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Bestow Liquidity

Bestow Liquidity


In the current times the entire world is grappling with COVID-19 pandemic. The outbreak was declared a Public Health Emergency of International Concern on 30 January 2020 by the World Health Organization. All economic activity has come to a halt.  Revenues have fallen flat. There is national lockdown in the country. Mckinsey and company and various other management firms like Boston Consulting Group and Harvard business Review have had presented their report on global health and economic crisis and advocated companies around the world in the Covid situation to act promptly to protect their employees, customers, supply chains and their financial results by de-leveraging and protecting liquidity. In the current situation Covid -19 spread seems unstoppable. As a priority the companies/employer’s in the immediate are expected to take care of the interests of their employees and workers. Businesses have taken a back push in these uncertain times.

At present it is therefore much desirable to provide certain further tax reliefs to the taxpayers to bestow liquidity:-


  1. Amendment to section 36

Section 36 (1) (vii) admits of claims for deduction for bad debts. However it is desirable for the assessee to actually write off debtor account in its books as a pre-condition.

Section clause may be amended to provide for allowance of deduction even with respect to a provision made in the books given the present uncertainties on account of Carona spread and lockdowns.

  1. Increase in Standard deduction

Due to Corona event individuals are expected to maintain extra hygiene conditions and self care. These have caused increase in spending for testing, masks, sanitizers, pest treatments etc.

It is desirable to double the standard deduction under section 16 to mitigate for additional costs.

  1. Section 43B and 115JB may be suspended for one year

Considering the liquidity crunch companies must be exempted from payment of minimum alternate tax for one year. Likewise section 43B application may be suspended for one year to restore cash to companies to meet their first obligations towards their employees and workers.

  1. House property income- notional value

Sections 22 and 23 may be suitably amended to provide for tax only on actual rent received during the previous year. In other words clauses that provide for computation of annual value on notional basis be made dysfunctional for one year.

  1. Defer taxation on PF/SAF/Pension contributions by employer

Section 17 has been recently amended by Finance Act 2020 to collect tax in advance on the value of employer’s contributions to provident fund, pension fund and superannuation fund trust where the sum total  exceeds seven lakh and fifty thousand rupees in a previous year.

This collection may be deferred by one year so as to be applicable from the 1st day of April, 2022. This measure would provide much needed liquidity to the taxpayer.


CA Gopal Nathani


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