(BCAJ
earlier carried a feature called SPOTLIGHT for several years. Ever since
updates became nearly instant from several sources, it was stopped. However,
today the problem is of too many regulatory changes too frequently. Keeping
track of important updates is becoming increasingly difficult. This feature, in
this new avatar, seeks to bring a curated set of changes in Tax, Accounting and
Audit, and FEMA at one place every month)
DIRECT TAX
1. Employees, who have donated to PM CARES Fund,
can claim deduction u/s 80G based on the Form 16 issued by employer, since one
consolidated donation receipt will be issued by PM CARES Fund in the name of
the employer [F. No. 178/7/2020 – ITA – 1 dated 9th April, 2020].
2. Clarification regarding short deduction of TDS
/ TCS due to increase in rates of surcharge by Finance (No. 2) Act, 20l9
[Circular No. 8/2020 dated 13th April, 2020].
3. Clarification for employers for deduction of
tax from salary paid to employees, in respect of option u/s
115BAC of the Income-tax Act, 1961 [Circular No. C1/2020 dated 13th
April, 2020].
4. In view of the prevailing situation due to the
Covid-19 pandemic across the country, reporting under clause 30C and
clause 44 of the Tax Audit Report kept in abeyance till 31st
March, 2021 [Circular No. 10 /2020 dated 24th April, 2020].
5. Clarification on provisions of Direct Tax Vivad
se Vishwas Act, 2020 – Circular No. 9/2020 dated 22nd April,
2020 [Corrigendum to Circular No. 9/2020 – dated 27th April,
2020].
6. Clarification in respect of exclusion of
number of days of stay in India for the purpose of determining residency
u/s 6 of the Act [Circular No. 11/2020 dated 8th May, 2020].
7. The rates of Tax Deduction at Source (TDS) for
the non-salaried specified payments made to residents
have been reduced by 25% for the period from 14th May, 2020 to 31st
March, 2021 [Press Release dated 13th May, 2020].
ACCOUNTS AND AUDIT
A. Extension
of the last date of filing of Form NFRA-2 – The time
limit for filing of Form NFRA-2 for FY 2018-19 will be 210 days from the date
of deployment of the form on the NFRA Website. [MCA General Circular No.
19/2020 dated 30th April, 2020.]
B.
Communication with Retiring Auditor through E-mail – During
the lockdown period, members may communicate with the retiring auditor vide
e-mail. Acknowledgement must be received from the retiring auditor’s
Institute-registered / official e-mail address in which case the same would be
deemed to be valid evidence of positive delivery of communication. [ICAI’s
Decision dated 1st May, 2020.]
C. Going
Concern – Key Considerations for Auditors amid Covid-19 – Auditing guidance
that focuses on implications of the pandemic for the auditor’s work related to
going concern and includes specific FAQs to deal with various situations in the
current environment. [ICAI’s Guidance dated 10th May, 2020.]
D.
Relaxation from publishing quarterly consolidated financial results under Reg
33(3)(b) of SEBI LODR – Listed entities that are banking
/ insurance companies or having subsidiaries that are banking / insurance
companies may submit consolidated financial results for the quarter ending 30th
June, 2020 on a voluntary basis. However, they shall continue to submit the
standalone results. If such listed entities choose to publish only standalone
financial results, they shall give reasons for the same. [SEBI Circular No.
SEBI/HO/CFD/CMD1/CIR/P/2020/79 dated 12th May, 2020.]
E. Physical Inventory Verification – Key Audit
Considerations amid Covid-19 – Auditing guidance covering
alternative audit procedures where it is impracticable for auditors to attend
physical inventory counting and related implications for the Auditor’s Report. [ICAI’s
Guidance dated 13th May, 2020.]
F. Auditor’s Reporting – Key Audit Considerations
amid Covid-19 – Auditing Guidance covering impact of
Covid-19 pandemic on (i) the auditor’s report, (ii) reporting under CARO 2016,
and (iii) reporting on Internal Financial Controls with reference to Financial
Statements. [ICAI’s Guidance dated 17th May, 2020.]
G. Advisory on disclosure of material impact of
Covid-19 pandemic on listed entities under SEBI (LODR) Regulations
– Listed entities encouraged to disclose impact of the pandemic on their
business, performance and financials. Illustrative list of disclosures
includes, estimation of the future impact of Covid-19 on operations; details of
impact on capital and financial resources; profitability; liquidity; debt
servicing ability; internal financial reporting and control; etc. [SEBI
Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/84 dated 20th
May, 2020.]
FEMA
(I) In view of the Covid-19 pandemic, the period
of realisation and repatriation of the full export value of goods or software
or services for exports made up to 31st July, 2020 has been
increased by the Reserve Bank of India from nine months to 15 months. The
similar period for exports to warehouses, however, remains unchanged at 15
months. [A.P. (DIR Series) Circular No. 27 dated
1st April, 2020.] The FEM (Export of Goods and Services)
Amendment Regulations, 2020 enabled the Reserve Bank to specify the period of
realisation and repatriation in the above cases in consultation with the
Government [FEMA 23(R)/(3)/2020-RB dated 31st March, 2020].
(II) As per the announcement made in Union
Budget 2020-21, certain specified
categories of Central Government Securities (G-Secs) were to be opened up fully
for non-resident investors without any restrictions. RBI has now introduced
a separate route – ‘Fully Accessible Route’ (FAR) for such investment by
non-residents in G-Secs from 1st April, 2020. Its main features
are the following:
(a) FAR is available to eligible investors which
are defined as any ‘person resident outside India’ as per section 2(w) of FEMA.
(b) Investment can be made in all securities as
periodically notified by the RBI. The securities covered for this purpose, with
effect from 1st April, 2020 are notified vide Circular No.
FMRD.FMSD.No.25/14.01.006/2019-20 dated 30th March, 2020.
(c) There shall be no quantitative limit on
investment. The minimum residual maturity requirement, security-wise limit and
concentration limit would also not apply to investors under FAR.
(d) Existing investments by eligible investors in
specified securities shall be considered under FAR.
(e) FPIs have been provided one year to readjust
their investments to comply with the revised requirements under the Medium Term
Framework (MTF). Further, the MTF itself has been revised for FY 2020-21 vide
A.P. (DIR Series) Circular No. 30 dated 15th April, 2020.
[FAR
Directions – A.P. (DIR Series) Circular No. 25 dated 30th March,
2020.]
(III) Existing facilities for
non-residents and residents to hedge their foreign exchange risk on account of
transactions permitted under FEMA have been revised following the
announcement in the Statement on Developmental and Regulatory Policies dated
5th December, 2019. The revised facilities broadly provide for:
(a) A User Classification Framework has now been
provided and authorised dealers shall offer derivative contracts to a user as
this framework. The framework classifies users as retail and non-retail users.
Non-retail users are all entities regulated by a financial sector regulator;
EXIM Bank, NABARD, NHB and SIDBI; companies with minimum net worth of Rs. 500
crores; and persons resident outside India other than individuals. All other users
are classified as retail users. Complex derivative contracts are not available
to retail users.
(b) Amongst other conditions, users may undertake
over the counter (OTC) currency derivative transactions for derivative
contracts involving Indian rupees up to US$ 10 million without the need to
evidence underlying exposure.
(c) Banks shall be provided with the discretion, in
exceptional circumstances, to pass on net gains on hedge transactions booked on
anticipated exposures in case specified conditions are met.
[A.P. (DIR
Series) Circular No. 29 dated 7th April, 2020.]
The revised
directions were supposed to come into effect from 1st June, 2020,
but have been postponed to 1st September, 2020 in view of the
pandemic. Directions on the participation of banks in Offshore Non-deliverable
Rupee Derivative Markets issued vide A.P. (DIR Series) Circular No. 23
dated 27th March, 2020 will come into effect from 1st June,
2020 as hitherto [A.P. (DIR Series) Circular No. 31 dated 18th
May, 2020].
(IV) To counter opportunistic
takeovers / acquisitions of Indian companies during the current pandemic by
China, Regulation 6(a) of Non-Debt Instrument Rules has been amended to
provide that investment into India under Schedule I (Foreign Direct Investment)
will be allowed only with Government approval in the following cases:
(a) By an entity from a country which shares a land
border with India;
(b) Where the beneficial owner of an investment into
India is situated in a country which shares a land border with India, or is a
citizen of such a country;
(c) By a citizen of Pakistan or an entity
incorporated in Pakistan in sectors or activities other than defence, space,
atomic energy and such other sectors or activities prohibited for foreign
investment;
(d) Where transfer of ownership of any existing or
future FDI in an entity results in beneficial ownership of such entity falling
within restricted categories as per all the provisos mentioned in points
(a) to (c) above.
[Notification No. S.O. 1278 (E)
dated 22nd April, 2020. Similar
amendment made to Para 3.1.1 of Consolidated FDI Policy 2017 vide Press Note No. 3 dated 17th
April, 2020.]
