Tax Insights

from India Tax & Regulatory Services

Taxation and Other Laws (Relaxation and Amendment of

Certain Provisions) Act, 2020 notified
30 September 2020

In brief
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The Government of India notified the Taxation and Other Laws (Relaxation and Amendment of Certain
Provisions) Act, 2020 (TOLA) on 29 September 2020 after receiving the President of India’s assent. The TOLA
seeks to enact legislative amendments in direct and indirect tax laws, which were introduced by the Taxation
and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (Ordinance) as a COVID-19 pandemic
relief measure. The TOLA also legislates subsequent relaxations/ notifications/ amendments announced by the
Government and the Faceless Assessment Scheme introduced by the Government, as part of its vision for a
‘Transparent Taxation - Honouring the Honest’.

In line with the introduction of the Faceless Assessment Scheme in the TOLA, the Central Board of Direct
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Taxes (CBDT) has also launched the Faceless Appeal Scheme (Scheme) on 25 September 2020 by issuing
appropriate notifications in this regard.

In detail

Extended due dates for tax compliances

The TOLA gives legislative effect to the relaxation in due dates for various tax compliances announced by the
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Government. The f ollowing is a snapshot of the extended d ue dates:

Sr. Due date given

Compliances
No. effect to

Tax deducted source (TDS)/ tax collected at source (TCS) Return f or quarter
1. 15 July 2020
ending March 2020 by the Government

TDS/ TCS Return f or quarter ending March 2020 by other than the
2. 31 July 2020
Government

Deductions for specified amount under chapter VIA of the Income-tax Act,
3. 1961 (Act) under heading-B deduction (i.e. insurance premium, contributions 31 July 2020
to new pension fund, etc.) for financial year (FY) 2019-20

4. Issuance of Form 16 for FY 2019-20 15 August 2020

5. Filing of belated and revised income-tax return (ITR) f or FY 2018-19 30 September 2020

1
No. 38 of 2020 dated 29 September 2020
2
Notification Nos. 76 & 77 dated 25 September 2020
3
Vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (No. 2 of 2020) and Notification Nos. 35
& 56 of 2020

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Tax Insights

Sr. Due date given

Compliances
No. effect to

6. Investment under sections 54 to 54GB for capital gains benefit under the Act 30 September 2020

7. Furnishing of any report of audit for FY 2019-20 31 October 2020

8. Filing of ITR f or FY 2019-20 30 November 2020

9. TDS/ TCS Returns f or quarter ending June 2020 and September 2020

10. Linking of Permanent Account Number (PAN) with Aadhar

11. Filing of Form 61A (Specified Financial Transactions)

12. Completion of assessment proceedings for FY 2017-18

13. Completion of assessment for FY 2016-17 (Transfer Pricing cases)

14. Issue of intimations under sections 143(1)/ 200A of the Act

31 March 2021
Other notices and orders or compliances for which due date falls until 31
15.
December 2020

Commencement of business operation in Special Economic Zones where a

16.
letter of approval has been received on or before 31 March 2020

Any other due date falling during the period from 20 March 2020 to 31
December 2020 f or the completion of any proceeding or passing of any
order or issuance of any notice, intimation, notification, sanction or approval
17.
by any authority, commission or Income-tax Appellate Tribunal (Tribunal)
under the specified law; or the filing of any appeal, reply or application or
f urnishing of any report, etc., under the specified law

Relaxation in computation of interest

In case of small taxpayers whose self-assessment tax liability does not exceed INR 100,000, the benefit of the
extended due date shall be available for computation of interest (if any) under section 234A of the Act.
Depending on the outstanding tax liability, post advance tax payment, even large taxpayers could avail this
benef it.
In case of an individual being resident in India who is a senior citizen and has no income under the head ‘profit
and gains of business & profession’, any self-assessment tax paid by such individual for FY 2019-20, would be
treated as advance tax discharged within the original due date of filing of return, i.e., 31 July 2020.

For delayed payments of advance tax, self-assessment tax, regular tax, TDS, TCS, equalisation levy, securities
transaction tax (STT), commodity transaction tax due between 20 March 2020 and 29 June 2020 and paid on or
bef ore 30 June 2020, reduced interest rate at 9% per annum shall apply. Further, immunity from penalty and
prosecution has been granted for the delay relating to this period.

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Amendment to deemed residency provisions

An individual is regarded as resident in India in any FY, if he stays in India for 182 days or more during the FY;
or his stay in India is 60 days or more during the previous year and 365 days or more in the preceding four FYs.
However, relaxation is provided to an Indian citizen or a person of Indian origin, who being outside India, comes
to India f or the purpose of visit, wherein the 60 days threshold as mentioned above is replaced by 182 days.

The Finance Act, 2020 amended the provisions of section 6 of the Act –
a) to reduce 182 days to 120 days for an Indian citizen or a person of Indian origin, having total income, other
than the income from foreign sources, exceeding INR 1.5m during the FY.
b) inserted clause (1A) to provide that a citizen of India having total income, other than the income from
f oreign sources, exceeding INR 1.5m during the FY will be deemed to be a resident of India if he is not
liable to pay tax in any country outside India on account of his domicile, residence, or any other criteria of a
similar nature.
c) def ined term “income from foreign sources" as income which accrues or arises outside India (except
income derived from a business controlled in or a profession set up in India).
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However, there were certain ambiguities in the amended provisions. In order to provide clarity to the individual
taxpayers, TOLA has made the following amendments to the provisions of section 6 of the Act with effect from
FY 2020-21 –

a) The reduced number of days to determine residency will apply only to a citizen of India, or a person of
Indian origin who, being outside India, comes on a visit to India.

b) The above-mentioned deeming fiction to determine the residency of an individual will not apply to an
individual who is resident in India otherwise.

c) For computation of total income, in case of deemed residency provisions, income that is deemed to accrue
or arise in India should be factored for determining the INR 1.5m threshold.

Faceless Assessment Scheme

On 13 August 2020, the Prime Minister launched the platform for ‘Transparent Taxation - Honouring the Honest’
to make the tax system ‘Seamless, Painless and Faceless’. Subsequently, the Government issued a series of
notif ications to implement the faceless assessment scheme. TOLA has legislated these provisions vide a new
section 144B, which has been inserted with effect from 1 April 2021. The provisions of section 144B of the Act
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are mostly in line with the procedure notified earlier. However, some additions have made to these provisions,
as f ollows –
• Additional procedures have been laid down in the context of faceless assessment when a taxpayer has
opted for dispute resolution panel (DRP) proceedings.

• The authorities to be assigned for assessment unit, verification unit, technical unit and the review unit have
been specified.

• Every notice, or any order, or any other communication shall be delivered to the taxpayer by way of –

a) Placing an authenticated copy in the taxpayer’s registered account; or

b) Sending an authenticated copy to the registered email address of the taxpayer or his authorised
representative; or
c) Uploading an authenticated copy on the taxpayer’s mobile app (taxpayer downloads and installs an
application software of the Income-tax Department developed for mobile devices, on its registered
mobile number).

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Vide Press Release dated 2 February 2020
5
PwC News Alert - 17 August 2020 - Central Government amends E-assessment Scheme, 2019 to conduct faceless
assessments; and PwC News Alert - 18 September 2019 - Central Government notifies E-assessment Scheme laying down
procedure for electronic assessment

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In addition, new provisions have been inserted under the Act to widen the scope of the faceless mechanism to
conduct other income-tax proceedings, which inter alia covers transfer pricing proceedings, DRP, rectifications,
giving effect to an appeal order, TDS proceedings, etc. In this regard, the following sub-sections/ sections have
been inserted in the Act, which would be effective from 1 November 2020 –

• Transf er pricing [section 92CA(8)]

• Jurisdiction of income-tax authorities [section 130]

• Collection of information [section 135A]

• Inquiry or valuation [section 142B]

• DRP [section 144C(14B)]

• Reassessment [section 151A]

• Rectif ication of mistakes, amendments and issuance of notice of demand or intimation of loss [section
157A]
• Issuance of lower/ nil withholding certificate, proceedings under section 201 of the Act, recovery of taxes
[section 231]
• Appeal to the Tribunal [section 253(8)]

• Revision of orders [section 264A]

• Giving effect to an order of Commissioner of Income-tax (Appeals) [CIT(A)], Tribunal, High Court, Supreme
Court, any other order [section 264B]

• Prosecution and compounding [section 279(4)]

• Granting approval or registration [section 293D]

The Central Government has been empowered to make a scheme, by notification in the official gazette, for
these proceedings to impart greater efficiency, transparency and accountability.

However, the penalty proceedings remain out of this scheme. The amendments in this regard are expected in
due course.

Faceless Appeal Scheme

The Finance Act, 2020 introduced provisions under section 250 of the Act empowering the Central Government
to introduce a scheme for the purposes of disposal of appeal by the CIT(A) so as to impart greater efficiency,
transparency and accountability. Thereaf ter, the Prime Minister while launching the platform for ‘Transparent
Taxation - Honouring the Honest’ had announced launching of faceless appeal on 25 September 2020.
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In line with the above, the CBDT has launched the Scheme, which provides for disposal of all appeals by the
CIT(A) in a f aceless manner, subject to certain exceptions.
For the purpose of this Scheme, Faceless Appeal Centres would be set up. The centre would comprise of a
National Faceless Appeal Centre (NFAC), Regional Faceless Appeal Centres (RFAC) and Appeal units, to
conduct the e-appeal proceedings6.

As per the Scheme, there will be no physical interface between the taxpayers or authorised representative and
the tax authorities. However, if need be, a request for personal hearing exclusively via electronic mode can be
made to present the case. The request would be accepted only if it is approved by the Chief Commissioner or
the Director General, in charge of the RFAC.
The Scheme also prescribes the procedure for automated allocation of appeal; admission of appeal; filing of
additional grounds, admitting additional evidence; e-communication of the appellate order, etc. It also provides
the procedure for penalty proceedings for non-compliance of any notice, direction or order as well rectification

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Income-tax authorities for setting up Faceless Appeal Centres notified vide Notification Nos. 80 & 81 dated 25 September 2020

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proceedings. An independent review of the draft appeal order is mandated before such order is finalised and
communicated to the appellant.

The Principal Chief Commissioner or the Principal Director General, in charge of the NFAC has been
empowered, subject to CBDT approval, to specify the format, mode, procedure and processes for effective
f unctioning of the Faceless Appeal Centres set-up under this Scheme.

Centralisation of powers for conducting survey proceedings

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On 13 August 2020, the CBDT issued an order under section 119 of the Act to ensure that survey proceedings
under section 133A of the Act, being an intrusive action, be conducted with utmost responsibility and
accountability.
The CBDT entrusted Directorates of Investigation (Investigation Wing) for the investigation wing and Principal
Chief Commissioner of Income-tax (TDS)/ the Chief Commissioner of Income-tax (TDS) for TDS charges with
an “only and exclusively” right to act as an income-tax authority, and take over these powers from the present
jurisdictional income-tax authority.

To give the necessary effect to this in the legislation, suitable amendments have been made in section 133A of
the Act with effect from 1 November 2020.

New procedure for registration/ re-registration of charitable trusts and institutions extended
The Finance Act, 2020, introduced a new procedure for registration of all existing and new charitable trusts and
institutions (under section 12AB of the Act).

To continue claiming exemption, existing registered trusts and institutions were required to apply for fresh
registration within three months from the date this section is made effective. Initially, the section was effective
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f rom 1 June 2020, which was later deferred to 1 October 2020.

To provide further relief to taxpayers given the continuing pandemic, the applicability of new provisions for
registration/ re-registration under section 12AB have been deferred to 1 April 2021. Related sections [ viz.
10(23C), 11, 12A, 12AA, 56(2), 115BBDA, 115TD and 253)] under the Act have been re-modified such that pre-
amended provisions (i.e. provisions prior to amendments made vide the Finance Act, 2020) will continue.

Charitable trusts and institutions seeking fresh registrations until 31 March 2021 can make an application under
the existing provisions of section 12AA of the Act. From 1 April 2020, the application for registrations will have
to be made under section 12AB of the Act. Registered trusts and institutions would be required to apply for re-
registration under section 12AB of the Act in FY 2021-22 on or before 30 June 2021.
Similarly, amendments made vide the Finance Act, 2020, in sections 35 and 80G of the Act for intimation, filing
statement before the income-tax authorities and furnishing certificates to donors, etc., with effect from 1 June
2020 are def erred to 1 April 2021.

Reduction in rates of TDS and TCS

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The CBDT, in May 2020, provided relaxation by reducing the TDS and TCS rate by 25% for payments made to
residents for the period 14 May 2020 to 31 March 2021. To give the necessary effect to this in the legislation,
sections 197B (for TDS) and sub-section (10A) to section 206 (f or TCS) of the Act have now been inserted and
made ef fective from 14 May 2020.
The CBDT has clarif ied that there shall be no reduction in rates where the tax is required to be deducted or
collected at higher rates due to non-furnishing of PAN/ Aadhaar. However, as per the amendment in the TCS
provisions, the higher rate of 1% under section 206C(1H) of the Act in case of non-furnishing of PAN/ Aadhaar
would reduce to 0.75%.

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F No. 187/3/2020-ITA-I dated 13 August 2020
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Press Release dated 24 June 2020
9
Press Release dated 13 May 2020

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Extension of the Vivad se Vishwas Amnesty Scheme

The Finance Minister announced the extension of time-limit for payment under the Vivad se Vishwas Amnesty
Scheme (VsV Scheme) until 31 December 2020 (from 30 June 2020) without paying any additional amount of
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10%, on 13 May 2020. In addition, the compliances falling due under the VsV Scheme during the period 20
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March 2020 to 30 December 2020 was extended to 31 December 2020. The necessary legislative
amendment has now been notified under the VsV Scheme to give effect to the above-mentioned amendments.

Category III AIF in IFSC – new tax regime

To provide tax incentives to Category III Alternative Investment Funds (AIFs) domiciled in the International
Financial Services Centre (IFSC), the Act seeks to provide a new taxation framework, summarised as follows –
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a) For AIFs
The f ollowing incomes earned by an AIF, which are attributable to non-resident investors [not being a
permanent establishment (PE) of a non-resident in India] in the AIF, shall be exempt from income-tax –
- Income accruing or arising or received on transfer of any securities (other than shares in a company
resident in India). Thus, gains on transfer of derivatives or debt securities or offshore securities shall be
exempt.
- Income f rom securities issued by a non-resident (not being a PE) and where such income otherwise does
not accrue or arise in India.

- Income f rom a securitisation trust, which is chargeable under the head ‘profits and gains of business or
prof ession’.

The income-tax leviable on the income earned by the AIF, attributable to non-residents investors (not being a
PE of a non-resident in India) in the AIF, shall be as follows –

Income Proposed income-tax rate

Income in respect of securities (such as interest, 10% (interest income on certain rupee-
dividend) denominated bonds, Government securities or
municipal debt securities referred to in section
194LD of the Act continue to be taxed at 5%)

Short-term capital gains on transfer of shares in an 15% (STT paid; else 30%)
Indian company

Long-term capital gains on transfer of shares in an 10%

Indian company

Taxes shall be withheld on income payable to the AIF at the following rates –

Income Withholding rate

Interest income ref erred to in section 194LD of the 5%

Act

10
PIB Press Release dated 13 May 2020
11
Notification No. 35 of 2020 dated 24 June 2020
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AIF is a fund established in the form of a trust or a company or a limited liability partnership or a body corporate that has been
granted a certificate of registration as Category III AIF, which is located in the IFSC, and all the units are held by non-residents
other than units held by the sponsor o r manager.

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Income Withholding rate

Income in respect of securities (such as interest, 10%

dividends)

Capital gains on transfer of securities NIL

The manner of attribution of income to a non-resident (not being a PE of a non-resident in India) and resident
investors shall be prescribed.

Surcharge on certain long-term capital gains, short-term capital gains and dividends earned by the AIF shall be
capped at 15%.

The provisions of alternate minimum tax shall not apply to the AIF.
b) For non-resident investors in the AIF

Any income accruing or arising to or received from the AIF or on transfer of units in the AIF shall be exempt
f rom tax in the hands of investors.

Capping of surcharge on dividend income earned by Foreign Portfolio Investors (FPIs)

The Act was amended earlier this year to abolish the classical system of levying dividend distribution tax on
dividends and to shift the tax incidence on dividends with effect from 1 April 2020 to the hands of the
shareholder.

Dividends earned by FPIs are taxable at 20% (excluding surcharge and cess).

The surcharge on dividends earned by non-corporate FPIs, which could have been as high as 37%, shall now
be capped at 15%.

The ef f ective tax rates for such dividends earned by non-corporate FPIs are as follows –

Income threshold Effective tax rate - Pre Effective tax rate – Post

Up to INR 5m 20.80% 20.80%

For INR 5m to INR 10m 22.88% 22.88%

For INR 10m to INR 20m 23.92% 23.92%

For INR 20m to INR 50m 26.00% 23.92%

Above INR 50m 28.50% 23.92%

This change is effective from 1 April 2020.

Power to remove difficulties

The Central Government has been empowered to remove difficulties, if any, that arise in giving effect to the
provisions of TOLA, within two years from the end of the month in which TOLA has received the assent of the
President.

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The takeaways

The TOLA has provided certainty to taxpayers on various relaxations announced by the Government, especially
those announced in the press conference that did not form part of the Ordinance.

The TOLA and the Faceless Appeal Scheme has also expanded the scope of a ‘technology-enabled
administration’ of tax proceedings. This move is a bold step towards digitisation and an insight into the
Government’s vision and road map for tax administration in the future.

Let’s talk

For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor.

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