Updates and Analysis of Covid 19 situation relating to Direct Tax
• The Income Tax Return Forms for Financial Year 2019-20 will be revised by the Central Board of Direct Taxes, in order to incorporate the impact of the extra time granted for making investments and to grant the roll over benefit for claiming the benefit in certain cases of Capital Gains during the extended period of 01.04.2020 to 30.06.2020.
• The Income Tax Department has recently released refund to around 10.2 lac assesses amounting to Rs.4000 crore. However in certain cases , the department has issued an email to certain tax payers who were selected under the risk management process of the department whereby the tax payers are required to provide the confirmation to the Department by logging in to the Income Tax Portal within 30 days of receipt of such email .
• The income tax department said these reminder emails are for the benefit of taxpayers as it seeks them to confirm their outstanding demand, their bank accounts and reconciliation of defect/mismatch prior to issue of refund. • The date for commencement of operation for the SEZ units for claiming deduction under deduction 10AA of the IT Act has also extended to 30.06.2020 for the units which received necessary approval by 31.03.2020.
• Indian entities of many multinationals, which receive a fixed margin or a mark-up from their parents, could face transfer-pricing issues due to Covid-19, since many multinationals are renegotiating and slashing their fixed mark-ups to the Indian Counterparts, which may seem an anomaly and become a point of question since the tax authorities might not agree with the markdown.
• Managers of foreign portfolio investments and private equity funds based outside India had moved to India during the Covid-19 pandemic and with the lockdown extended to May 3 2020, the period of stay of these fund managers would exceed 30 days.
• As per the Income Tax Act, a fund is taxable in the jurisdiction where the manager or the decision maker is based for more than 30 days. Further, the risk of a permanent establishment being created in a place where decisions are taken or a decision-maker is located also persists and as such the local jurisdiction has the right to tax the global income of the company or fund.
CA Jaya Krishna Kapoor,Senior Executive, British Council