Important clarifications on extension of Financial year, Deductions and other compliance

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Whether the financial year closure is extended from 31st March to 30th June 2020?

Financial year closure is not extended. The present announcement by FM has clarified that the fake news about the extension of the financial year is getting circulated. There is no extension in the financial year closure, that is it will remain the same “year ending on 30th March”. The financial year is not extended to 30th June.

Only the date of compliances which was required by March 31, 2020 either by the taxpayers or by the tax authorities has been deferred till June 30, 2020.

Belated returns or Revised returns for the FY 2018-19 can be filed till June 30, 2020

All taxpayers who have not filed the return of income of FY 2018-19 can file or revise the return till June 30, 2020. In the normal curse, the belated income tax return cannot be filed after the end of the relevant assessment year. However, due the lockdown till 14th April, Government is allowing the filing of return of FY 2018-19 (AY 2020-21) till June 30. Readers may note that earlier there was a period of two years for filing or revising the return which is reduced to 1 year earlier.

In the FY 2019-20, Income is taxable till March 31 only and not upto June 30, that is for taxability of income financial year is considered till March 31 only.

The income of the FY 2019-20 (i.e., till March 31, 2020) will be taxable for the FY 2019-20.

Deductions under 80C, 80D, etc. can be claimed by investing till June 30.

Investment in PPF/LIC etc. which are eligible for deduction u/s 80C and mediclaim payment for claiming deduction u/s 80D can be done till June 30, 2020.

Read more: Are the tax-saving investments for FY 2019-20 allowed till June 30, 2020?

Whether income earned in between 1st April 2020 to 30th June 2020 will be taxable in the FY 2019-20?

No. Not at all. Income earned in between 01.04.20 to 30.06.20 will be taxable in the FY 2020-21. The income of the FY 2019-20 (i.e., till 31st March 2020) will be taxable for the FY 2019-20.

If the person has incurred loss in the month of April/May/June, whether he will be eligible for set off while filing the income tax return for the FY 2019-20?

It may be noted that only the date of certain compliance/investment has been extended to 30th June 2020. The closure of books of accounts will be on 31st March 2020 only. The loss incurred in the month of April/ May/ June will not be eligible for set off against income of FY 2019-20 because the income /loss till 31st March 2020 will only be considered.

New LIC, medical, PPD, NPS etc. policies taken till June 30, will be eligible for the deduction for the FY 2019-20.

There is a restriction of Rs. 1.50 lakh for deposits in the PPF A/c in one year. If the person has not deposited any amount in the PPF account till June 30, 2020 and if he deposits it in between April to June 2020, then surely he will be eligible for deduction u/s 80C in the FY 2018-19. However, as per the present PPF rule, such a person may not be able to invest again Rs. 1.50 lakh for FY 2020-21 as there is a yearly ceiling of Rs. 1.50 for deposit in the PPF Account. To take care of this situation, the Government need to amend the PPF rules to provide that Rs. 3 lakh in aggregate can be invested for the FY 2019-20 and 2020-21.

Payment of Premium of old policies of LIC/Mediclaim/PPF/NPS etc. due upto March 31, can be claimed as deduction even if paid till June 30.

If the person pays the premium which is due in April-2020 and if he makes the payment of the same before June 30, 2020, then he can get the deduction in the FY 2019-20 (AY 2020-21). Only the payment of such policies which has become due before March 31 would be considered for deduction.

Housing loan interest is eligible for deduction on accrual basis, so interest accrued till March 31 will be eligible for the deduction in FY 2019-20. However, installments due up to March 31 can be claimed as deduction even if paid till June 30.

If a person deposits the amount in April to June 2020 in his housing loan account, then he would be eligible for deduction u/s 80C subject to the condition that the amount is due till March-2020. It may be noted that interest on housing loan is eligible for deduction on accrual basis and not on payment basis. All interest which is due till March 31, 2020 even if not paid (even till June 30, 2020) is eligible for claiming in AY 2020-21itself that is this is not specific to current extension as it is there in section for all years.

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