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Income Tax Returns for AY 2020-21: Ready Referencer

With the extended time limit for filing of Income Tax Return (for AY 2020-21), u/s. 139(1), without late fees, for Non-Audit cases and for Non-Corporate assessees of 31st December 2020 fast approaching, given below is a quick guide for ready reference of some key changes that have been made in the respective Income tax return forms for this year.

Further, the conditions and features for eligibility of forms that are applicable for filing the correct income tax returns are also specified as follows:

Key Procedural Changes:

  • ITR 1 to ITR 4 can be filed using PAN or Aadhar by Individuals.
  • The submitted ITR forms display the ITR-V with a watermark ‘Not Verified’ until the same is verified either electronically by EVC or by sending the same via post after manual signing.
  • The unverified form ITR-V will not contain any income, deduction and tax details. The unverified form will only contain basic information, E-filing Acknowledgement Number and Verification part.
  • The unverified acknowledgement is titled as ‘INDIAN INCOME TAX RETURN VERIFICATION FORM’ & final ITR-V is titled as ‘INDIAN INCOME TAX RETURN ACKNOWLEDGEMENT’.
  • Return filed in response to notice u/s. 139(9), 142(1), 148, 153A, and 153C must have DIN.
  • There is a separate disclosure for Bank accounts in case of Non-Residents who are claiming income tax refund and not having a bank account in India.

COVID related Changes:

  • The Government had extended the time limit for claiming tax deduction u/CH VIA to 31st July 2020, and the details of the same need to be reported in Schedule DI (details of Investment).
  • The time limit for investing the proceeds or capital gains in other eligible assets, so as to claim exemptions u/s 54/ 54B/ 54F/ 54EC, had been extended to 30th September 2020.
  • Penal interest u/s. 234A @ 1% p.m., where the payments were due between 20-03-20 to 29-06-20 and such amounts were paid on or before 30-06-20, had been reduced to 75%, vide ordinance dated 31-03-20.
  • Period of forceful stay in India, beginning from quarantine date or 22-03-20 in any other case up to 31-03-20, is to be excluded, for the purpose of determining residential status in India.[1]

Consequences of Late filing of Return of Income:

  • Late Fees u/s. 234F of INR. 5,000 up to 31.12.20 and INR. 10,000 up to 31.03.21. In case of total income up to 5 Lacs, the penalty is INR. 1,000.
  • Penal Interest u/s. 234A @ 1% per month
  • Reduced to 75%. vide Ordinance dated 31.03.20, where the payments were due between 20.03.20 to 29.06.20, and such amounts were paid on or before 30.06.20.
  • Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.
  • In case of a belated return, loss under any head of Income (except unabsorbed depreciation) cannot be carried forwarded.
  • Deduction claims u/s. 10A, 10B, 80-IA, 80-IB, etc would not be allowed.

Consequences of Late filing of Return of Income:

  • Late Fees u/s. 234F of INR. 5,000 up to 31.12.20 and INR. 10,000 up to 31.03.21. In case of total income up to 5 Lacs, the penalty is INR. 1,000.
  • Penal Interest u/s. 234A @ 1% per month
  • Reduced to 75%. vide Ordinance dated 31.03.20, where the payments were due between 20.03.20 to 29.06.20, and such amounts were paid on or before 30.06.20.
  • Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.
  • In case of a belated return, loss under any head of Income (except unabsorbed depreciation) cannot be carried forwarded.
  • Deduction claims u/s. 10A, 10B, 80-IA, 80-IB, etc would not be allowed.

Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.

  1. Section 5A: Apportionment of income between spouses governed by the Portuguese Civil Code.
  2.  115BBDA: Tax on dividend from companies exceeding Rs. 10 Lakhs; 115BBE: Tax on unexplained credits, investment, money, etc. u/s. 68 or 69 or 69A or 69B or 69C or 69D.
  3. Inserted in sec 139(1) by Act No. 23 of 2019, w.e.f. 1-4-2020:

Provided also that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year:

  • has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or
  • has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or
  • has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or
  • fulfils such other conditions as may be prescribed,

Shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.

4. Section 57: Deduction against income chargeable under the head “Income from other sources”.

5. Schedule DI: Investment eligible for deduction against income (Ch VIA deductions) to be bifurcated between paid in F.Y.19-20 and during the period 01-04-20 to 31-07-20.

6.High-value Transaction: Annual Cash deposit exceeding Rs. 1 crore or Foreign travel expenditure exceeding Rs. 2 Lakhs, Annual electricity expenditure exceeding Rs. 1 Lakh.
7.Schedule 112A: From the sale of equity share in a company or unit of equity- oriented fund or unit of a business trust on which STT is paid under Section 112A.

8. 115AD(1)(iii) proviso: for Non-Residents – from the sale of equity share in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under Section 112A.
9. Section 40(ba): any payment of interest, salary, bonus, commission or remuneration paid to a member in case of Association of Person (AOP) or Body of Individual (BOI).

10. Section 90 & 90A: Foreign tax credit in cases where there is a bilateral agreement; Section 91: Foreign tax credit in cases of no agreement between the countries.

[1] Circular No 11 of 2020 dated 08th May 2020.

References

Image Credits: Photo by Markus Winkler from Pexels

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5 Ways Law Firms Can Ensure Client Value in the Emerging Environment

For us lawyers, the bulk of our interactions with clients and other stakeholders such as the courts, lawyers representing the other parties, the police, government officials etc. are now largely virtual as a direct result of the pandemic. In turn, this has increased our dependence on technology, reflected in terms of the quality of connectivity as well as familiarity with the digital platforms used. Naturally, all this impacts the quality of discussions and therefore, our ability to assist clients.

But the real change that has unfolded over the past few years (even before the pandemic started unfolding) has been around how clients perceive the “value” that lawyers and law firms add. To be fair, even before the pandemic hit us all, there have been rumblings about the billing models used, paying for time spent on activities not directly related to the matter, high lawyer fees and so on. All this will now come into focus even more sharply as clients become even more conscious of costs. 

The bottom line “value” that lawyers deliver to clients is the ability to obtain decisions in favour of their clients in various courts and/or quasi-judicial bodies. This in turn primarily depends on the lawyer’s knowledge and expertise- including the ability to study relevant case laws. Depending on the nature of the matter, court craft- the ability to present information and raise questions about the other side in ways that persuade the bench- also comes in. In many cases, the lawyer’s prior experience of arguing matters in front of a certain judge is also an element of value because it provides him/her with insights into the judge’s way of thinking. Just as critical is the lawyer’s ability to anticipate what the other side might do and take timely measures to mitigate the risk of such actions. In the Indian context, all this unfortunately often culminates in lawyers seeking and obtaining adjournments ad nauseam.

Taking a step back from how lawyers conventionally operate and dispassionately examining the notion of “value” to their clients, it is fair to say that law firms have plenty of room to change the manner in which they function.

Here are five aspects I believe one should consider while understanding the notion of “value” in the context of clients. 

  1. In an increasingly digital world, why should clients choose a lawyer or law firm from the same city in which the former is based? These days, courts allow documents to be uploaded in electronic format, and hearings are also conducted via digital platforms. A lot of corporate work is already done in a virtual model and this has only increased during the pandemic. In the foreseeable future, travel will only reduce, so consultations can easily be done online. Clients look for the most talented lawyer or law firm irrespective of where they are based. This means law firms should hire the best professionals out there.
  2. What lawyers primarily must do is anticipate potential problems that could arise during the execution of contracts and incorporate clauses to protect their clients. This is akin to ensuring quality at source in the manufacturing or software sectors. The tendency to use “templates” must be minimized, or at best limited to ensuring that the “standard” clauses are included. Commercial awareness and business acumen are key to ensuring that differences do not end up as legal disputes.
  3. A lot of time associated with travel, waiting at courts, etc. will now be saved; therefore, why should billing not more accurately reflect the actual time spent on the client’s case? And it can include the time lawyers and firms spend on research and planning- important activities whose value clients will fully understand.

 

  1. At least in India, many lawyers look at obtaining repeated adjournments as a strategic weapon. In some cases, it may be a legitimate avenue to help clients, but not always. Why should lawyers not change their mindset so that they focus more on obtaining a solution to their client’s problems instead of just wasting time? The lawyer’s lack of preparation or the desire to extend the case cannot and should not constitute grounds for adjournment. Remember that clients pay for time spent on hearings that simply result in the matter being deferred to another date in the future. But this change will also require a mindset change within the judiciary, which should start more actively questioning why one side is seeking frequent adjournments.
  2. Why should lawyers not develop a “solution” mindset that goes beyond litigation? Other avenues for dispute resolution, such as mediation or arbitration, must also be explored diligently. This is especially true in matters where the parties are amenable and the matter has a high probability of being resolved through alternative dispute resolution mechanisms. Think about it- a client wants a legally binding (and defensible) outcome, and not necessarily a stay, injunction, or an order issued by a court of law.

I would love to hear your views on the above, so please do leave your comments.

 

Image Credits:  Photo by Andrea Piacquadio from Pexels

Taking a step back from how lawyers conventionally operate and dispassionately examining the notion of “value” to their clients, it is fair to say that law firms have plenty of room to change the manner in which they function.

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