COVID-19 has resulted in many challenges for taxpayers when meeting important tax compliance obligations. To assist taxpayers who are suffering financial difficulties due to COVID-19, the government has announced a variety of tax benefits and compliance reliefs for those who meet the eligibility requirements.
To make things easier for them, the government implemented several relief measures, including extending deadlines for compliance, interest income exemption and providing tax exemptions in some instances.
Some of the most noteworthy announcements that you should know are mentioned in the following sections.
Did you know?
The government recently announced five significant tax reliefs for individuals due to COVID-19.
The Five Major Tax Cuts
With the new COVID-19 law, the government has announced direct tax measures to make life easier for individual taxpayers. The tax relief includes reductions in existing rates and reduced rates of tax collected at source on specified receipts. It also extends the deadline for investment in residential properties and 'Vivaad se Viswas' payments without interest to the end of the financial year.
The new law also offers exemptions on the tax on ex-gratia from an employer. The government has extended this tax break for individuals who received this financial aid from their employers. The amount is not limited, but the exemption is worth ₹50,000 crores. You will also receive more cash in your bank account from income from interest during this time. The tax deductions you can get for these benefits are much greater than you imagined.
The tax-free interest package will also benefit individuals who have undergone treatment for COVID-19. The government will be releasing ₹50,000 crores from the budget in FY 2019-20. These reliefs will benefit the individual taxpayers who have already undergone treatment for this disease. Moreover, the relief package will also help members' families who have experienced treatment.
Here are the five significant Tax reliefs for all individuals owing to COVID-19.
Also Read: GST on Medicines and Pharma – Applicability, Rates & Exemptions
1. Employees Are Exempt From Paying Income Taxes
A considerable number of companies have provided financial aid to their employees by covering the costs of COVID-19 therapy. The IT department has granted an exemption from income tax on the amount received in exchange for the money collected from the employer in support of the COVID-19 treatment. There is no tax on the number of money employees get from their employers or other individuals for COVID-19 treatment.
Many taxpayers have received financial aid from their employers and well-wishers to assist them with the costs of treatment for COVID-19. As a result, it has been agreed to exempt income tax for the amount received by a taxpayer for medical treatment of COVID-19 for the fiscal year 2019-20 and subsequent years.
In addition, taxpayers who have received financial assistance from other individuals may be entitled to a tax reduction. Treatment expenses spent in fiscal years 2019-20 and after are eligible for this type of tax relief.
2. Family Members of the Taxpayer Are Exempt From Paying Taxes
As a result of the pandemic epidemic, many people died. There is no tax on an ex-gratia payment received by a family member of a deceased employee as a result of the death of the employee. Additionally, till the total amount of financial aid received from family and friends exceeds ₹10 lakhs, there would be no tax on that assistance.
“With the introduction of this legislation, the CBDT has provided a much-needed and welcome reprieve. When taxpayers were hospitalised or otherwise exposed to severe medical treatment, they confronted a number of concerns that were both genuine and dangerous. COVID therapy has also proven to be prohibitively expensive for a substantial percentage of individuals. The exemption for money received for medical treatment will provide some relief, and we anticipate that a considerable number of taxpayers will benefit from this exemption.”
According to Amit Maheshwari, Tax Partner at AKM Global, a tax and consulting firm, “the exemption of ex-gratia funds received on death is also a welcome step that will provide some solace to the aggrieved families.”
Those who work for and care for such taxpayers have extended financial help to their family members to aid them in coping with the unexpected death of a wage earner.
As a result, to reduce the tax burden on the family, the income tax department provides exemptions on quantities received by the family from various sources. The government may propose legislative changes to the tax exemptions listed above to make them permanent.
3. The Integration of Aadhaar and PAN
The government has extended the deadline for integrating Aadhaar to PAN by three months. One can now link their Aadhaar number to their PAN number until the 30th of September in 2021. According to the government, linking Aadhaar to a PAN to file for TDS on savings bank interest is necessary.
According to the government, the deadline for integrating PAN and Aadhaar has been extended from 30 June to 30 September. Tarun Kumar, a chartered accountant in Delhi, noted that the government had extended the deadline for linking PAN with Aadhaar from 30th June 2021 to 30th September 2021. “Many people were encountering technical difficulties while integrating their PAN with Aadhaar at the new Income-tax e-filing portal. As a result, the government has further extended the deadline to 30th September 2021 from 30th June 2021,” he continued.
4. Eligible for a Capital Gains Tax Exemption
To be eligible for an exemption under Sections 54 to 54GB, the taxpayer must complete all required obligations within a given time before the deadline. The deadline for filing tax returns to avoid paying capital gains tax has been extended.
As a result, the tax compliance deadline for actions taken between 1 April 2021 and 29 September 2021 results in tax savings under Sections 54 to 54GB of the Income Tax Act. It includes making an investment, deposit, payment, acquisition, purchase, construction, or any other action to save tax that has been extended until 30 September 2021.
For example, the acquisition or construction of real estate, the investment in capital gains bonds, the deposit of money, or any other activity required to qualify for an exemption under the applicable requirements.
“For example, if you were required to invest in 54EC bonds to avoid capital gains on a residential property and the deadline for doing so was June 30, you now have until September 30 to execute the transaction,” Kumar explained.
The deadlines for submissions between April 1, 2021, and September 29, 2021, have been extended to September 30, 2021.
Also Read: Understanding Income Tax Allowances and Allowed Deductions for Salaried Individuals
5. Payment Is Made Using the Vivad Se Vishwas Tak System
The deadline for making payments (without additional amount) under the Vivad Se Vishwas Tak plan has been extended until 31 August. The deadline for making payments (with an additional amount) has been extended until 31 October. Previously, the deadline had been set for June 30th, 2021.
The following are some of the significant deadlines for the fiscal year 2020-21 that have been extended:
- Taxpayers who have filed income tax returns but whose accounts do not require further examination must submit their returns by September 30, 2021.
- The deadline for taxpayers subject to a tax audit to file their income tax returns is November 30, 2021.
- The deadline for filing a late and revised return is January 31, 2022.
- The conclusion of the tax audit report is anticipated for October 31, 2021.
- The CBDT's decision to extend the deadlines will bring relief to taxpayers who are now enduring partial lockdowns in several states.
Conclusion
If you're wondering whether or not COVID-19 will result in income tax reduction for individuals, you're in luck since it will. Earlier this year, the government established several exclusions and extended dates connected to COVID-19 compliance. You may now apply for a tax exemption on your treatment expenditures for fiscal years 2019-20 and beyond, and the deadlines will be extended according to the plan.
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