How Tax Calculations Have Changed During COVID-19

The COVID-19 pandemic has led to a set of unfortunate outbreaks of the Indian economy. Economic activities had come to a standstill due to the nation-wide lockdown imposed by the government. The impact prompted the government to change tax calculations to provide relief to the taxpayers.

The finance minister, Nirmala Sitharaman, introduced economic relief measures. It includes financial aids, provision of subsidized/free food, debt repayment deferrals, etc. The beneficial rates of the relief measures are going to be available for the rest of the current fiscal year.

Alongside, the income tax department has also notified changes in tax calculations and the release of pending refunds to noncorporate taxpayers. The finance act received presidential assent on 27th March – 2020 for the FY 2020-2021 (i.e., 1^st April 2020 – 31^st March 2021).

The government altogether aims at increasing the cask flow and fast-track the economic revival in the country. In this article, we have coupled some of the vital changes in Income tax calculations and relief measures.

Changes in Income Tax Calculations Amid COVID-19

The current Income Tax Act (ITA) includes various exemptions and deductions for individuals paying taxes. Tax bill laws are simplified with the newly imposed personal tax regime from 1^st April 2020.

To avail of the simplified regime, taxpayers must file GST returns within the specified due dates. Here, we have listed some of the deductions and exemptions that are not applicable to those who opt for the new income tax regime.

• Deductions on investments or payments under the VIA of Income Tax Act (ITA). For instance, life insurance or Mediclaim premium, health insurance, housing loan repayment, education fees, worker contributions to EPF, etc.
• Other deductions such as standard deductions, family pension deduction, and profession tax.
• Exemptions on House Rent Allowance (HRA) and Leave Travel Allowance (LTA).
• Other tax exemptions such as food vouchers, beverages, vouchers, etc.
• No deductions on loan interest paid on housing loans for a self-occupied property.

Taxpayers can choose if or if not to file returns under the new regime. Several senior citizens opt for the old tax regime as it is more beneficial for them. However, it does not apply to individuals with business or professional sources of taxable income.

COVID-19 Income Tax Calculations Relief Measures

The government of India has been striving to counter COVID-19. The Income Tax Council has taken a collective approach to adopt tax calculation measures. The procedural framework of filing Income tax returns/GST returns have been simplified for the taxpayers.

It includes various measures, such as the extension of statutory deadlines to 30^th June 2020 and GST returns and e-invoicing to 1^st October 2020. Find the specific tax calculation relief measures below.

Reductions on TDS/TCS Rates

• A 25 percent reduction in current source deductible tax rates for specified non-salary payments made to residents.
• The tax collection rate from the source for a given income has also been reduced by 25%.
• Paying transactions such as contract, interest, commission, professional fees, dividends, rent, and brokerage will be eligible for reduced rates from taxes payable. It is applicable until the end of the tax year.
• According to government estimations, the newly amended TDS and TCS rates will release 50 billion rupees in liquidity.

Revised Rates on TDS

The government has notified specific revisions on tax withholding’s rates of India. The revised dates apply between 15^th May 2020 to 31^st March 2021:

• Taxes payable on mutual fund dividend payment, dividends, brokerage, interest on securities, interest under Section 194a, commission, and rental of real property have been reduced to 7.5% from the current 10%.
• TDS on real estate purchase payments and e-commerce participants have dropped to 0.75% compared to the current rate of 1%.
• The TDS rate of payments made to subcontractors and contractors by an undivided Hindu family or other corporate entities has been reduced to 0.75% and 1.5%.

Extended Due Dates

• The government has extended all the due dates for income tax returns for the current fiscal year from 31^st July and 31^st October to 30^th
• The Income Tax Department has also extended the due dates for tax audits from 30^th September to 31^st
• The 30^th September assessment exclusion date has been extended to 31^st Likewise, the assessments excluded on 31^st March 2021, are extended until the end of September 2021.
• The payment period for payments under “Vivaad se Vishwas Scheme,” a tax dispute settlement mechanism, has been extended, with no additional amount until 31^st

Conclusion

In a nutshell, it is a difficult time. It is a situation that no one has experienced before, so everyone is trying to learn as they go. We can only get through this by handling it together.

The government has also notified the immediate issue of pending income tax refunds to charitable funds and non-commercial companies—for instance, Limited Liability Corporations, Sole Liability Corporations, and Cooperative Partnerships.

Likewise, the government of India has taken several necessary steps to provide support to trade and businesses. The changes in income tax calculations and relief measures are focused on easing the pain and helping the Indian community of individuals and companies to sustain amid COVID-19.

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