FORCE (Fiscal Options & Response to Covid-19 Epidemic), a task force of young IRS officers, hit the headlines this week with its policy paper outlining the recommendations that the CBDT could take to fight with the economic downside due tothe COVID-19 Pandemic.
The CBDT has charge-sheeted the senior IRS officers for their rolein leaking the report on social media instead of sending it to the board first, misguiding the young officers who wrote the report and creating havoc in the already stressed economic conditions in the country as per the news available on media. I think thatCBDT has to take such rigorous action against the IRS officers and disregarded the complete reportsince this highlighted the matter in print media without the permission from CBDT and authority of the top brass.However, except some of the provisions which demand high tax on the superrich community, most of the provisions are related to tax relief/incentives to the general public, employees, MSMEs and different sectors which are under stress in this unprecedented situation.
I am trying to present some of the tax-relief measures which have remained unnoticed under the umbrella of High Tax Rate or Cess to a class of people. The sector-wise analysis of the tax-relief/incentives can be described as follows:
Spending on COVID relief activities
1. Spending on CSR activities should be allowed as business expenditure u/s 37 for FY 2020-21.
2. Include the CM Relief Funds for the purpose of CSR use by companies.
3. A one-time opportunity to the companies to contribute a portion of their unspent CSR funds till FY 2019-20 to PM CARES Fund and utilize a portion of such unspent money for their business purpose.
4. Contributions to PM CARES Fund and CM Relief Funds to be counted as CSR FY 2021-22 as well.
5. Donation to these Funds to be allowed as deduction u/s 80G over next few years instead of just in FY 2020-21.
6. Extension of benefit u/s 80G to Companies paying taxes under the new regime of lower tax rates
7. New Tax Saving Scheme like COVID savings Certificates (like NSC) to mobilize more funds.
8. Additional deduction for investment made in these funds upto Rs.2,50,000 like u/s 80C.
Relief to Employees or an individual assessee during the COVID crisis period.
1. Amount spent on the Covid-19 treatment should be allowed as deduction under section 80DDB.
2. Bonus/allowances given to employees with annual income upto Rs. 10 lakhs to be non-taxable.
3. Increase in cap on overall deduction u/s 80G from 10% to 25% of total Income
4. Individual taxpayers who lost their job should be allowed to defer the tax payment.
5. NPS, KVP withdrawals to be made tax free
6. Increased deduction for payment of interest over purchase of house, automobile etc.
7. Allow set-off of short-term capital loss due to stock market slump from salary
8. ESOP taxation benefits-Startup benefits should be extended to all.
Relief to corporates from genuine hardship in carrying on their business.
1. Presumptive taxation at 6% for all transactions and not just digital transactions.
2. If taxpayer didn’t lay-off employees, there should be 200% weighted deduction on employee expenses for this year
3. Interest on late deposit of TDS as deductible expense during FY 2020-21
4. Allowing interest payment as deduction on a due basis
5. Salaries to the non-managerial employees during the COVID crisis to be treated as CSR.
6. Mark to market losses – allowed as a deduction.
7. Exemptions to the sectors u/s10A (STPI Units) can be extended for another 5 years
8. Increase the allowable cash transaction limit to Rs. 20,000 as earlier.
9. Provision for carry back of net operating losses arising in the current and previous financial year upto five years.
10. Carry forward losses/MAT/AMT credit expiring on March 31, 2021 may be carried forward till March 31, 2022
11. Raising threshold limits for compulsory tax audit to Rs. 10 crores as a onetime measure
12. Increased deduction for provision for bad debts in case of banks u/s 36(1)(viia).
13. Reduced corporate tax rate for corporates that have suffered a reduction in turnover of > 25%.
14. Revising monetary threshold for TDS deduction for all sectors
Relief to the Healthcare Sector which is at the centerstage of helping humanity
1. Complete tax holiday / tax break is proposed for the next 3 years in the healthcare sector.
2. To allow deduction for all capex for manufacturing of PPE, ventilators and face masks.
3. Deduction of 125% of amount paid to any research association for scientific research.
4. Additional Depreciation on machinery bought for manufacturing PPEs, Ventilators, masks etc.
5. Zero tax for Healthcare workers
Specific relief for Work from Home (WFH)
Expenses incurred by companies in enabling WFH for its employees can be allowed as an eligible business expense and weighted deduction of 150% can be considered to promote WFH.
Relief/incentives to assessee for timely compliance and collection of revenue.
1. Tax discounts and rebates in percentage points for timely compliances.
2. New Amnesty scheme for collection of Undisputed demand.
3. TDS deducted for the employees can be deposited by the end of the FY
4. Relief in late filing fee of ITR, TDS returns and late deposit of TDS
5. The time limit for VIVAAD SE VISHWAS scheme should be extended to Dec 31, 2020
6. Option for return filers to pay self -assessment tax till 6 months after filing of return
7. Exploring ‘Zero scrutiny year’ for the current financial year.
8. Suspension of debt recovery, including suspending the garnishing of wages or bank accounts and asset seizures and sales for a limited time period.
9. If taxpayer paid excess advance tax in Q4 FY19-20, it may be carried forward for FY 20-21
10. Relaxing the requirement of depositing 20% to 10% of tax demand for stay appeal before ITAT
Specific relief to NGOs
Social Measures to public at large
1. Minimum income/direct cash transfer scheme
2. Expansion and re-design of MNREGA
However, as mentioned earlier, this report also contains some of the measures for a short span to increase the tax base of the revenue as well which includes to –
1. Raising the highest slab rate to 40% for total income levels above a min. threshold of Rs. 1 cr.
2. Re-introduction of the wealth tax for those with net wealth of Rs. 5 crores
3. Increase the surcharge applicable to the Higher income Foreign Companies having a Branch Office/ Permanent Establishment in India.
4. Additional one-time Cess of 4% on account of COVID Relief (could be called COVID Relief Cess)
5. Reintroduction of the ‘Inheritance Tax’:
6. Introduction of a tax on MNEs on the lines of Base erosion anti-abuse tax (BEAT) of US.
7. Increase in equalization levy by 1%, i.e. from 6% to 7% for ad services, and from 2% to 3% for e-commerce.
8. Encourage the superrich and those willing, to give up at least one tax subsidy/tax deduction/ tax concession for only a year
This report also includes the detailed analysis of each and every sector of the industry whether it is tourism, real state, auto or textile. While analyzing the report, I also found that it suggests:
1. How to utilize the additional money collected through enhanced tax rate, additional cess or other measures for COVID-19 cause.
2. Justification behind every tax-relief measure or incentives to be provided.
3. How to implement these measures and how these will provide benefit to the assesses.
4. Measures to stop the misuse of the above-mentioned tax-reliefs/incentives.
5. Inclusion of a Global case study on MSME sector
6. Detailed analysis of the Tax measures taken in other countries in the corporate sector and personal taxation.
I don’t think that such a detailed analysis in a short span by a wing of highly intellectual people can be left without discussion due to thereason that it was shared in public without the permission of the top authorities. The issue related to the protocol of the department can be discussed separately, and the charge-sheet has already been issued to the respective IRS officers but it should not become a hurdle in immediate discussion of this report by the Finance Ministry on how these relief measures can be implemented to bring the economy out from slowdown and further to fight against the COVID-19 pandemic.