Tax deadlines, penalties you needn’t worry about

You heard finance minister Nirmala Sitharaman’s announcement on 24 March that tax-related deadlines have been extended from 31 March to 30 June. So even as the new financial year (FY) 2020-21 begins, you need not worry about some of the paperwork you may have left for the last minute. But as you wait out the covid-19 lockdown at home, it’s a good opportunity to take care of unfinished tasks, instead of leaving them for later in these uncertain times, when a new day can bring new challenges of various kinds.

According to the announcement, all tax-related deadlines falling between 20 March and 29 June have now been extended till 30 June. There are some other relaxations the FM has offered.

We break down the FM’s announcement for you so that you can make a checklist of the things you need to do before 30 June.

ITR deadlines

Belated income tax returns (ITR): According to the Income-tax Act, 1961, the due date for filing ITR for any FY, typically, is 31 July of the relevant assessment year (AY). However, if someone fails to file her ITR by the due date, the government gives them time to file a belated return till 31 March of the same AY. The deadline for filing belated returns for FY19 or AY20 was 31 March, which has now been extended till 30 June.

However, filing belated ITR attracts a penalty. An ITR filed after the original due date (31 July) till 31 December attracts a flat penalty of 5,000, whereas one filed between 1 January and 31 March attracts a late fee of 10,000. However, if your income is below 5 lakh, the penalty is a flat 1,000 for all timelines till 31 March, and in this case till 30 June.

Earlier, whether you needed to pay a penalty depended on the decision of the assessing officer, but since the introduction of Section 274F in Finance Act, 2017, you have to pay the penalty upfront.

Revised returns: The facility of revising returns is extended to give a window to those who make a mistake while filing returns such as giving incorrect information or failing to report certain income or claim deductions.

Those who intend to revise their ITR for FY19 can do so till 30 June, provided the assessment of return has not been done yet. Once you file a return, the income-tax department examines the return of income to confirm its correctness. The process of examining the return of income by the department is called “assessment”. Once this assessment is done, you receive an intimation from the department.

Tax-saving investments

To avail deductions: Though it is advisable to do your tax-saving investments well in advance, a lot of people end up leaving it for the end of the FY.

If you have failed to make investments in tax-savings instruments which qualify for tax deductions under Section 80C, such as equity-linked savings scheme (ELSS), Public Provident Fund (PPF), National Savings Certificate (NSC) and so on, you can still make investments till 30 June and still claim deduction for FY20.

Even investments in the National Pension System under Section 80CCD and health insurance under Section 80D can be made by 30 June to avail deduction benefit for FY20.

Reinvestment of capital gains: If you have made any long-term capital gains (LTCG), the time limit for roll-over benefit or reinvestment of LTCG to save tax has been extended from 20 March-29 June 2020 to 30 June. For instance, you are allowed to claim tax exemption on LTCG arising from the transfer of capital assets like real estate and gold if you reinvest the gains in capital gains bonds specified under Section 54EC of the Income-tax Act. However, you need to reinvest the gains in these bonds within six months of the asset’s transfer. With the extension in the deadline, the six-month period extends till 30 June, so you can still invest in these bonds to claim the roll-over benefit.

So, if you make investments in any tax-saving instrument between 1 April and 30 June, you will perhaps get the option of claiming deduction for either FY19 or FY 20. “There is no clarification as such from the tax department on this as of now. But maybe taxpayers will have to make a declaration on whether the investment is for FY20 or FY21,” said Shailesh Kumar, director, Nangia Andersen Consulting Pvt. Ltd, a chartered accountancy firm.

Lower penal interest

On self-assessment tax: Self-assessment tax is estimated at the time of filing returns. You are required to pay a penalty on any tax dues pending at your end as assessed by you while filing your belated returns. The interest rate is charged on the dues for each month of delay in payment. Usually, taxpayers settle due taxes just before finally filing their ITR.

The FM has relaxed the rate of interest on due taxes from 12% earlier to 9% per annum until you file the returns.

On advance tax: According to Section 208 of the Income-tax Act, every individual assessee whose estimated tax liability for an FY exceeds 10,000 needs to pay advance tax. Typically, a salaried individual need not worry about paying advance tax as employers deduct it on their behalf. But professionals and freelancers have to estimate their incomes and pay advance tax accordingly.

The fourth and last installment date to clear your advance tax liability expired on 15 March. While you can still pay your due taxes after this deadline, you have to pay penal interest, which has been reduced too. “The date of the last installment of advance tax payment has not been extended, but the interest for delayed deposit of advance tax due on 15 March will now be computed at 9% instead of 12% for the period between 20 March to 30 June 2020,” said Sonu Iyer, national leader, People Advisory Services, EY India.

Pan-Aadhaar linking

Even the deadline for linking your Permanent Account Number (PAN) with Aadhaar has been extended till 30 June. Remember that if you don’t link your PAN before the due date, it will be considered inoperative. If the tax department finds you using an inoperative PAN, it may impose a penalty of 10,000 on you, depending on the purpose you are using it for.

Other deadlines

Vivad Se Vishwas: In Budget 2020, the government announced the Vivid Se Vishwas scheme to resolve direct tax disputes. Under this, all those who have tax appeals or petitions pending on or before 31 January 2020 could get a complete waiver of interest or penalties if they paid the disputed amount on or before 31 March. “The deadline for settling tax disputes under the scheme has been extended to 30 June, and 10% additional charges which were supposed to be levied from 31 March have been removed up to 30 June 2020,” said Amit Maheshwari, partner, Ashok Maheshwary and Associates LLP, a chartered accountancy firm.

Other schemes: The deadline for any compliance that a taxpayer needs to fulfil under the Prohibition of Benami Property Transaction Act, Black Money Act, Equalization Levy law and so on between 20 March and 29 June has been extended till 30 June. Various other statutory compliances related to the Companies Act, 2013 and goods and services tax have been extended till 30 June as well.

Many of these tasks such as paying due taxes and investing in tax-saving instruments can be completed online. So make use of the lockdown and do them now.

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