Covid-19 Impact On Taxation, Relaxations By Government And Some Measures Which Need To Be Taken!

The outbreak of COVID-19 across the globe has been unprecedented, with major economies announcing regulatory relaxations amidst lockdowns. Following the suit, Finance Minister (FM), Ms. Nirmala Sitharaman announced certain relief measures on 24 March 2020 relating to Taxation, Corporate Affairs, Insolvency, and Bankruptcy Code (IBC), Fisheries, Financial Services, and Commerce Sector.

The taxpayers have most of their deadlines expiring at the end of the financial year i.e., 31 March 2020.Considering the significant impact, COVID-19 is having on businesses, the FM has proposed the following:

  • The CBDT explained that necessary modifications in the return forms are being made to allow taxpayers to avail the benefits of their investments/transactions made from April to June 2020. After incorporating necessary changes, the return filing utility will be made available by May 31, to avail benefits for FY 2019-20, it further said.
  • While the due dates for payment of taxes remain unchanged, the interest cost @ reduced rate of 0.75% per month/ part of the month may be charged on Delay in respect of following payments made between 20 March 2020 to 30 June 2020 including:

1. Self-assessment tax

2. Regular tax

3. Taxes withheld or collected at source

4. Equalization levy

5. Securities Transaction Tax and

6. Commodities Transaction Tax

7. However, the late fee/penalty on such delayed payments have been waived off.

  • The first cut-off date for payment of taxes without any additional interest cost has been extended from 31 March to 30 June 2020.
  • Extension of PAN-Aadhar linking deadline till 30 June 2020.


Financial Services Measures

Three months’ relaxation for:

  • No charges on cash withdrawal from other bank’s ATM,
  • Waiver of minimum balance fee;
  • Reduced bank charges for digital trade transactions by all trade finance consumers.

(Latest Amendments yet to be issued)

Insolvency and Bankruptcy Code 2016 (IBC)

  • Minimum amount of default required to initiate insolvency and liquidation on corporate debtors raised from INR 1 lakh to INR 1 crore, effective immediately, in order to prevent admission of MSMEs defaulting due to economic conditions in lieu of COVID-19.
  • Proposed Suspension of new initiations of Corporate Insolvency Resolution Process under Sections 7, 9 and 10 of IBC for 6 months, contingent upon scenario beyond 30 April 2020 as a safeguard companies from defaults attributable to financial downturn pursuant to the COVID-19 pandemic.

The above relief measures announced by the government are unprecedented and welcomed by all the taxpayers. But to discuss over some issues and recommendations which should be worked upon for, lets first look at some case studies.

Case Studies:

  • Considering some of the Big Entrepreneur Businesses, one among those Uber revealed there Profit & Loss statement mentioning the loss of $2.9 billion in the first quarter as its overseas investments were hammered by the coronavirus pandemic, but the company is looking to its growing food delivery business and aggressive cost-cutting to ease the pain.
  • Major companies in India such as Larsen & Taubro, Bharat Forge, Grasim Industries, Ultratech Cement, Aditya Birla Group, Tata Motors have temporarily suspended or significantly reduced operations. Young startups have been impacted as funding has fallen. Fast-moving consumer goods companies in the country have significantly reduced operations and are focusing on essentials.

Recommendations which has become provided:

Some 50 officers of the Indian Revenue Service (IRS) recommended raising the highest tax rate to 40% for people with annual income above 10 million rupees ($131,130) or a wealth tax for those with net worth of 50 million or more in a report sent to the Central Board of Direct Taxes (CBDT) and shared on Twitter on Saturday.

Late on Sunday on Twitter, the Income Tax Department, governed by the CBDT, said the report did not reflect the official views of the CBDT and the Finance Ministry. It said an inquiry was being launched into why the report was shared with the public.

However summing up, Finance Ministry sources said that neither IRS Association nor any group of officers mentioned in report were ever asked by the government to give any report on the subject. It was not part of their duty to prepare such a report and taking personal views to the media constituted an act of indiscipline, the sources said. The report, dated April 23, said that “In times like these, the so called ‘super rich’ have a higher obligation towards ensuring the larger public good”.

Other Measures taken:

  • Finance Ministry suggested a surcharge for foreign companies with a permanent establishment in India. The revenue generated by the proposals should be used for specific projects identified by the government and aimed at having a decisive impact on reviving the economy, the report added.
  • Making the case for increased taxes, the report said the government would need to support the underprivileged as well as small and medium enterprises. Along with other measures, it suggested a One-time COVID relief tax of 4% for individuals with taxable income of more than 1 million rupees.
  • On 18 April 2020, the Government of India passed an order that would protect Indian companies from FDI during the pandemic. All countries sharing a land border with India would now face scrutiny from the Ministry of Commerce and Industry before any FDIs.


But some suggestive measures which can be reviewed and taken as after the calling of Anti crisis due to COVID-19, to mitigate the negative effects of this pandemic, Poland Government has set a New law covering


PIT and CIT taxpayers who are actively involved in combating the epidemic may benefit from that special tax relief:

1. One-off Depreciation Allowance: possibility of applying a one-off depreciation allowance with respect to fixed assets acquired in 2020 for the purposes of the production of goods related to combating Covid-19;

2. Qualified R&D Expenditures: possibility of including eligible research and development expenditures made in 2020 with the aim of developing products necessary to combat Covid-19 in the calculation of income tax prepayments;

3. 200% of Donations made between 1 January 2020 and 30 April 2020 is deductible;

4. 150% of Donations made in May 2020 is deductible;

5. 100% of Donations made between 1 June 2020 and 30 September 2020 is deductible.

Our Finance Ministry can as well review the policy of other countries in this pandemic which can be of great help. These are some of the suggestions which can be looked to strengthen the businessperson position which will ultimately leave a great positive impact on economy.


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April 2021