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Recently 50 Indian Revenue Service (IRS) Income Tax (IT) Officers supposedly volunteered to provide a document of suggestions called F.O.R.C.E. [Fiscal Options and Response to COVID-19 Epidemic].The CBDT has strongly condemned the release of the report in social media by stating as underCBDT disowns IRS Officers Report report circulating on social media regarding suggestions on tackling COVID-19 situation; Makes it clear that“CBDT never asked IRS Association or these officers to prepare such a report. No permission was sought by the officers before going public with their personal views and suggestions on official matters, which is a violation of extant Conduct Rules.”;While stating that necessary inquiry is being initiated in this matter, CBDT re-iterates that “the impugned report does not reflect the official views of CBDT/Ministry of Finance in any manner.”However I am giving summary of their report belowThe preface to the document prepared by them states that “this volunteering initiative tried to identify actionable areas to mobilise revenue while protecting taxpayers’ welfare as a fiscal policy response in general and response of direct taxes administration in particular.”The conclusion drawn by them is reproduced here“Thus, it is clear that:a) the Government needs to spend considerably more to revive the economy; andb) it needs to raise additional revenue, but in ways that must not burden the already distressed common man.The Government therefore has an uneviable task of spending more - As investment, relief measures, stimulus, health care etc and also balancing a fiscal deficit which will happen due to greater spending but lesser revenues due to COVID disruptions and an already faltering economy that was not growing at the pace it should.The Report expects that there will be non-compliance by taxpayers due to genuine hardship caused by the COVID-19 virus which will lead to a decline in revenue collection and also an erosion in the tax base.In summary the Report states that while there will be non-compliance and that this non-compliance may help the economy in the short run, it should not be encouraged as it will reduce tax base which will be difficult to recover. It also states that non-compliance may become a norm even when the economy rebounds and it will be hard to get people to comply. It also states that choice of non compliance will be discretionary making it unjust and inequitable.The Officers have in their report raised certain suggestionsREVENUE MOBILISATIONa) Short term measures (3–6 months)Raising of higher slab rate of tax to 40% from the existing slab rate of 30% for total income above threshold of Rs. 1 CroreAn alternative suggestion of re-introducing wealth tax for those with net wealth of Rs. 5 Crores or more. The rate of wealth tax was not specified but it could be 1–2%Increase in surcharge applicable to foreign companies having a branch office or a permanent establishment in India.They have suggested that the revenue garnered through these measures should be kept in an escrow account against which the government will identify certain specific projects or expenditure which will have a decisive impact on the economy and commit to utilising the taxes garnered through the above measures only on those items. It is suggested that the information be made public with a live spending meter to show how much is spent on what measures.COVID Relief Cess of 4% as a one time levy in cases where the taxable income is greater than Rs. 10 Lakhs so as to help finance capital investment in COVID Relief work.Currently no deduction is allowed for expenses under CSR as per Companies Act. It is suggested that companies undertaking COVID relief activities under CSR be allowed to claim as allowable expenditure for the FY 2020–21Suggested to allow payment of non-managerial staff salaries as part of CSR obligations.To include CM Relief Fund as a CSR ActivitySuggestion to devise a scheme where unusued CSR fund upto FY 2019–20 can be partly used to donate to the PM Cares Fund and balance to be used for business activity. Suggestion is 75% to PM Cares Fund and 25% to Business Purpose.To consider contribution to PM Cares Fund and CM Relief Fund as CSR not just for FY 2020–21 but also for FY 2021–22To allow deduction to PM Cares Fund u/s 80G not just in current year but to spread the benefit over the span of next three years at the option of the donor.To extend benefit of donation u/s 80G to those companies who are making a donation to PM Cares Fund and opting for new regime of lower tax rates only for the FY 2020–21. (Under new lower tax regime no deductions under Chapter VI were otherwise allowable)To issue COVID Savings Certificate like National Saving Certificate so as to mobilise money. It is proposed that person investing in such scheme will be allowed a deduction of upto Rs., 2,50,000/-. The scheme to be open to Individuals, HUF, Charitable entities and Political Parties.Amnesty Scheme for collection of undisputed demand with waiver of interest in part or full as well as undisputed penaltyb) Medium Term measures (9–12 months)Provision of tax discounts and rebates in percentage points for those tax payers who are complying in a timely manner. This will incentivise tax complianceImpose additional tax liability on corporations making base eroding payments such as interest and royalty to foreign related party. It is to be levied as an alternative tax on modified taxable income where the modified tax exceeds the normal income tax liability. This is suggested to curb tax evasion by MultinationalsReintroduction of inheritance tax. in some countries this is as high as 55%.Increasing taxes levied on Overseas Citizen of India on capital gains accruing out of inherited properties by 10%Increase in Equalisation Levy by 1% i.e. from 6% to 7% for ad services provided by non resident entities online, and from 2% to 3% for non resident e-commerce entities.Tax department can encourage the super rich and those willing, to give up at least one tax subsidy/tax deduction/ tax concession for only a year- for e.g. an individual could voluntarily opt for giving up his/her 80C deduction for a year.Other tax measuresA complete tax holiday / tax break is proposed for the next 3 years for all corporates, firms and businesses operating in the healthcare sector which is to include manufacturing of pharmaceuticals, medical grade masks, gloves, gowns, ventilators, testing labs, construction contractors involved in building of hospitals/primary health centers, etc.Tax incentives in the short run can aim at businesses that find it easier to operate with social distancing, so that their immediate economic and revenue potential can be fully maximized. However, long term tax incentives should target those workplaces which will find it harder to operate in the ‘new normal’EXPENSE RATIONALISATIONDefence Expenditure to be scaled down by postponing acquisitions where process has not kick startedExpenditure on ambitous projects like bullet train where work has not started to be held backRe-orient expenditure budget presented in February 2020 to meet funding requirement in Q1 to fight COVID. They have suggested that apart from amount set aside for infrastructure works in Ministry of Railways and Ministry of Road Transport and Highways atleast Rs. 1 Lakh Crores of capex be used for COVID works. And out of Revenue expenses, atleast 10% saving to be done equivalent to Rs. 263,014/- Crores to be used for COVIDDirect cash transfer of Rs. 3000-Rs. 5000/- a month for atleast 06 months, to beneficiaries including agricultural labourers, farmers, daily wage earners, informal sector workers and others. Economic studies have estimated this population to be around 12 crore households, comprising of 60 crore individuals.Enlarge the budget allocated to MNREGA and ensure guaranteed work for the marginalized. The scheme to focus on public works programmes such as building of rural roads, public health infrastructure, primary school buildings and the like.To support MSMEs by giving some form of wage support so that employees may be retained or given paid leaveTAXPAYER WELFAREShort Term measures:I. Measures to boost consumption and improve disposable income:i. Short term capital loss made by retail investors due to recent stock market slump should be allowed to be set off from salary income.ii. Amount spent on treatment of hospitalization due to Corona should be allowed as deduction under section 80DDB. This requires notifying Corona under Section 80DDB.iii. The bonus or any other allowances given to the employees with annual income 10 lakhs should not be considered as taxable income at the hands of employees.iv. The taxpayers can file return within due date and there will be option of paying the self assessment tax after 6 months of filing the return.v. Individual taxpayers who lost the job were allowed to defer the tax payment for 6 months or till the new job is found, whichever earlier.vi. Withdrawal from NPS and other small saving instruments should be made 100 percent tax free. This should also apply to interest chargeable on KVP.vii. Increased deduction for payment of interest over purchase of house, automobile etc. Increased deduction under section 80C can be provided for payment of interest over the loan taken for fresh purchase of property and automobiles, electronic items which have been made in India completely.II. Support for MSMEs:i. RESTORE THE CASH TRANSACTIONS LIMIT UNDER SECTION 40A (3) AND 40A(3A) TO 20000: the COVID crisis has hit the economy really hard and worst hit is the informal sector. what people would be looking for in this sector is hard cash. But a low limit of 10000 may inhibit firms from dealing with workers. a higher limit would certainly go a long way.ii. Provision for carry back of net operating losses arising in the current and previous financial year upto five years may be introduced. This provision will especially beneficial for start-ups. It will improve cash flow by way of immediate refund of taxes paid earlier.iii. Due to the current crisis, there is likely to be a significant delay in tax audits under section 44AB. Thus assesses having income unto 10 crores may be exempted from tax audit requirement for the current fiscal year only.iv. Presumptive taxation under 44AD should be allowed at 6 percent for all transactions and not just digital transactions.v. TDS deducted u/s192 for the employees can be deposited by the end of the FY, rather than monthly deposit. This will give relief for the deductors and ease the cash flow pressure for the business and able to maintain the payroll without any job cutsvi. MSME whose total tax liability is less than 5/10 lacs be given a tax moratorium (deferment only) for 1 year. It will result in a positive cash flow of 33% for thoseIII. General tax relief measures for corporates:Advance tax relief: Advance tax payment schedule may be rationalized to mandate a payment of only 25% of total taxes till September 2020 (u/s 234C of the Act) without payment of interest. or Considering the reliefs and incentives announced and proposed by the government, the viability of collection of advance tax at 25%, 55%, 80% and 100% by the respective dates can be considered. OR the tax collection may be advanced in three instalments of 50% by September 15th, 85% by December 15th and 100% by March 15th to that the government can balance the reliefs with the tax collections.The rates of interest on delayed payment of advance taxes could be lowered (to say 0.5 % per month from the existing 1%) Further, all the taxpayers had paid advance tax in 2019-2020 based on expected incomes which did not materialize in March. They have paid extra advance tax on that account. They may be allowed to carry forward some excess of the advance tax paid to this year.Corporate tax relief for stressed sectors:As a one-time measure, the option of providing reduced corporate tax rate to companies which have suffered a reduced turnover beyond a threshold (say 25%-30%) during the FY 2020-21. Certain conditions may be attached to avail the same e.g.. No reduction in no. of employees, there is no re-constitution of business by way of merger / de-merger, slump sale, amalgamation etc., no other incentives are availed etc. Such an incentive will also aid the travel and tourism industry, including the aviation sector, which has been hard-hit by the pandemic.Carry forward losses/MAT/AMT credit expiring on March 31, 2021 may be carried forward till March 31, 2022. Brought forward losses of taxpayers that will be expiring on March 31, 2021 under the provisions of Section 72 of the Income Tax Act, 1961 along with MAT and AMT credit under Section 115JAA and 115JD of the Act may be extended till March 31, 2022.The “Speedy Refund programme issued to all taxpayers without any distinction in a phased manner depends the fiscal cost involved. Including refunds witheld due to issue of scrutiny notice.Increased depreciation expenditure to promote capital expenditure such as on Building and Plant and MachineryRelief in late filing fee of ITR, TDS returns and late deposit of TDS for Q4 of FY2019-20, Q1 &Q2 of FY2020-21 provided returns were filed in time.Interest on late deposit of TDS as deductible expense during FY 2020-21Salaries deduction under section 37(1)to be made weighted average of 200 %. This will incentivize employers to not layoff workers.Section 80JJAA may be amended to provide tax relief for MSMEs at the rate of 30 percent on the wages cost, on retention of 90% of workforce at full compensation and benefits till filing of return for AY 2020-21.Losses for the previous year 2020-21 can be made a separate category and given same treatment with respect to set off and carry forward as unabsorbed depreciation.Bring some expenditure out of ambit of section 43B: firms in this crisis will face a problem of cash flows particularly interest. Hence interest payments can be allowed on due basis as an exception to this year.-Extend the benefits of depreciation for plants in backward areas of certain states to all the states.-Amendment in section 40A (13): to bring mark to market losses due to sudden change in market conditions under the ambit of deductible expenses.-The time limit for VIVAAD SE VISHWAS scheme should be extended from present 31st march 2020 to 31st December 2020 so at to benefit taxpayers who are stuck in litigation and unable to avail the scheme benefits due to lockdown.Exemptions to the sectors under section 10A, which the government has announced will be phased out can be extended for another 5 years.For businesses engaged in aviation companies (passengers), hotels, automobile, construction and real estate sector.TDS deduction for payment to businesses engaged in the aforementioned sectors may be waived off or be allowed at nominal rates to support the liquidity position of businesses.This can also be facilitated by an upward revision of the monetary threshold for TDS deduction.-For the real estate sector, the time limit construction of affordable housing project under to get tax relief under section 80-IBA should be extended from 5 years to 7 years considering the downturn in the economic activity due to the present crisis. Further, the requirements in terms of area of plot and the size and stamp duty value of residential units to allow the project to qualify for tax relief under the said section may be relaxed to benefit more projects than what was originally envisaged. Similarly,moratorium on the notional rent income from the inventory should be extended for another 3 years or till there is boom in the real estatesector, will bring more relief to the already stressed sector.Expenses incurred by companies in enabling Work from Home (WFH) for its employees can be allowed as an eligible business expense and weighted deduction of 150% can be considered. This could include steps like development of Virtual Private Networks, data storages etc.ESOP taxation benefits: It can be provided to startups under section 192 as part of the Finance Act 2020, can be extended to regular employers for the current fiscal year who as a part of cutting their expenses can deduct the salary of their employees and grant them shares, leading to equity infusion.The Government should issue a clarification stating that there would be no impact on the determination of POEM of Companies under the domestic law on account of Board meetings taking place through video conferences and extended stays of employees in India due to travel restrictions.IV. For the health sector:DEDUCTION UNDER SECTION 35AD: currently losses under section 35AD are not allowed to be set off from profits of any other business except specified business under section 35AD. This deduction under the current year for the hospital business can be allowed to be set off from other businesses. Similarly, Manufacturing of PPE, ventilators and face masks can be notified as a specified business under section 35AD to allow deduction for all the capital expenditure done in course of setting up a new business.-Deduction under 80GGA extended to 125 percent of amount paid to any research association which has as its object the undertaking of scientific research for the purpose of developing medicines or ventilators etc. to fight the Corona outbreak.Additional Depreciation should be allowed on machinery bought for manufacturing PPEs and Ventilators, masks, glovesetc. to support the activities to meet the increased demand in the covid-19 management.-“Zero tax for Healthcare workers”: The healthcare frontline workers should be given complete relief for this FY from paying tax. It is the appreciation for the courage of the corona warriors who fought this pandemic by risking their lives.V. Serving the service sector:PROVISION FOR BAD DEBTS IN CASE OF BANKS (section 36(1) (viia): this can be raised from 8.5 % to 12% for Indian banks, 7.5% for public financial institutions, SFCs, NBFCs. considering the widespread losses to business and subsequent rise in NPAs, banks would need cushioning to protect their lending ability so that economy can revive.Exemptions to IT sector under section 10A, which the government has announced will be phased out can be extended for another 5 years.VII. For NGOs to be partner in covid relief:All relief work towards Covid relief can be deemed to be considered a part of definition of charity as stipulated in the Section 2(15) of the Income Tax Act so that activities can be suitably carried out by the various charitable institutions.NGOs can be allowed an additional deemed application of 1% of their gross income to account for additional expenditures for which they may not have additional proof of expense for some time frame.Donations in cash above Rs. 10000/- to be allowed to assist the mobilization of the resources suitably by the NGOs, subject to the verification later on through the donation receipts and donor details.Expenditure in cash above Rs. 10000/- can be relaxed allowing deductions to the NGO for higher amounts subject to the verification of the bills and vouchers.Inter charity donations other than corpus donation should be allowed not restricted to the similarity of the subjects of the donor trust and the donee trust, if the purpose is covid relief and response, subject to the application determined vide Circular no 1132 dt 5-1-1978 and Instruction Number 1582 dt 19-10-1984.Substantial refunds of many trusts due to the TDS wrongfully deducted by the payers/ donors treating their payments as professional/ contractual income inspite of 12A registration of these trusts, are pending and their release must be expedited to ease the liquidity crunch which is being faced by these charitable institutions.Bringing long term capital gains and short term capital gains in definition of adjusted total income and allowing deductions on cash donations up to a certain limit. u/s 80G. Similarly, cap on overall deduction under 8OG to charitable institution can be temporarily lifted from 10 percent of total income to 25 percent, where such donation is given to charitable intuitions engaged in relief of the poor or providing medical facilities.Registered charitable organisations should be allowed to engage in activities other the ones originally mentioned in their deed of registration if it pertains to fighting the current pandemic.-The charitable trust has to spent 85% of the donations received for the purposes of the charitable trust in the same financial year or in the next financial year by giving undertaking in order to take exemption. The donations which are remaining unspent in the two years if donated to PMCARES or specific fund before return filing date, then 200% of such donation will be taken as spent for the purposes of the charitable trust.VIII. Procedural Measures to be undertaken by the Income tax department:To explore a “zero scrutiny year” for the current fiscal year. This will be a bold step but this is required at this time of crisis.Administrations may want to consider suspension of debt recovery, including suspending the garnishing of wages or bank accounts and asset seizures and sales. Otherwise, the scheme of giving 10% reduction in the arrear demand if it is paid within due date can be explored for the capable assesses.The dept. should go for minimum search and seizure operations in the current year, at least till 30 September, 2020.Deferring the applicability of proviso to Section 254 of the Act – mandatory requirement for payment of 20% of demand for stay before ITAT. Relief can also be provided by lowering the above limit of 20% to 10% to assist the taxpayers. This move will help foreign companies which are facing repetitive litigation wherein huge demands are raised on account of issues which involved substantial question of law, particularly for foreign companies.Tax payment facilitation: To facilitate the seamless and timely tax payment, taxpayers can be facilitated by following measures: Other banks which have pan-India presence can be included in the list of the authorised banks to accept tax payment. Some loan facility can be provided by the banks to the taxpayers which can be used for the payment of taxes.Taxpayers facilitation and communication: Short AVs can be released on social media encouraging taxpayers for better compliance as a patriotic contribution towards nation’s War Against COVID-19 with help of DTE. Of PR, PP & OL.T website, print, online & TV may be used for promoting these initiatives. Income Tax official website and PR,PP&OL/Spokesperson/AIIRSA may be used to give appropriate publicity to this initiative of REGION IT.UTILISE ASK CENTRES AS A “FORCE MULTIPLIER” FOR COVID-19The ASK will have an IT-COMAL Desk (INCOME TAX – COVID-19 MANAGEMENT LIASON) manned by a skeletal roster of staff. Act as a temporary single-window to receive requests/queries from taxpayers most affected by COVID-19. such as help with refunds or applications for stay of demand/grant of instalments. The Desk will push the requests to concerned http://PCIT.IT-COMAL. The Desk will also serve as a data bank for identifying business entities and Trusts who may be able to part with Central or jurisdictional state government/s in any COVID-19 related endeavour. For e.g. if Min. of Textiles needs to locate manufacturer who can be contacted for making PPE/masks etc., it can call/email the IT-COMAL Desk.The department should also consider organising a 'Facebook Live' session where it can address the queries and grievances of taxpayers in real time.Creating a Chatbot (or a virtual assistant- 'Tax assistant' like the Google Assistant) on the department website to interact with taxpayers and deal with common grievances that might arise in this situation.VPN access: The Income Tax Department itself should implement the Virtual Private Network so that it is able to work from home also and to be able to continue working in such crisis times in the future.TACKLING TAX EVASIONFocus on underreporting by those entities that should not have lower incomeAnalyse duration and intensity of industry wise lockdown, location of business etcFocus on businesses reporting losses so as to verify doubtful claims and manipulation by consolidated groupsSecure tax witholding through broader surveys and exchange of information with other agenciesWatch for scams such as investor scams, insider trading and impostor scams and to wholly tax such incomeAmnesty Scheme with 65% tax for undisclosed income where 35% will be used for COVIDVigilance on activities by charitable organisation using non invasive methods and data analytics