Covid-19 Relief Package and Income Tax Relaxations in India.

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Covid-19 Relief Package and Income Tax Relaxations in India.

As part of the Covid-19 relief package, the Finance Minister of India has announced a series of tax measures. Prime Minister Narendra Modi had earlier promised an economic package targeting land, labour, law and liquidity to brighten the nation's economy.


The measures announced today will be of great relief to businesses and will play a crucial role in increasing cash flow, as utility rates will be available until the end of this financial year. This will quickly track the revival of businesses and enterprises, including the issuance of pending refunds to all, non-corporate taxpayers.

Here are the major steps announced by the finance minister:

· TDS / TCS Deduction Reduction in original tax deduction for proposed non-payment payments to residents is a 25% reduction.

· It also reduced the rate of tax on source for prescribed receipts by 25%.

· Reduced TDS rates will apply until the end of the financial year for payments for transactions such as contract, professional fees, interest, rent, dividend, commission and brokerage

· Reducing the rate of TDS and TCS will give the government an estimated liquidity of Rs 50,000 crore.

If the profitability of a company is expected to be low, the total amount payable as a tax will be lower, so assessors will apply to the concerned under Section 197 of the Income Tax Act to allow for a lower withholding rate.



Revised TDS Rates

Finance Minister of India announced some changes in the TDS rates between May 15, 2020 and March 31, 2021:

· TDS on payment of dividends through mutual funds, interest on securities, dividends, interest on commissions, brokerage and brokerage, rent on immovable property has been reduced to 7.5 % instead of the present 10%.

· TDS on e-commerce participants acquisition payments of immovable property have been reduced by 0.75% compared to the existing 1%.

· The TDS rate for payments made by a Hindu undivided family or other corporate entities to contractors and sub-contractors has been reduced to 0.75% and 1.5% respectively.

This is a very sound and comforting decision and will ease the administrative burden, with deadlines extended. The deadline for all financial tax returns is extended from July 31st to October 31st. The tax audit deadline has been extended from September 30 to October 31. The assessment date is prohibited on September 30. It was extended to December 31st. Similarly, the validation ban on March 31, 2021, extends to the end of September 2021. The Vivaad Se Vishwas Scheme - Tax Dispute Redressal System extended till December 31.

The decision that the government will soon provide for pending income tax refunds to non-corporate businesses, sole proprietorships, limited liability partnerships, charitable trusts and cooperative societies would fast-track the revival of business and enterprises.








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