The country has come to a standstill due to pan India lockdown to contain spreading of highly infectious Novel Coronavirus COVID-19.
As the country has come to a standstill due to pan India lockdown to contain spreading of highly infectious Novel Coronavirus COVID-19, Financial Minister Nirmala Sitharam has announced extension of cutoff dates related to income tax, GST and other compliances till June 3, 2020.
However, the extension beyond the financial year (FY) 2019-20 end date of March 31, 2020 has created some doubts. For example, if a person makes some tax-saving investment between April 1, 2020 to March 31, 2020, whether it will pertain to FY 2019-20 or FY 2020-21.
So, to remove such confusions, will it be better to extend FY 2019-20 itself? Experts, however, differ on this.
According to Archit Gupta, Founder and CEO – ClearTax, “The spread of Coronavirus or COVID-19 has shut businesses and enforced a stay at home for all of us. The Indian financial year ends on March 31, and we are at the fag end of the financial year 2019-20. The account closure as on March 31, 2020 sets the stage for preparing for audits and tax filings that will commence on April 1, 2020. The complete shut down and curbs on movement will make it difficult to close the accounts and carry out the audit procedures at the year-end March 31 and in the month of April.”
“In the present lockdown and scare of a pandemic, it is impossible to carry out the business closures, audits for the year ending March 31, 2020 and plan for the FY 2020-21 beginning April 1, 2020. An extension of the financial year until April 30, 2020 or beyond will provide sufficient time to recover from the effects of the pandemic, restart business activities, carry out audits and tax compliances,” said Gupta.
As per Gopal Bohra, Partner, NA Shah Associates LLP, “The extension in financial year will help to government department also to achieve their March 31 deadline for various compliances. For example to reopen the time barring assessment by issuing notice under section 148 or revision of assessment under section 263 or to complete the time barring penalties/assessments etc.”
“There are many more such reasons which necessitated the government to extend the financial year beyond March 31, 2020 instead of increasing the dates of various compliances in staggered manner by different regulatory authorities as the same may not resolve all the problem the tax payers or business community is facing in the present situation,” said Bohra.
According to Dr. Suresh Surana, Founder, RSM India, “There is an alarmingly high degree of uncertainty looming amidst the countrywide shutdown which would deeply impact businesses. Understandably, it would also unsettle all the regulatory compliance requirements in the critical month of March, which coincidentally is the last month of the fiscal year 2019-20.The merit of extending the financial year is that it may avoid massive write downs in valuation of inventories, financial instruments, forex losses in case the current crash in prices of commodities and financial markets is reversed.”
However, indicating problems of extending FY, Dr. Surana said, “The extension of the financial year 2019-20 would be a big practical challenge as it would have a chain impact by disrupting the periodicity of the subsequent financial years and would make the fiscal and budgetary exercise demanding.”
On the other hand, CA Karan Batra, Founder and MD of CharteredClub.com, said, “I understand it’s a problem, but a lesser problem than extending the financial year. Big companies, especially the listed ones need to prepare balance sheet on a yearly basis. Everything will go for a toss if FY is extended.”
“Moreover, if FY is extended, the current financial year will have 15 months and the next FY will have only 9 month,” he added.