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On 24th March 2020, FM Nirmala Sitharaman addressed the nation announcing certain economic decisions in the wake of the Covid-19 Pandemic. One of the key announcements was an extension of the tax filing deadline from March 31st, 2020 to June 30, 2020, for FY 18-19. 

Sitharaman also stated that other tax-related deadlines have also been extended. These include deadline extension of PAN-Aadhar linking from March 31 to June 30, 2020, Vivad se Vishwas scheme to June 30. 

The last date for filing GST returns for March, April and May 2020 has also been extended to June 20, 2020.

Furthermore, the FM has also announced that for companies that have their turnover exceeding Rs. 5 crore, no penalty will be levied on late GST return filing. These extensions have brought in a lot of questions from taxpayers. In this article, we have tried to unriddle some of the most common questions. Read On! 

Key Points to Remember

  • The F.Y. ends on 31st March 2020 only as scheduled
  • For tax saving purposes, the investments in specific instruments that you had to complete by 31st March has an extension now
  • The date is extended to 30th June 2020 now

Will the next financial year start from April or July 1st? 

There will be no change in the dates of the next financial year; it will start from April only. A Financial Year (FY) is the time period between 1 April and 31 March – the year in which the income is earned. However, the financial year 2019-20 will be ending on June 30, 2020, whereas the financial year, 2020-21 will begin on July 1, 2020, and will end on March 31, 2021. Thereafter, all the accounting years will commence from April 1.

If someone invests after April 1, 2020, will it be considered for FY 2019-20 or FY 2020-21? How can one invest in April first week for FY 20-21?

You can invest in tax-saving schemes such as ELSS in April 2020 for the financial year 2019-20 or 2020-21. It’s just that, for any investment made from April-June 2020, you have to self declare which year you are making this investment in, i.e. whether it is for F.Y. 2019-20 or F.Y. 2020-21 while filing returns. 

The revenue/income for these 3 months will also be incorporated as the last date is extended till 30th June, i.e. for 15 months?

No, only the income from April 2019 to March 2020 will be considered for income tax filing. There will be no changes in that. The income for April-June 30th, 2020 will be considered in the Assessment year 2021-22.

Are these changes applicable to PPF account also?

Yes, this is applicable to PPF also. If you make an investment in PPF until 30th June 2020, it will be considered  for tax exemption for FY 2019-20 . 

What will be the effect on EPF contribution or home loan EMI (Interest+Principal) paid from April 1st, 2020 to June 30th, 2020?

Only voluntary savings such as investment made in post offices, banks, LIC, Chit finds, shares, mutual funds, and other such institutions in April- June 2020 may be used for FY 19-20. All other compulsory contributions such as EPF will be for the financial year 2020-21. 

What will be the last date of selling equity in cash in A.Y. 2020-21?

There will be no changes in this. It remains to be 31st March .

Tax Saving Investments Utilization

With the extension in the deadline of income tax filing, individuals who still have not made any tax-saving investments can accomplish that now and lower their tax burden. There are multiple tax saving options in which you can save tax under section 80C; some of the popular ones are:

ELSS (Equity-Linked Saving Scheme) Mutual Fund: It is a diversified mutual fund scheme under which the investment amount is eligible for tax exemption up to a maximum limit of Rs 1.5 lakh under section 80C of the income tax act. The investment has a lock-in period of 3 years and provides around 15%-18% returns.

National Pension Scheme (NPS): This is one of the tax-saving instruments schemes and helps to provide tax exemption under three different sections:

  • Contributions up to a maximum limit of Rs 1.5 lakh can be claimed for tax exemption under section 80C of the income tax act
  • One can additional deduction up to Rs. 50,000 under Section 80CCD (1b)
  • If 10% of the salary of an individual is contributed by the employer in NPS, then that amount is not taxed
  • It provides around 12%-14% returns
  • You can continue to invest in this scheme till retirement

Public Provident Fund: PPF is a long term investment scheme that offers an attractive rate of interest and returns on the amount invested. The interest earned and the returns are not taxable under income tax and the amount deposited during a year will be claimed under section 80C deductions.

Conclusion

The extension comes as a relief for taxpayers who are yet to file their tax returns and could not do so because of lockdown and curfews amidst the Coronavirus pandemic. Many income tax officials, associations and chartered accountants have been asking the government to extend these deadlines for both businesses and individual taxpayers and it is great that the government has given due attention to this problem. The government is also devising an economic package and it will be announced soon according to the finance minister.

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

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