Key Income Tax Relief Measures to Mitigate the Impact of COVID-19

2024-08-02

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At this time when most economic activities have suffered from the lockdown imposed to tackle the Covid-19 pandemic, some flexibility in tax laws were much needed to relief the taxpayers who are still not over the sluggish market conditions. And thankfully, the government of India has announced various economic relief measures, including financial aid and the provision of subsidized or free food and water. While businesses do not have control over tax payouts since the amount is fixed by the government, tax relief has helped significantly in easing the cash flows. This has essentially helped people meet their daily and business needs, meeting their working capital requirements, meeting other contractual commitments, and so on. The relief measures taken by the government can be broadly categorized into the following:

1) Extension of tax-compliant timelines

For many countries, the COVID-19 outbreak happened at a time when income tax returns and payments were due. In India, the government has provided for extension of due dates like filing of original as well as revised income-tax returns for the FY 2018-19, which ended on 31 March 2020, has been pushed to July 31, 2020 (for salaried individuals). Also, The Central Board of Direct Taxes (CBDT) has announced an extension of the deadline for making tax-saving investments for the Financial Year (FY) 2019-20. The deadline has been moved from 30 June to 31 July 2020, in order to provide relief to taxpayers amid the corona-virus pandemic. So, tax-payers now have more time for making investments in tax savings instruments to claim tax relief under various sections of the Income tax Act.

top-income-tax-relaxations-to-counter-COVID-19-impact-graph

2) TDS and TCS rate cuts

The finance minister has announced a reduction of 25% in the rate of tax deducted at source (TDS) for non-salaried payments made to residents in order to enhance liquidity in the hands of taxpayers. Plus, to provide more funds at the disposal of the taxpayers, the rates of Tax Collection at Source (TCS) have also been reduced by 25% of the existing rates. Moreover, to give relief to employers in payment of Provident fund (PF) and to increase the take-home salary for employees, the EPF contribution was initially reduced to 10% each for employers and employees. In an extension, the government also announced that the central government will pay 24% of the monthly EPF obligations into employee accounts below 15,000/ month, working in organizations having up to 100 employees.

3) Issuance of tax payments

The COVID-19 outbreak has had an unexpected impact on the cash-flow situation for many businesses as well as individuals. Such cash flow issues can cause a long-term effect on the functioning of not just one, but several businesses connected to each other. Therefore, to assist taxpayers and easing their cash flow burdens, the Indian Government announced issuance of all pending income-tax refunds of up to INR five hundred thousand immediately. This move will ease the cash flow burden of small businesses. In addition, all pending refunds to charitable trusts and non-corporate businesses including LLP, Co-operatives, proprietorship, and partnership shall be issued immediately.

All these measures are a huge relief to businesses and individual tax-payers as they’ve been imposed to help increase cash flow and offer beneficial rates likely till the end of the current financial year.

TDS Rate Chart for FY 2022-23 (AY 2023-24)

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