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COVID-19 tax-saving extension: Here are the key aspects

COVID-19 has a huge impact on businesses and individuals alike. All folks are locked down reception . During such a time, finishing compliance on time is probably going to be challenging for many folks . to permit taxpayers some leeway towards saving on save taxes for FY 2019-20, the govt has extended the deadline for creating investments to June 30, 2020. Taxpayers have tons of queries about how all of this may work. Here is what you want to realize the new deadlines.

There is no change within the fiscal year:

First, it is vital to know that there's no change within the fiscal year. FY 2019-20 has ended on March 31, 2020. However, certain tax-saving investments are often made by taxpayers between April 1, 2020 and June 30, 2020. Such investments shall be eligible for inclusion within the tax calculation for FY 2019-20.

The intention of the govt is to permit you to form investments to your PPF and NSC accounts, five-year fixed deposits etc. for the previous FY 2019-20. the govt has released a Taxation and Other Laws Ordinance, 2020 to offer effect to the present move. An ordinance means this doesn't need to be approved by the Parliament immediately and may be a law automatically. As per the ordinance, for all the deductions from Section 80C to Section 80GGC, wherever a maturity for creating a payment or investment has not been met, it can now be made by June 30, 2020. this is often in effect a blanket extension for all due dates where a payment is required to be made for claiming a deduction. Therefore NPS deposits (Section 80CCD(1B) and Section 80C), expenses on medical treatment of differently-abled dependent 80DD), and everything else that falls between the sections 80C to 80GGC are now eligible for being claimed within the earlier financial years, where payment/investment is formed in Q1 2020.

This extension has also been allowed for claiming capital gains exemption under Section 54G to Section 54GB. Therefore any investment, deposit, payment, acquisition, purchase, construction or any similar action, which was required to be made for the aim of claiming exemption as per the above sections, can now be made until June 30, 2020. for instance , investment in capital gains bonds must be made within six months of the date of sale of the asset, which also now stands extended if it wasn't met. Purchase or construction of a house property or deposit during a capital gains account scheme are often made by the maturity of filing return anyways.

Operational aspects:

Several taxpayers tend to require decisions associated with their tax saving within the previous couple of days of March. it's during this point that enormous investments are reported in ELSS of mutual funds; several make a beeline to form PPF, SSY deposits at banks, many insurance policies are bought. While the govt has extended the timeline, it's going to pose certain practical challenges. Banks may need to align systems to simply accept deposits for a previous fiscal year . for instance , within the FY 2020-21, you'll have two entries reflecting in your PPF checking account , one concerning investment for FY 2019-20 and therefore the other for FY 2020-21. Usually PPF banking systems don't accept cheques or deposits, once the utmost limit of Rs 1.5 lakh is breached. Banks also will need to make suitable changes to make sure that NPS deposits are accepted for subsequent FY.

While section 80D could also be allowed, it's impossible to buy a health policy now to hide the amount which has already elapsed. Now a policy payment made will only cover the upcoming period. And, therefore, payments made towards a insurance policy between April 1, 2020 and June 3o, 2020 shall be eligible for claiming deduction for FY 2020-21. Such a policy premium must only be claimed once between the 2 financial years. Therefore, a change in ITR forms for filing income earned in FY 2019-20 could also be made to reflect investments wiped out Q1 2020. Similarly, tons of taxpayers could also be making contributions to the PM National Relief Fund or PM Cares Fund (new name). Section 80G allows 100 per cent deduction for the quantity contributed to the present Fund. All contributions made between April 1, 2020 and June 30, 2020 are going to be eligible for deduction for less than one FY under section 80G, as already specified under section 80G(5A).

Also note that while taxpayers could also be ready to make such investments within the coming quarter, employers aren't getting to make any adjustments to incorporate your tax saving for FY 2019-20. they're bound by law to deduct TDS as needed , for the FY 2019-20, supported information they need already collected from you. Therefore, for any investments made later, you'll need to claim a tax refund by filing your tax return.
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