Tax Column

Tax Column

Jayesh Dadia
Chartered Accountant 

I am an individual having interest and capital gains income for the financial year 2019- 2020. I always invest in saving schemes in the month of March to avail deduction under Sections 80 C and 80 G of the Income Tax Act. However, in March this year, due to the virus pandemic and national lockdown, I could not make my payment of LIC premium or deposit in PPF. What is the option available with me?

Don’t panic. You can make the payment up to June 30, 2020. The Ministry of Finance has extended the time limit for various payments which are eligible for deduction under Sections 80 C to 80 G from March 1 to June 30 vide taxation and other laws for relaxation of certain provisions. If you want to avail any exemption of capital gains by way of payment or deposit of any payment under Sections 54 to 54 F of the Income Tax Act, you can do so before June 30, 2020.

I own a private limited company in India. This Indian company has a wholly-owned subsidiary company in Mauritius. The Indian company has made huge business losses in the financial year 2019-2020. The Indian company has received dividend from its foreign subsidiary during the same financial year. I believe that dividend received would be set off against the current year business loss of the Indian company and therefore no tax would be payable on foreign dividend. Is this correct?

No, your views are not correct. There is a special tax on foreign dividend received from foreign subsidiary at the rate of 15 per cent under Section 115 BBD of the Income Tax Act. The tax is payable irrespective of the business loss if it is more than the foreign dividend income. The Indian company is therefore liable to pay tax at the rate of 15 per cent on the amount of foreign dividend for the financial year 2019-2020.

I am an individual having residential property in the city where I stay during weekdays. I also have one small farmhouse where I spend weekends and holidays. Do I have to pay notional income on any one house as I understand that only one house is exempted?

From the financial year 2019-2020, an individual is entitled for exemption in respect of two residential houses. As such you do not have to pay any notional income for the second house.

I have seen many advertisements related to the ‘Vivad se Vishwas’ scheme in the print media. Could you please explain what it is all about? Who is entitled and how does one avail of its benefits? My private limited company has various disputes with the Income Tax Department which are pending before various appellate authorities. Would we be eligible for the scheme?

The ‘Vivad se Vishwas’ scheme was introduced to make way for dispute resolution with respect to pending income tax litigation. The main object of this scheme is to reduce pending Income Tax litigation, generate revenue for the government and provide peace of mind to taxpayers. Thus, the scheme, which is in the nature of amnesty and settlement, is applicable only to Income Tax litigations. Since you own a private limited company with taxation litigation pending before appellate authorities, you can avail the benefits of this scheme. Under this scheme, any Income Tax litigation pending before CIT(A), Tribunal, High Court and Supreme Court can be settled both by the assessee and the Income Tax Department.

As per the scheme, if pending litigation involves levy of tax, interest and penalty, the assessee need to pay only the tax amount. Interest and penalty would be waived. If litigation involves only penalty, then the assessee has to pay only 25 per cent of the penalty amount.

In cases where the assessee has paid part or full amount of the disputed demand then the same can be adjusted against the final demand determined under the scheme and if payment is made in excess of demand, then the assessee can get refund also. The due date of availing the scheme is September 30, 2020. Your company has to file Form No. 1 online with the assessing officer. It needs to be filled up properly so that it would be easy for the assessing officer to approve it and allow you to make final payments of taxes or interest or penalty, if any.

The final tax demand needs to be paid within 15 days from the date of approval. On payment, a certificate will be issued stating that the dispute has been settled and nothing is pending for that particular litigation. On the basis of this certificate, the assessee will enjoy immunity from penalty and prosecution. If you feel that you do not have a fair chance of winning in appeal, then you must avail of this scheme which has already commenced. The scheme is an excellent opportunity for everyone to settle their pending litigations.

Is donation to the PM CARES Fund eligible for 100% deduction under Section 80 G of the Income Tax Act? Could you explain the main features of the fund and how it works and what is the ceiling of donation and deduction?

The Prime Minister’s Citizens Assistance and Relief in Emergency Situation Fund (PM CARES Fund) has been set up by the central government on March 28, 2020 following the virus pandemic in India. The fund will be used for combating the corona virus outbreak and similar pandemic like situations in the future. Donations to PM CARES Fund would qualify for Section 80 G benefits for 100 per cent exemption under the Income Tax Act. Further, there is no limit on the amount of donation. For example, you can donate your entire income of the year and get appropriate deduction under the Income Tax Act. Donations will also qualify to be counted as CSR expenditure under the Companies Act, 2013. The fund can also receive foreign donations. Donations can be made online by availing all the approved digital payment systems.

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