 30 September 2021;
• passing of assessment orders: further extended from 30 June 2021 to 30 September 2021;
• passing of penalty orders: further extended from 30 June 2021 to 30 September 2021; and
• processing of equalization levy returns: further extended from 30 June 2021 to 30 September 2021.

Tax exemptions

The following payments are exempt from income tax:

• amount received by a taxpayer for the treatment of COVID-19 from an employer or from any person during FY 2019/20 and subsequent years; and
• ex-gratia payment received by family members of an employee from the employer of such employee (without limit) or from other persons (limited to INR 1 million in aggregate) on the death of the employee on account of COVID-19 during FY 2019/20 and subsequent years.

The extensions and tax exemptions are available via a press release issued on 25 June 2021 and CBDT Circular No. 12/2021 dated 25 June 2021.