How to E-Verify Income Tax Return

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How to E-verify Income Tax Return

There are different ways to do this given below:

1. Via Aadhaar- OTP based

To verify your ITR via aadhaar, your mobile number should be linked to the aadhaar card and your PAN should also be linked with the Aadhaar.

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Steps to be followed:

  • Login on Income Tax portal.

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  • Click on ‘View Returns/ Forms’

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  • Select ‘Income Tax Returns’ and ‘Submit’

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  • Click on “Click here to view your returns pending for e-verification”

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  • Click on ‘e-verify’

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  • Select the option “I would like to generate Aadhaar OTP to e-verify my return”

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  • An SMS with 6-digit OTP will be sent to your registered mobile number

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  • Enter the OPT received and click on “Submit”

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2. Generating EVC via Net Banking

You can e-verify your ITR with the help of net banking. But only few banks provide that facility.

Your PAN must be linked with the bank account.

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Steps:

  • Login to your bank account
  • Select the e-verify option under the ‘Tax’ tab. You will be directed to e-filing website.
  • Click on ‘Generate EVC’ option on ‘My account’ tab.
  • A digit alpha-numeric digit will be sent to your email or mobile number
  • Now go to ‘e-verify’ option under ‘My account’ tab
  • Click on the option ‘I have EVC already’
  • Enter the OTP you received on your mobile number & click on ‘Submit’.

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List of banks that provide this facility:

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3. Generating EVC via Bank Account

In order to e-verify your ITR through this process, first you have to pre-validate your bank account.

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How to pre-validate your bank account

  • Go to the “Profile settings” in your e-filing account to pre-validate your account.
  • Enter the required details such as:
    • Bank’s name
    • Account number
    • IFSC Code
    • Mobile number (linked with the bank account)
  • The pre-validation will be successful, if all the information matches with the bank account records.

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Now, e-verify your ITR by following these steps:

  • Select “Generate EVC” option under the “My Account” tab.
  • An OTP will be sent on your registered mobile number
  • Select “E-verify” under “My Account” tab.
  • Enter the OTP & click on “Submit”

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List of banks provide this facility: 

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4. Verifying ITR through Demat Account

It is same as that of bank account. First you have pre-validate your demat account.

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How to pre-validate Demat account:

  • Go to “Profile settings” in your e-filing account.
  • Enter the required details:
    • Mobile number (linked to demat account)
    • Email ID (linked to demat account)
    • Depository name (NSDL or CSDL)

 Usually it takes 1-2 hours to pre-validate your demat account.

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Once your account is pre-validate, e-verify your ITR following the given procedure:              

  • Select “Generate EVC” option under the “My Account” tab.
  • Select “Generate EVC through Demat Account Number”
  • An OTP will be sent on your registered mobile number
  • Select “E-verify” under “My Account” tab.
  • Enter the OTP & click on “Submit”

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SECTION 44AD – PRESUMPTIVE TAX SCHEME FOR BUSINESSES

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Who can opt for presumptive taxation scheme under Section 44AD?

All the small businesses with total turnover/gross receipts of up to Rs. 200 Lakh (except the business of plying, hiring and leasing goods carriages covered under section 44AE).

Resident Individuals, HUF’s and partnership firms (but not LLP) and who has not claim deductions under Section 10AA, 10A, 10B, 10BA or deductions under any provision of Chapter VIA under the heading “C- Deductions in respect of certain incomes” in the relevant assessment year.

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What is the tax rate under this scheme?

In the presumptive taxation scheme tax would be charged on 8% of total turnover/gross receipts.

However, the taxable amount would be “6%” instead of 8% of total turnover or gross turnover receipts, if the amount is received

  • By an account payee cheque or
  • By an account payee bank draft or
  • By use of electronic clearing system
  • Through a bank account or
  • Through such other electronic mode as may be prescribed

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Are there any deductions available under this scheme?

The answer to this is no.

All the deductions under section 30 to 38 shall be deemed to have been allowed in full & no further deduction shall be allowed.

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Treatment of WDV of assets

The WDV of any asset of such shall be deemed to have been calculated as if the assessee has claimed and had been actually allowed deduction in respect of depreciation for it.

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Do we have to prepare books of accounts & audit?

Under this scheme a relief is provided to small businessmen from maintaining the books of accounts & audit. Such assessee opting for the presumptive scheme are not required to maintain books of accounts under section 44AA or get them audited under section 44AB.

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Higher threshold limit for non-audit of accounts for assesses opting for this scheme

Under section 44AB, it is obligatory for every person carrying on business to get their books of accounts audited, if his total sales or turnover or gross receipts exceed Rs. 1 crore.

However, if an eligible person opts for presumptive taxation scheme under section 44AD, he will be not required to get his accounts audited if the total turnover or gross receipts does not exceed Rs. 2 crores.

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Who is not eligible to opt for this scheme?

The following persons are specifically excluded from the applicability of this scheme:

  • A person carrying on profession as referred in section 44AA (1) i.e. legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the board.
  • A person earning income in the nature of commission or brokerage
  • A person carrying on any agency business.

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What if the person decided to not to opt for the presumptive taxation under Section 44AD?

If a person opts for presumptive taxation scheme under section 44AD, the he has to continue to pay tax under this scheme for the next 5 subsequent financial years.

If he decided to opt out of this scheme in any of these subsequent years, he won’t be able to take benefit of the presumptive taxation scheme under section 44AD for the next 5 years.

This person also required to maintain books of accounts under section 44AA, provided his total income exceeds the basic limit and have to get their books audited under section 44AB.

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FAQ

1.X is an insurance agent and has a total turnover of Rs. 75 lakhs in F.Y. 2019-20. Is he eligible to opt for presumptive taxation scheme under section 44AD?

  • A person earning an income in the nature of commission or brokerage cannot adopt the presumptive taxation scheme under Section 44AD. So, an insurance agent cannot adopt the presumptive taxation scheme.

 

2. I have a total turnover of Rs. 1 crore in F.Y. 2019-20 and have opted for presumptive taxation scheme under section 44AD. Can I claim deduction for depreciation on assets?

  • No, in case of a person opting for presumptive taxation scheme cannot claim deduction for depreciation. As under this section it is assumed that the deduction for depreciation has already been allowed and WDV of such asset shall be deemed to have been calculated.

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3. In the F.Y. 2017-18, Mr. Raj filed his ITR under the presumptive taxation scheme for the first time, but in F.Y. 2018-19 he decided to opt out of it. Now, in F.Y. 2019-20, he wants to adopt presumptive taxation scheme again. Is he eligible to do so?

  • No, he cannot opt for the scheme in F.Y. 2019-20. If a person opts for presumptive taxation scheme under section 44AD, the he has to continue to pay tax under this scheme for the next 5 subsequent financial years. If he decided to opt out of this scheme in any of these subsequent years, he won’t be able to take benefit of the presumptive taxation scheme under section 44AD for the next 5 years.

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4. I have a total turnover of Rs. 1.5 crore and opted for presumptive taxation scheme. I forget to pay advance tax on business income on or before 15th March of the F.Y. But I paid the tax on 25th March, so do I have to pay interest on that amount?

  • Yes, if you pay advance tax after 15th March of the F.Y., you have to pay interest on that amount @1% per month from due date till the tax is paid.

 

5. I’m doctor by profession and have a total turnover of Rs. 50 lakhs in F.Y. 2019-20. Can I opt for presumptive taxation scheme under section 44AD?

  • No, a person carrying on profession as referred in section 44AA (1) cannot opt for presumptive taxation scheme.

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6. In the F.Y. 2018-19, I opted for presumptive taxation scheme for the first time. Now, in F.Y. 2019-20 my total turnover are Rs. 1.5 crore and I wanted to opt out of the scheme. Do I have to prepare books of accounts & get them audited?

  • Yes, you have to prepare books of accounts for F.Y. 2019-20 under section 44AA and get them audited under section 44AB as total turnover for the year exceeds the basic limit.

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7. What is the due date for filing income tax return if, a person opts for section 44AD & in the case he didn’t opt for presumptive taxation scheme?

  • In case of a person opts for presumptive taxation scheme under section 44AD, the due date for filing income tax return would be 31st July of A.Y.

In case of a person does not opt for the presumptive taxation scheme under section 44AD, he is required to get his books of accounts audited, and in that case, he can file his return on or before 30th September of A.Y.

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8. I have a total turnover of Rs. 1.6 Crores and I have opted for 44AD. Do I need to get my accounts audited as my total turnover exceeds Rs 1 Crores?

  • No, if you opted for Section 44AD, you are not required to get your accounts audited even if your total turnover exceeds the limit of Rs 1 crores.

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Section 44ADA – Presumptive Tax Scheme for Professionals

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Who can opt for presumptive taxation scheme under Section 44ADA?

To claim benefits of non-maintenance of Books of Account, you need to fulfill the following two conditions:

1.The person needs to be a professional, who belongs to any of the following professions:

2. legal,

3. medical,

4. engineering or

5. architectural profession or

6. the profession of accountancy or

7. technical consultancy or

8. interior decoration or

9. any other profession as is notified by the board (Board here means the Central Board of Direct Taxes), &

10. Should have Total turnover or Gross Receipts below or equal to Rs 50 lakhs in the previous year.

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What is the presumptive tax rate under this Section 44ADA?

In the presumptive taxation scheme under Section 44ADA the tax would be charged on 50% or more (as claimed to have been earned by the assessee) of the total turnover or gross receipts.

It implies that the 50% or more (as claimed to have been earned by the assessee) of the total gross receipts would be treated as profits & gains from profession.

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Are there any deductions available under this scheme in relation to expenses incurred for the profession?

The answer to this is no.

All the deductions under section 30 to 38 shall be deemed to have been allowed in full & no further deduction shall be allowed.

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Are there any deductions available to the person opting this scheme in relation to Chapter VI-A i.e. Section 80C, 80D, etc.?

Yes, those deductions will be available as available to other persons.

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Treatment of WDV of assets

The WDV of any asset of such shall be deemed to have been calculated as if the assessee has claimed and had been actually allowed deduction in respect of depreciation for it.

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Do we have to prepare books of accounts & audit?

Under this scheme a relief is provided to professionals referred in Section 44AA (1) from maintaining the books of accounts & audit. Such assessee opting for the presumptive scheme are not required to maintain books of accounts under section 44AA or get them audited under section 44AB.

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What if the person wants to claim lower profits than 50% of the total gross receipts?

In case of a person, wants to claim profits lower than the profits assumed under section 44ADA i.e. 50% of total gross receipts and his total income exceeds the maximum amount which is not chargeable to income tax i.e. 2, 50,000, he has to maintain books of accounts under section 44AA & get them audited under section 44AB.

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FAQ’s

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1. Raj is an insurance agent, his total turnover for the F.Y. 2019-20 is Rs 48 lakh. Is he eligible to opt for presumptive taxation scheme under section 44ADA?

  • A person earning an income in the form of commission or brokerage cannot opt for the presumptive taxation scheme under section 44ADA. So Mr. Raj is not eligible.

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2. I’m an architect by profession. I have total gross receipts of Rs 45 lakh in the F.Y. 2019-20. I want to claim a profit of Rs. 20 lakh in the F.Y. 2019-20 which are less than 50% gross receipts. Do I have to maintain books of accounts?

  • Yes, you have to maintain books of accounts & get them audited. If you want to claim lower profits and have income which exceeds the maximum amount chargeable under income tax, then you have to maintain books of accounts & get them audited.

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3. I’m a doctor by profession. I opted for presumptive taxation scheme under section 44ADA. After declaring profit @50% of gross receipts, can I claim further deduction of expenses incurred for my profession?

  • No, you cannot claim any further deductions under section 44ADA. All the deduction under section 30 to 38 shall be deemed to have been allowed.

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4. I have opted for presumptive taxation scheme under section 44ADA. Do I have to pay advance tax?

  • Yes, you have to pay advance tax on or before 15th March of the financial year. If you fails to pay advance tax, interest will be charged on such amount as per under section 234B & section 234C.

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5. Amita is a dentist. She has total gross receipts of Rs. 49 lakh. She opted for presumptive taxation scheme under section 44ADA. She wants to know if she can claim depreciation for the medical equipment under section 44ADA.

  • No, in case of a person opting for presumptive taxation scheme, under section 44ADA, cannot claim deduction for depreciation. As under this section it is assumed that the deduction for depreciation has already been allowed and WDV of such asset shall be deemed to have been calculated.

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6.Shreya is an interior decorator. She has a total turnover of Rs. 40 lakh. Is she eligible to opt for presumptive taxation scheme under section 44ADA?

  • Since, Ms. Shreya is carrying a profession referred to in section 44AA (1) and has a total turnover less than Rs. 50 lakhs, she satisfies both the conditions of section 44ADA. So, she is eligible to opt for presumptive taxation scheme under section 44ADA.

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Set Off and Carry Forward of Losses

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What is the meaning of Set Off of Losses?

Set-off means adjustment of losses against the profit or income of same Financial Year.

A set off could be an intra head set off or inter head set off.

Intra head Set-off means loss from one source of income can be set off against income from another source but in the same head of income.

Inter head Set-off means loss under one head of income can be set off against income from another head of income but in same financial year.

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Given below is the detailed guide to set-off of losses

Head of Income Set-off
Same source under same head Other source under same head Inter head
Salary N/A N/A N/A
House property Yes Yes Yes

(max limit

Rs. 2, 00,000)

PGBP Non-Speculation Yes Yes Yes (Except Salary)
Speculation Yes No No
Owing & Maintenance race horses Yes No No
Specified business under section 35AD Yes No No
Capital Gain Short term Yes Yes No
Long term Yes No No
Other Income Yes Yes Yes

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What is the meaning of Carry-forward of Losses?

If the losses cannot be set-off in the same year due to inadequacy of eligible profits, then such profits are carried forward to the next financial year for adjustment against the eligible profits.

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Head of Income Carry Forward Set off
For Assessment years
Salary N/A N/A
House property 8 years Under Same head
PGBP Non-Speculation 8 years Under Same head
Speculation 4 years Under Same source
Owing & Maintenance race horses 4 years Under Same source
Specified business under section 35AD Indefinite years Under Same source
Capital Gain Short term 8 years Under Same head
Long term 8 years Under Same source

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Key Notes

  • Any loss under the head ‘Other income’ cannot be carried forward.
  • Loss under the head ‘Income from Salary’ is not possible.
  • In order to carry forward the losses, it is mandatory to file return of income on or before the due date of filing of Income tax return.
  • House property losses and unabsorbed depreciation can be carry-forward even if return is filed after the due dates.
  • In case return is filed after due dates, set-off and carry forward of losses of previous years are allowed but further carry forward of current year losses is not allowed.
  • As per the provision of section 72(2), brought forward business loss is to be set-off before setting off unabsorbed depreciation.
  • The order to be followed:
    • Current year depreciation/ capital expenditure on scientific research & expenditure on family planning, to the extent allowed.
    • Brought forward loss from business /profession
    • Unabsorbed depreciation.
    • Unabsorbed capital expenditure on scientific research.
    • Unabsorbed expenditure on family planning.
  • If income from a particular source is exempt from tax, then loss from such source cannot be set off against any other income which is chargeable to tax. (For Example: Share of profit from a firm)

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Frequently Asked Questions

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Query 1: I have a loss from house property of Rs. 2.5 lakhs as I have paid interest on home loan taken for purchase of my own house. I have earned salary income of Rs. 8 lakhs. Can I reduce my loss from house property against income from salary?

Ans: Yes, you can reduce your taxable income and set off the loss from house property but up to Rs. 2 lakhs only as inter head adjustment of loss under house property is allowed up to Rs. 2 Lakhs only and further, carry forward of Rs 50,000 is also not allowed. Therefore, now taxable income is Rs. 6 Lakhs (i.e. 8 Lakh – 2 lakh) and loss of Rs. 50,000 will lapse.

Query 2: I own two houses – one is self-occupied and other is rented. On self-occupied house property, I have paid interest of Rs. 2.5 lakhs on home loan taken for purchase of house. From rented house, I have earned rental income of Rs. 4 lakhs. Can I adjust loss on interest paid from self-occupied with my rental income?

Ans: Yes, loss on self-occupied house property can be adjusted against rental income but up to Rs. 2 Lakhs only, remaining loss of Rs. 50,000 will lapse.

Query 3: I have earned a rental income of Rs. 1,20,000/- p.a. and paid interest on home loan of Rs. 2,30,000/- taken for purchase of the same house. I have also earned business income of Rs. 5 lakhs during the year. How can I adjust the loss of Rs 2,30,000/- against income earned?

Ans: Firstly, your interest of Rs. 2,30,000/- will get adjusted against the rental income under same head and the remaining loss of Rs. 1,46,000/- [Rs. 1,20,000 – 36,000 (30% Standard Deduction) – 2,30,000] will get adjusted against business income as inter head adjustment is allowed up to Rs. 2 lakhs.

Query 4:  I have earned rental income of Rs. 5 lakhs and interest paid on home loan taken for rented property is Rs. 4 Lakhs. Can I adjust full interest of Rs 4 Lakhs against my rental income or up to Rs 2 Lakhs?

Ans: Limit of Rs 2 lakhs will not apply on interest paid on loan taken for rented property, this limit is for self-occupied property only. Hence, in case of rented property full interest of Rs 4 lakhs will get set-off against rental income.

Query 5: I have a loss from house property of Rs. 2.5 lakhs as I have paid interest on home loan taken for purchase of my own house. I have earned business income of Rs. 1.2 lakhs. Can I reduce my loss from house property against business income?

Ans: Yes, you can adjust your loss from house property against business income of Rs. 1.2 lakhs and remaining loss of Rs. 80,000/- will be carried forward to next year and can be adjusted against house property income only.

Query 6: I have earned a salary income of Rs. 65,000 and a loss from non-speculative business of Rs. 27,000?

Can I set-off the loss of non-speculative business with salary Income?

Ans: Business loss cannot be set off against salary income. So, the business loss of Rs. 27,000 cannot be set off against the salary income of Rs. 65,000 and hence, it will be carried forward to next 8 assessment years.

Query 7: I have made a gain from intraday trading of Rs. 1.5 lakhs and incurred a loss of Rs. 2.8 lakhs in my newly startup business. Can I adjust loss of Rs 2.8 lakhs with profit of Rs 1.5 Lakhs?

Ans: Yes, you can adjust your loss from normal business with speculative business. Hence, loss of Rs 2.8 lakhs can be adjusted with gain of Rs 1.5 lakhs and remaining will be carried forward to next 8 assessment years.

Query 8: I have incurred a loss from trading in future and options and earned a profit from my manufacturing business. Whether the loss from future and options is eligible to set off against manufacturing business?

Ans: Yes, as trading in future and options considered as non-speculative business (i.e. normal business) and loss from one normal business can be set off against another. Therefore, loss from future and options can be set off against gain from regular manufacturing business.

Query 9: I have a short-term capital gain of Rs. 50,000 and a long-term capital loss of Rs. 20,000. Can I claim a set-off of loss of long term with short term capital gain?

Ans: Long term loss can be set-off only from other long-term gain. We cannot set off long term capital loss against short term capital gain. So, the long-term capital loss of Rs. 20,000 cannot be adjusted for short term capital gain of Rs. 50,000. Hence, the same will be carried forward to next year.

Query 10: I have done both intraday and future & options trading this year and incurred loss in intraday and gain in F&O. can I set-off the losses with the profit?

Ans: No, in this case, set-off is not allowed because as per law, intraday trading is considered as the speculative business activity although trading in future & options is a normal business activity. Loss from speculative business can be set off against speculative profit only and hence, this loss should be carried forward to next 4 assessment years.

Query 11: I have sold debt mutual funds and made long term loss of Rs 60,000. I made short term gains of Rs 25,000 on sale of listed equity shares. Can I set off the long-term loss against the short-term capital gain and pay tax on the net amount.

Ans: You cannot set off the long-term loss against the short-term gain. You can carry forward the long term loss of Rs 60,000 for 8 successive years and need to pay tax on the entire short term capital gains of Rs 25,000.

Query 12: In case of change in the constitution of business, can the loss be carried forward by the reconstituted entity?

Ans: Generally, the person incurring the loss is only entitled to carry forward the loss in subsequent year(s). However, in certain cases of reconstitution of the business-like amalgamation, demerger, conversion of proprietary firm into company or conversion of partnership firm into company, etc., the reconstituted entity is entitled to carry forward the unadjusted loss of predecessor entity (provided that conditions specified in this regard are satisfied).

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Section 115BAB – For domestic manufacturing company which is a New Company

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1. Applicability of Section 115BAB

This section is applicable w.e.f. 1st April 2019 [FY 2019-20 (A.Y. 2020-21)].

Benefit of lower tax rate is available to domestic companies who satisfying the specified conditions mentioned in point 2.

This section states that domestic companies have the option to pay tax at a lower rate of 15%.

2. Conditions specified under section 115BAB

A domestic company shall have an option to pay income tax at the rate of 15% (plus applicable surcharge and cess, effective rate of 17.16%), provided the following conditions are complied with:

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a. The company has been set up and registered on or after 1st October, 2019 and has commenced manufacturing on or before 31st March, 2023 and is

  • not formed by the splitting up and reconstruction of a business already in existence except in case of a business re-established, reconstruction or revival under section 33B
  • does not use any plant or machinery previously used for any purpose. However, the company can use plant and machinery used outside India and used in India for the first time and no depreciation in respect of such plant and machinery has claimed earlier.

Also, the company can use old plant and machinery, the value of which does not exceed 20% of the total value of the plant and machinery used by the company.

  • does not use any building previously used as a hotel or a convention centre, as the case may be.

‘Hotel’ means a hotel of two-star, three-star or four-star category as classified by the Central Government. ‘Convention centre’ means a building of a prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities, as may be prescribed.

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b. The company should not engage in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it.

For clarification of doubts it has been clarified that, the business of manufacturing and production of any article or thing, does not include business of

  • development of computer software in any form or in any media;
  • mining;
  • conversion of marble blocks or similar items into slabs;
  • bottling of gas into cylinder;
  • printing of books or production of cinematograph film; or
  • any other business as may be notified by the Central Government in this behalf.

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c. Domestic companies should not claim any deductions/exemption mention below:

  • Deduction u/s 10AA especially available for units established in SEZ
  • Deduction u/s 32 (Additional depreciation) and 32AD (Investment allowance) available for investment in new plant and machinery made in notified backward areas in the states of Andhra Pradesh, Bihar, Telangana, and West Bengal
  • Deduction u/s 33AB for tea, coffee and rubber manufacturing companies
  • Deduction towards deposits made for site restoration fund u/s on 33ABA by companies engaged in extraction or production of petroleum or natural gas or both in India
  • Deduction u/s 35 for expenditure made for scientific research
  • Deduction u/s 35AD for capital expenditure incurred by any specified business
  • Deduction u/s 35CCC for expenditure incurred on an agriculture extension project
  • Deduction u/s 35CCD for expenditure on skill development project
  • Deduction under chapter VI-A in respect to certain incomes, which are allowed under section 80IA, 80IAB, 80IAC, 80IB and so on, except deduction under section 80JJAA and 80M (w.e.f A.Y. 2021-22)
  • Without set-off of any loss carried forward from earlier years, if such losses relate to the deductions mentioned above

d. In order to exercise this option new manufacturing domestic companies required to file their income tax returns on or before the due date of filing income tax returns i.e. usually 30th September of the assessment year.

e. Option once exercised by the domestic company cannot be withdrawn for same or subsequent years.

f. The domestic companies who do not wish to avail this concessional rate immediately, can opt for the same after the expiry of their tax holiday period.

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3. Tax liability under section 115BAB

Particulars Tax Rate
Income tax should be charged at 15% 15.00%
Add: Surcharge: 10% of tax amount (i.e.10% of 15%). 1.50%
Add: Health and Education cess: 4% of income tax plus surcharge [i.e. 4% of (15% plus 1.5%)]. 0.66%
Total 17.16%

 

MAT : Such companies will not be required to pay minimum alternate tax (MAT) under section 115JB of the act. Since MAT provision in itself will not be applicable for the companies, its credit will not be allowed to be set off against its profit computed under the regular provision.

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4. Applicability of transfer pricing provisions

In a case where due to a close connection between the company and any other person, or for any other reason, the business between them is so arranged such that the company earns more than ordinary profits, the assessing officer may ignore the excess profits. The Assessing Officer will take only the amount of profits reasonably deemed to be derived from the business.

In a case where the business transaction involves a specified domestic transaction referred to in section 92BA, the profits of the transaction will be determined having regard to the arm’s length price.

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The above information does not intend to give any opinion or advisory in relation to various alternatives of tax computation available in Income Tax Act. The readers are advised to please take help from Expert Tax Consultants with their specific facts and circumstances.

 

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Section 115BAA – Lower Tax Rate introduced for Domestic Companies

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1. Applicability of Section 115BAA

This section is applicable w.e.f. 1st  April 2019 [FY 2019-20 (A.Y. 2020-21)].

Benefit of lower tax rate is available to all domestic companies after they comply certain conditions.

Domestic Companies are given an option.

Option once exercised cannot be revoked (That is no coming back by choice). But if you do not comply certain conditions then you will not get this option.

A lower tax rate is prescribed which is 22% Plus 10% Surcharge Plus 4% Health and Education cess (applicable in all circumstances).

Effective rate of tax comes to 25.168%

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2. Conditions specified under section 115BAA

All domestic companies shall have an option to pay income tax at the rate of 22% (plus applicable surcharge and cess), provided the following conditions are complied with:

Domestic companies should NOT claim any deductions/exemption mention below:

 

S. No. Under Section Details
i Deduction u/s 10AA Available for units established in SEZ
ii Deduction u/s 32 (Additional depreciation) and 32AD (Investment allowance) Available for investment in new plant and machinery made in notified backward areas in the states of Andhra Pradesh,  Bengal

 

iii Deduction u/s 33AB For tea, coffee, and rubber manufacturing companies
iv Deduction u/s 35 For expenditure made for scientific research
v Deduction u/s 35AD For capital expenditure incurred by any specified business
vi Deduction u/s 35CCC For expenditure incurred on an agriculture extension project
vii Deduction u/s 35CCD For expenditure on skill development project
viii Deduction under Chapter VI-A Deductions in respect to certain incomes, which are allowed under section 80IA, 80IAB, 80IAC, 80IB and so on.
ix Deductions in respect of Section 33ABA Deduction towards deposits made for site restoration fund u/s on 33ABA by companies engaged in extraction or production of petroleum or natural gas or both in India
x Set off of Losses Without set-off of any loss carried forward from earlier years, if such losses relate to the deductions mentioned above

 

Domestic companies can claim the following deductions:

i Section 80JJA Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste
ii Section 80M Deduction in respect of certain inter-corporate dividends (Applicable for FY 2020-21 (AY 2021-22))

 

In order to exercise this option domestic companies required to file their income tax returns on or before the due date of filing income tax returns.

Option once exercised by the domestic company cannot be withdrawn for same or subsequent years.

The domestic companies who do not wish to avail this concessional rate immediately, can opt for the same after the expiry of their tax holiday period.

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3. New Rate applicable to domestic companies

Particulars Tax Rate
Income tax should be charged at 22% 22.000%
Add: Surcharge: 10% of tax amount (i.e.22%). 2.200%
Add: Health and Education cess: 4% of income tax plus surcharge [i.e. 4% of (22% plus 2.2%)]. 0.968%
Total 25.168%

 

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4. Provision related to MAT

As per Section 115JB, Companies who are opting for section 115BAA will be exempt from computing MAT.

Since MAT provision in itself will not be applicable for the companies, its credit will not be allowed to be set off against its profit computed under the regular provision.

If the company is having MAT credit available for F.Y. 2019-20, they may opt for payment of taxes under regular provisions of income tax if they want to do so. They can opt for lower tax rate under section 115BAA from next Financial Year.

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The above information does not intend to give any opinion or advisory in relation to various alternatives of tax computation available in Income Tax Act. The readers are advised to please take help from Expert Tax Consultants with their specific facts and circumstances.

 

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Income Tax Rates for other than Individual for F.Y. 2020-21 (A.Y. 2021-22)

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1. Tax Rate for Companies:

Tax rates for domestic companies

Particulars Tax rates
Total turnover or gross receipts during the previous year 2017-18 does not exceed Rs. 400 Crore 25%
Other domestic companies 30%

 

Tax rates for foreign companies

The tax rate for foreign company is 40%.

In case foreign company received any royalty from Government/Indian concern or technical fees as per agreement approved by the Central Government, then tax rate applicable will be 50%.

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Surcharge:

Company Net total income is between Rs. 1Crore – 10 Crores Net total income exceeds Rs. 10 Crores
Domestic company 7% 12%
Foreign company 2% 5%

Health and Education cess: 4% of income tax plus surcharge.

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For domestic manufacturing company which is a NEW company under section 115BAB

Income tax should be charged at 15%

Surcharge: 10% of tax

Health and Education cess: 4% of income tax plus surcharge.

For more information in relation to 115BAB – click here

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Under section 115BAA – Tax for certain domestic companies

 Income tax should be charged at 22%

Surcharge: 10% of tax

Health and Education cess: 4% of income tax plus surcharge.

For more information in relation to 115BAA – Click here

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2. Income Tax Rate for Partnership Firm:

A partnership firm (including LLP) is taxable at 30%.

Surcharge: 12% of tax where total income exceeds Rs. 1 crore.

Health and Education cess: 4% of income tax plus surcharge.

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3. Income Tax Rates For HUF

HUF has an option to pay tax as per new tax regime or old regime, here given below are the tax rates for both the options available

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Under Old Tax Regime:

Net Total income Income-Tax rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000- Rs. 5,00,000 5%
Rs. 5,00,000- Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

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New tax regime with no deduction and no exemption

Following conditions needs to be fulfilled:

Conditions Options Available
If assesee is not having business income in FY Have option to opt for any scheme every year
If assesee is having business income in FY Option once exercised for a Financial year shall be valid for all subsequent years and once the option is withdrawn, the same cannot be exercised again unless such business income cease to exist
If assesee fails to satisfy any condition (i.e. claimed any deduction or exemption not available) New regime option shall become invalid

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Net Total income Income-Tax rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,001- Rs. 5,00,000 5%
Rs. 5,00,001- Rs. 7,50,000 10%
Rs. 7,50,001- Rs. 10,00,000 15%
Rs. 10,00,001- Rs. 12,50,000 20%
Rs. 12,50,001- Rs. 15,00,000 25%
Above Rs. 15,00,000 30%

Note: List of Exemptions and deductions not available for availing benefit of new tax regime

 

Surcharge: 10% of income tax where total income exceeds Rs. 50 lacs but up to Rs.1 Crores.

15% of income tax where total income exceeds Rs. 1 Crore but upto Rs. 2 Crores

25% of income tax where total income exceeds Rs. 2 Crore but up to Rs. 5 Crores

37% of income tax where total income exceeds Rs. 5 Crores

Health and Education cess: – 4% of income tax and surcharge.

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4. Income Tax Rates For AOP/BOI/Any other Artificial Juridical Person:

Net Total income Income-Tax rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000- Rs. 5,00,000 5%
Rs. 5,00,000- Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

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Surcharge: 10% of income tax where total income exceeds Rs. 50 lacs but up to Rs.1 Crores.

15% of income tax where total income exceeds Rs. 1 Crore but upto 2 Crores

25% of income tax where total income exceeds Rs. 2 Crore but up to Rs. 5 Crores

37% of income tax where total income exceeds Rs. 5 Crores

Health and Education cess: – 4% of income tax and surcharge.

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5. Income Tax Slab Rate for Co-operative Society:

Co-operative society has an option to pay tax as per new tax regime or old regime, here given below are the tax rates for both the options available

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As per Old Tax regime

Net Total income Income-Tax rate
Up to Rs. 10,000 10%
Rs. 10,000 to Rs. 20,000 20%
Above Rs. 20,000 30%

Surcharge: 12% of tax where total income exceeds Rs. 1 crore.

Health and Education cess: 4% of income tax plus surcharge

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As per New Tax Regime subject to some conditions: A resident Co-operative Society is taxable at 22%.

Surcharge: 10% on such tax

Health and Education cess: 4% of income tax plus surcharge.

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6. Income Tax Slab Rate for Local Authority:

A local authority is taxable at 30%.

Surcharge: 12% of tax where total income exceeds Rs. 1 crore.

Health and Education cess: 4% of income tax plus surcharge.

 

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TDS Rate chart for F.Y. 2020-21 (A.Y. 2021-22)

Section*

Nature of Payment* Threshold Limit* TDS Rates for Indian Residents*
192 Salaries Income tax slab Slab rates
192A Payment of accumulated balance due to an employee (EPF Premature Withdrawal) Rs. 50,000 10%
193 Interest on Securities Rs. 10,000 10%
194 Dividends (Other than listed company) Rs. 5,000 10%
194A Interest other than “Interest on securities” from post offices, co-operative societies and bank deposits

Interest from others

Rs. 40,000 (For senior citizen Rs. 50,000)

 

Rs. 5,000

 

10%

 

10%

194B Interest by way of winning from lotteries, crossword puzzles, games etc. Rs. 10,000 30%
194BB Income by way of winning from horse race Rs. 10,000 30%
194C Payment to contractor/ subcontractor

a)      HUF/Individual

b)      Others

Rs. 30,000 for single payment & Rs.1,00,000 for aggregate payment during the F.Y.  

1%

2%

194D Insurance Commission Rs. 15,000 5%
194DA Payment in respect of life insurance policy Rs. 1,00,000 1%
194EE Payment in respect of deposits under National Savings Scheme Rs. 2,500 10%
194F Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India NA 20%
194G Commission etc. on sale of lottery Rs. 15,000 5%
194H Commission or brokerage Rs. 15,000 5%
194I Rent of land, building or furniture Rs. 2,40,000 10%
194I Rent of Plant and Machinery Rs. 2,40,000 2%
194IA Payment/credit of consideration to resident transferor for transfer of any immovable property (other than rural agricultural land) Rs. 50 Lakhs 1%
194IB Payment/credit of rent by an individual/HUF (if not subject to tax audit under section 44AB in the immediately preceding financial year) Rs. 50,000 per month 5%
194IC Payment under joint development agreement to a resident individual HUF (who transfers land/ building) NA 10%
194J

 

Payment for fees for Technical services, Professional services or royalty etc.

a)      Fees for technical services not in nature of nature of professional services or royalty in consideration of sale

b)     All others (including Professional fees, royalty etc.)

Rs. 30,000  

 

2%

 

10%

194K Payment of any income in respect of

a) Units of a Mutual Fund as per Section 10(23D)

b) Units from the administrator

c) Units from specified company

Rs. 5,000 10%
194LA Payment of compensation on acquisition of certain immovable property Rs. 2,50,000 10%
194LBA Certain income distributed by a business trust to its unit holder NA 10%
194LBB Payment in respect of units of investment fund specified in section 115UB NA 10%
194LBC

 

Payment in respect of an investment in a securitization trust specified in clause (d) of the Explanation occurring after section 115TCA-
– if recipient is an individual or a Hindu undivided family
NA 25%
194LBC Payment in respect of an investment in a securitization trust specified in clause (d) of the Explanation occurring after section 115TCA-
– if recipient is any other person
NA 30%
194M Payment of commission (not being insurance commission), brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J. Rs. 50 lakhs 5%
194N Cash withdrawal in excess of 1 crore during the previous year from one or more account maintained with bank or co-operative society Rs. 1 Crore 2%
194O Applicable for E-Commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform.  Rs. 5 lakhs 1%

*Disclaimer: The below mentioned TDS Rate chart is just for ready reference of tax rates and threshold limits and does not intend to give any guidance on applicability of these provisions on any transaction. For getting guidance on applicability of TDS provisions on any transaction we request you to please take help from Expert Tax Consultants.

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Direct Tax Vivad se Vishwas Scheme 2020

Currently, there are more than 4.5 Lacs cases of Direct tax related disputes are pending at various appellant authorities which results in locking of tax arrears and consumption of time, energy and resources on the part of both Government and Taxpayers.

In order to resolve these pending disputed cases, The Hon’ble Finance Minister on 1st February 2020 introduced “Vivad Se Vishwas Scheme” with an aim of settlement of direct tax cases pending in multiple forums as on 31st January 2020.

Applicability

Under this scheme, taxpayer whose Direct tax related dispute is pending before

  • Supreme Court
  • High Court
  • ITAT
  • CIT(A)

as on 31.01.2020 against an assessment/reassessment order or in respect of TDS/TCS is eligible to make a declaration under this dispute resolution scheme.

An “appellant” is eligible to apply for the scheme irrespective of the fact whether the demand in such case is pending or has been paid.

Who is Appellant?

Here “Appellant” is a person in whose case an appeal or a writ petition or special leave petition has been filed either by him or by the income-tax authority or by both, before an appellate forum and such appeal or petition is pending as on 31st January 2020.

Last date to file declaration under Vivad Se Vishwas scheme

As per the scheme, the taxpayer should opt and deposit the disputed dues by June 30, 2020 (This is an extended date due to COVID-19, earlier date was March 31, 2020), in order to get 100% relief from interest, penalty and fees. In case it is just penalty and interest which is in dispute, the taxpayer will have to pay only 25% of the disputed amount.

Procedure of opting the Scheme

1. An appellant can file a declaration to the designated authority to initiate resolution of pending direct tax disputes.

2. Based on the declaration filed, the designated authority within 15 days will determine the amount payable by the appellant and grant a certificate.

3. The appellant must pay this amount within 15 days of the receipt of the certificate and inform the designated authority of such payment.  

4. Such amount will not be refundable.

5. On receipt of the amount, the designated authority shall pass an order in writing, stating that the due amount has been paid.

6.The order passed by the designated authority shall be final and after that both the taxpayer and Government shall be barred from any further proceedings.

Key points of Vivad se Vishwas Scheme that a taxpayer must know:

1. For dispute resolution, the appellant is required to furnish an undertaking stating that he waives all his rights to seek any remedy or claim in relation to that dispute under any law.

2. All such claims already filed in relation to the dispute must be withdrawn before filing the declaration.

3. Once a dispute is resolved, the designated authority cannot levy interest or penalty in relation to that dispute.  

4. No appellate forum can make a decision in relation to the matter of dispute once it is resolved.  

5. Such matters cannot be reopened in any proceeding under any law, including the IT Act.

6. Once the designated authority issues the certificate, appeals pending before the Income Tax Appellate Tribunals and the Commissioner (Appeals) will be deemed to be withdrawn.

7. In case of appeals or petitions pending before the Supreme Court and High Courts, the appellant is required to withdraw the appeal or petition.

8. The declaration filed by an appellant will become invalid if

  • its particulars are found to be false
  • he violates any of the conditions referred to in the IT Act
  • he seeks any remedy or claim in relation to that dispute.  

 

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Indirect Tax (GST and Custom) – Various due dates extended due to COVID 19

The Government of India through the Finance and Corporate Ministry has announced several measures to provide the relief to the Individuals and the companies. The individuals and the various businesses are required to comply with numerous statutory requirements time to time like filing of GSTR 3B monthly, Annual returns, compliance of laws for composite dealers, compliance with custom laws within a stipulated time, etc. In the light of this global pandemic COVID-19, the ministry has extended the date of compliance for various requirements falling within the period of March 20, 2020 to June 29, 2020. The extended date is June 30, 2020

 

Customs

S. No. Particulars Existing Due Date Extended Due date
1 Custom Clearance   24×7 Custom clearance till end of 30th June, 2020
2 Other Matters: Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied Laws. Due date falling and /or time limit expiring between March 20, 2020 to June 29, 2020 Extended to June 30, 2020

 

Goods and Service Tax (GST)

S. No. Particulars Existing Due Date Extended Due date
1 GSTR-3B for taxpayer having turnover less than 5 Crore for the month of February, March and April 2020 (i.e. the returns which are due to be file in the month of March, April and May 2020) February 2020 – March 20/22/24, 2020

March 2020 – April 20/22/24, 2020

April 2020 – May 20/ 22/24, 2020

(Depending upon state to state)

For all the months Due Date Extended to last week of June 2020

With No interest, late fee, and penalty to be charged

2 GSTR 3B for other taxpayers (i.e. having turnover 5 crores or more) February 2020 – March 20, 2020

March 2020 – April 20, 2020

April 2020 – May 20, 2020

For all the months Due Date Extended to last week of June 2020

With No late fee, and penalty to be charged if complied till June 30, 2020. Whereas Interest will be charged at reduced rate of 9% (currently 18%) if the payment is made after 15 days from the due date.

3 Relief for Composition dealers Date for opting for composition scheme – 31st March 2020

 

Date for opting for composition scheme – last week of June 2020

Date of Making payment for quarter ending March 31, 2020 – last week of June 2020

Date of filing of Return for 2019-20 – last week of June 2020

4 Annual Return of GST for FY 2018-19

 

March 31, 2020 Last week of June 2020
5 Other Matters: Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws. Due date falling and /or time limit expiring between March 20, 2020 to June 29, 2020 Extended to June 30, 2020
6 Sabka Vishwas Scheme Payment date extended to June 30, 2020.

No interest for this period shall be charged if paid by June 30, 2020.