Date extension: Clarification given on investment instruments, but no mention of NPS!

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Published: April 2, 2020 11:36:08 PM

Due to nationwide lockdown, it has become difficult for many taxpayers and investors to invest on time to avail tax benefits for the Financial Year 2019-20.

Coronavirus Outbreak, COVID-19, Novel Coronavirus COVID-19, income tax, tax-saving investments, 80C, 80D, 80CCD(1B), 80G, PPF, SSY, NPS, NSC, RD, small saving schemesTaxpayers face problems, as FY 2019-20 ended on March 31, 2020 in the midst of the nationwide lockdown.

As people get locked down to ensure that social distancing is maintained to contain spread of highly contagious Novel Coronavirus COVID-19, it has become difficult for many taxpayers and investors to invest on time to avail tax benefits for the Financial Year (FY) 2019-20.

As the financial year ended on March 31, 2020 in the midst of the nationwide lockdown, to provide a relief to the affected investors complete their tax-saving investments for the year, Finance Minister had said that, “Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalisation Levy law, Vivad Se Vishwas law where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.”

However, in absence of specific sections under which extensions were given, there were thorough confusion among Asset Management Companies (AMCs), insurance companies, financial institutions, intermediaries and even Post Office, whether taxpayers, who missed the deadline, would be able to avail tax benefits by investing in popular tax-saving investments like – Public Provident Fund (PPF), National Savings Certificate (NSC), life insurance policies, National Pension System (NPS) and also through health insurance u/s 80D and donations u/s 80G or not.

Also Read: NPS Tier 1 contribution stopped despite due date extension for tax saving investments

Amid confusion, contributions for NPS was discontinued, while the Department of Post and other institutions and intermediaries sought clarification from the government.

To make the things clear the Ministry of Finance came to rescue. First the Department of Economic Affairs on March 30, 2020 made it clear that investors may make their investments till June 30, 2020 to keep their PPF, SSY (Sukanya Samridhhi Yojana) and NSRD (National Saving Recurring Deposit) accounts active.

Also Read: Corona Lockdown – Failed to make PPF, SSY deposits? Your a/c won’t become inactive

Subsequently, on March 31, 2020, the Department of Revenue issued a press note saying, “The date for making various investment/payment for claiming deduction under Chapter-VIA-B of IT Act which includes Section 80C (LIC, PPF, NSC etc.), 80D (Mediclaim), 80G (Donations), etc. has been extended to 30th June, 2020. Hence the investment/payment can be made up to 30.06.2020 for claiming the deduction under these sections for FY 2019-20.”

Although 80CCD also comes under Chapter-VIA, but the press note didn’t specifically mention if the due date for voluntary contributions to Tier 1 Account to NPS u/s 80CCD(1B) has been extended or not to avail tax deductions up to Rs 50,000 over and above the 80C limit of Rs 1.5 lakh in a financial year.

So, unless a specific clarification is issued in this regard, voluntary contributions to Tier 1 Accounts of NPS from April 1, 2020 would be considered as contributions for the FY 2020-21.

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