Economy may need more measures to heal coronavirus wound; these new measures are likely

Updated: March 30, 2020 4:12:52 PM

The government is mulling various probabilities for either complete removal of buyback tax and LTCG Tax or providing a temporary relief thereof.

economy healing, economic recession, economic slowdown, govt measures, fiscal measures, economic package, coronavirus, covid 19It has been announced that additional relief measures may be undertaken pursuant to the assessment of the growing impact of the COVD-19 outbreak. (Bloomberg image)
  • Neeraj Sharma

With COVID-19 declared as a pandemic by WHO, major economies have ordered shutdowns across the globe. With lockdowns severely impacting the international businesses and a prediction of lower growth by credit rating agencies, the Government was forced to announce bailout packages. In India, too, various industry bodies made representations seeking relief on numerous aspects from the Government, who has attempted to manage the deteriorating business conditions effectively with certain measures. The Finance Minister, Nirmala Sitharaman, announced a slew of relief measures on 24 March 2020.

Relief Measures

Measures have been announced for various sectors ranging from financial services to corporate affairs and fisheries, below is a brief snapshot of the industry expectation, measures announced and riders, if any, pertaining to direct taxes:

In the Pipeline

Furthermore, it has been announced that additional relief measures may be undertaken pursuant to the assessment of the growing impact of the COVD-19 outbreak. As per recent reports, the Government is also mulling various probabilities for either complete removal of buyback tax and LTCG Tax or providing a temporary relief thereof. Such a move would definitely bring cheer in the stock markets as well as aid in corporate restructuring, which may become a necessity when India revives itself from the COVID-19 outbreak.

Suggestions

The Government may consider giving necessary directions to the revenue authorities while completing the audit for the years affected by COVID-19:

  • Allowance of depreciation on fixed assets, especially in the manufacturing sector, have been not used temporarily owing to the impossibility of performance;
  • Relaxation in due dates for payment of ESI/PF, under their respective statues as allowability of such payments, post the due dates prescribed under the respective statutes has always been a tug of war between taxpayers and the revenue authorities;
  • Allowance of a provision or actual loss of inventories on account of obsolescence etc. during the lockdown period.

Conclusion

The above relief measures announced by the Government are unprecedented and would be welcomed wholeheartedly by all the taxpayers. While the fine print of necessary circulars/ notifications/ legislative amendments is awaited, it still needs to be seen whether relief may also be provided on the following counts, in the near future:

  • Extension of due dates for filing of audit reports/ tax returns for FY 2019-20;
  • Extension of the timeline for the assessment time barring on 30 September 2020.

Neeraj Sharma is Senior Executive Director, Direct Tax and Regulatory – Nexdigm (SKP). Views expressed are the author’s personal. 

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