Tax & Regulatory Compliance Relaxations Announced to Ease Burden on Business

As we near the end of second week of the three-week lockdown imposed by the Government of India to battle the COVID-19 pandemic, the sentiment amongst the people is mixed. The Hon’ble Prime Minister reassured the nation that the government will do all it can to bring the nation back to economic normality and stability. The World Bank has also aided the government by giving $1 billion emergency financing to strengthen India’s ability to respond to COVID-19.

We have summarised below key tax and regulatory compliance relaxations which may be relevant to your India operations:


TAX

  • All the relaxations announced in our last week’s update under tax have now been given effect to by the President of India through an Ordinance;
  • Clarification has been provided that there is no extension of the Financial Year (‘FY’). Any such news is fake news;
  • The Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (‘PM CARES Fund’) was set up on March 28, 2020 to encourage donations to help fight the outbreak. Every person giving donation to this fund will be eligible to claim 100% tax deduction. The deduction for donations made upto June 30, 2020 will be available against FY 2019-20 income without the taxpayer losing eligibility to opt for the new tax regime for FY 2020-21. In addition, the said donations can be claimed by the taxpayer either in FY 2019-20 or FY 2020-21. However, in case a taxpayer (including corporate) opts to claim the deduction in FY 2020-21, it would not be able to opt for the concessional tax rates in FY 2020-21;
  • Below are tax reliefs given to lower withholding tax (‘WHT’) cases:
    • For FY 2020-21 lower/nil WHT applications that have been filed but are pending for disposal and where WHT certificate was issued for FY 2019-20, the aforesaid certificate will stand extended and valid till June 30, 2020 or date of disposal of the WHT application for FY 2020-21, whichever is earlier;
    • In cases where WHT certificate was issued for FY 2019-20, the aforesaid certificate will stand extended till June 30, 2020;
    • Modified procedure has been prescribed for WHT applications for FY 2020-21;
    • >In respect of payments to non-residents having a permanent establishment in India and not having lower/nil WHT certificate for FY 2019-20, the order prescribes a 10% WHT rate including surcharge and cess on payments till June 30, 2020 or disposal of WHT application, whichever is earlier.

FOREIGN TRADE POLICY AND INDIAN EXCHANGE CONTROL REGULATIONS 

  • The Foreign Trade Policy (‘FTP’) is notified for 5 years with annual supplements generally notified by the Directorate General of Foreign Trade (‘DGFT’). The present FTP notified in 2015 was valid until March 31, 2020. It was expected to be replaced by a new Foreign Trade Policy effective April 01, 2020. However, the DGFT has extended the present FTP by another year, i.e., up to March 31, 2021.
  • The deadline for entities engaged in non-derivative forex transactions of $1 million or more to obtain Legal Entity Identifier (LEI) Code has been extended from March 31, 2020 to September 30, 2020.
  • Presently, value of goods or software exports made by exporters is required to be realized fully and repatriated to the country within a period of 9 months from the date of exports. In view of the disruption caused by the COVID-19 pandemic, the time period for realization and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export. The said extension will benefit all exporters including units in Special Economic Zones (SEZs), Status Holder Exporters (SHEs), Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs). All other provisions of Export of Goods and Services remain unchanged.

COMPANY LAW

  • The Ministry of Corporate Affairs (‘MCA’) has launched:
    1. Companies Fresh Start Scheme (CFSS), 2020 – For companies to file various pending/belated documents, forms, and returns with MCA without paying any additional fee. Companies would also be eligible to get immunity certificate within 6 months from the closure of the scheme; and
    2. Revised LLP Settlement Scheme, 2020 – For Limited Liability Partnerships (‘LLPs’) to give relief in filing various pending/belated documents, forms, and returns with MCA without paying any additional fee. Now, LLPs will also be eligible to get an immunity certificate for delayed filings.

The above Schemes are effective from 1st April 2020 till 30th September 2020.

  • DIN holders whose DINs have been deactivated due to non-filing of KYC (DIR-3 ) can now complete their KYC on or before September 30, 2020 without any additional filing fees.
  • Companies whose compliance status has been marked as “ACTIVE non-compliant” due to non-filing of ACTIVE e-form can now file the same on or before September 30, 2020 without any additional filing fee. 
  • MCA has clarified that any contribution made to the PM CARES Fund shall qualify as CSR expenditure. 

The Prime Minister has requested State governments to come up with a staggered exit plan from the nationwide lockdown. In the coming days, everyone is expecting the government to give more clarity on how the nation will emerge from the lockdown.

Credits:

  • Sujeet Kumar, Senior Manager – Tax & Regulatory
  • Deepali Bhatt, Manager – Corporate Secretarial
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