RBI’s Dec 31 deadline on tokenization: What does it mean for you?

RBI’s Dec 31 deadline on tokenization: What does it mean for you?

  • With tokenization, the entities involved in the transaction do not have to memorize what the card entails on either end since it is converted into a unique ‘token’ that facilitates the payment
  • Tokens and tokenization are terms that have been used often, recently. The Reserve Bank of India brought in CoF (card on file) tokenization guidelines that mandate replacing actual card data with encrypted digital tokens to facilitate and authenticate transactions.
  • Therefore, starting from January 1, 2022, the use of one’s credit or debit cards while shopping on any online platform such as Flipkart, Amazon, Myntra, Nayka etc., will change. One will not have to save one’s 16-digit card number along with the card’s expiry date on the website. As per RBI’s new rules, the only way one will be conveniently making a card payment repeatedly is through the process called ‘tokenization.’

What is CoF Tokenization?

Tokenization is a process that replaces sensitive information with a unique set of characters.

Shailesh Paul – Head, Merchant Sales, Acquiring and Cyber Source, India and South Asia at Visa says, “When applied to payments, tokenization essentially means that the 16-digital card number is replaced by a unique code or ‘token’ – useful for mobile or online transactions. This devaluation of sensitive data that tokenization facilitates, helps to mitigate any risks of security breaches.”

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In March 2020, the RBI said that payment aggregators and their on boarded merchants must not save the card details of users. Therefore, the RBI has allowed card issuers to offer card tokenization services as Token Service Providers (TSPs). This will be facilitated through consumer consent and will require an ‘Additional Factor of Authentication (AFA)’. With tokenization, the entities involved in the transaction do not have to memorize what the card entails on either end since it is converted into a unique ‘token’ that facilitates the payment.

The deadline to align with this mandate is January 1st 2022. Till then, any previous data that has been stored also needs to be deleted.

How Tokenization will benefit consumers at large to adopt digital payments?

Industry experts say tokenization does not affect the payment process or customer experience directly but adds another layer of security to the transactions. It assures that an individual’s sensitive details remain with them while they transact, thereby nullifying all risks associated with the vulnerability of data.

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Impact of the deadline of December 31, 2021

Experts say merchants are a crucial part of the transaction chain. “As tokenization comes about, they will have to make an effort to deploy tokenization for their customers. This is a complex task, requiring consent and co-operation from different players who are at varying levels of readiness. There is no change in the processes of chargebacks, disputes and the like, during the migration phase or post-implementation,” says Paul.

Having said that, RBI has mandated tokenization for merchants, not customers. An individual will still be able to choose whether or not they want their cards to be tokenized. Should a customer choose to not tokenize their card, they will have to enter their full card details, CVV and other details every time they make an online or mobile transaction, which will make the process tedious and lengthy. It is so because RBI has also mandated that all card details that had been saved with merchants up until now, have to be deleted.

Why is it necessary for taxpayers to break down dividend income by quarter?

Why is it necessary for taxpayers to break down dividend income by quarter?

The deadline to file an income tax return (ITR) for the assessment year 2021-22 is December 31st. As a result, when submitting ITRs, income taxpayers should keep in mind some adjustments made by the IRS.

One such change that a taxpayer cannot afford to overlook while completing ITR for AY 2021-22 is the reporting of dividend income. Taxpayers must now break down their dividend income by quarter. It will assist them in reducing their income tax liability.

 “Changes in dividend income tax that a taxpayer needs to remember while filing ITR for AY 2021-22,” “Dividend income up to ten lakh rupees in a single year was not taxable for taxpayers prior to the Financial Year FY21 because organizations had to pay a Dividend Distribution Tax (DDT) before making dividend payments. Those who got dividends of more than ten lakh rupees, on the other hand, used to pay only ten percent tax on the dividend payout. The Government, however, has made dividends distributed by an organization taxable beginning in FY21.”

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 Income taxpayers to report quarter-by-quarter breakup of dividend income when filing ITR for AY 2021-22 “Taxpayers must now provide a quarter-by-quarter breakdown of dividend income received in a financial year in order to calculate interest for failure to pay an advance tax liability. It will assist taxpayers in reducing their income tax liability, as taxpayers must now pay advance tax in the quarter in which dividend income is received.

The Internal Revenue Service is urging taxpayers to file ITRs before the December 31 deadline.

” Even for a regular income taxpayer, if there is dividend income, it must be declared in quarter-by-quarter split, or their ITR form would be rejected.

To prevent having one’s ITR form rejected, the taxpayer must state the following dividend income breakup:
  •  From April 1st to June 15th, 2020;
  •  From June 16th to September 15th, 2020;
  •  From September 16, 2020, through December 15, 2020;
  •  From December 16, 2020, to March 15, 2021; and
  •  From March 16th to March 31st, 2021.

Know why ITR reporting deadline for FY 2020-21 may be extended to December 31

Know why ITR reporting deadline for FY 2020-21 may be extended to December 31

The deadline to submit an income tax return (ITR) for the fiscal year 2020-21 is December 31, 2021. This deadline has already been pushed back twice, first from July 31 to September 30, 2021, and again to December 31, 2021. Chartered accountants and tax specialists, on the other hand, believe that there is a rationale for extending the ITR reporting date for people (whose accounts are not required to be audited)

In comparison to the previous fiscal year, FY2019-20, fewer taxpayers have filed their ITR this year in FY2020-21. According to a tweet from the Income Tax Department’s official Twitter account on January 11, 2021, more than 5.95 crore ITRs were filed for FY 2019-20. 

(January 10, 2021 was the last date to file ITR for FY2019-20). However, data shows that a little more than 3.59 crore ITRs had been filed as of December 15, 2021. With fewer than 15 days until the deadline of December 31, 2021, 2.36 crore ITRs are yet to be filed.

With less than 15 days to go, it’s probable that the rest of the people will be unable to file their tax returns due to the numerous faults that have been recorded on the newly established income tax system. It remains to be seen whether the newly opened e-filing income tax portal can handle the volume of people reporting ITRs at the same time in such a short period of time.

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Furthermore, for FY 2019-20, the government delayed the deadline for filing ITRs three times – initially from July 31 to November 30, then to December 31, and finally to January 10, 2021. The extension was granted despite the fact that the old tax filing portal was still in use, and there was no fear of new Covid-19 variations at the time.

“For individual taxpayers who are not subject to a tax audit, the extended deadline for filing taxes is December 31, 2021. Several issues with the new JSON utility continue, making it difficult for taxpayers to file their tax returns by the deadline. For example, problems in the utility linked to the computation of qualified donations and losses on residential property under the simplified tax regime must be resolved quickly. There are also operational difficulties. 

For example, the e-filing platform is excessively slow, and without an Indian cell phone or net banking, filing Form 67, which is essential for claiming foreign tax credit, and changing the password is still not possible. Furthermore, the AIS and TIS were just recently made accessible, leaving taxpayers with very little time to evaluate them before the end of the year.

Frequent Errors That Taxpayers Should Avoid While Preparing Tax Returns.

“In comparison to last year, around 50% of people have been able to file their tax returns. As a result, more than 3.5 crore tax returns must be filed in the next 15 days, which is a massive amount. Furthermore, the income tax website is brand new this year, with features such as pre-fill data, the Annual Information Statement (AIS), the Taxpayer Information Summary (TIS), and more. We anticipate the administration will make an informed choice in the next 5 to 10 days after considering all of the elements and scenarios.”

“The Income Tax Department has put out the Annual Information Statement (AIS), which gathers extensive financial data of the taxpayer, beginning with the financial year 2020-21 (i.e. for the year ended March 2021).” As a result, it is critical for the taxpayer to ensure that they have not only reconciled their income and reporting requirements with the Form 26AS, but also that they have thoroughly checked their reportable transactions / income that appears in the AIS. 

For the Financial Year 2020-21, the AIS database was just made available, which has resulted in an additional level of review that the taxpayer must complete before completing their tax return. AIS provides extensive information such as interest on bank accounts, securities transactions, mutual fund transactions, overseas transfers, deposit data, and so on. Given the income tax department’s delay in releasing AIS data on the new income tax portal, taxpayers must be given appropriate additional time to complete the process and ensure that their returns are complete in terms of income reporting and disclosure obligations.”