On 1st February 2021, FM Nirmala Sitharaman has announced some changes in income tax rules that will help ease the compliance for the taxpayers. Here are the top 10 income tax changes in budget 2021.
10 Income Tax Changes in Budget 2021
FM Smt. Nirmala Sitharaman did not announce any changes in the Income Tax slab for FY 2021-22 but have changed some rules to help ease of compliance for taxpayers. Here are the details of income tax changes in budget 2021-
Pre-filed ITR Forms– For ease of compliance, ITR to have details of salary, TDS, tax payments, etc., and also have pre-filled information on dividend, interest, and capital gains from listed securities.
Dividend payment to REIT/InvIT- The governmnet proposed to make dividend payment to REIT/InvIT exempt from TDS.
Further, the amount of dividend income can not be estimated correctly by the shareholders. For paying advance tax, the government proposed that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. It means that taxpayers will not be required to estimate their dividend income while making advance tax payments.
Higher rate of TDS for non-filing of Income Tax Returns- From FY 2021-22, it is proposed to insert a new section 206AB in the Income Tax Act.
Section 206AB will provide for the higher rate of TDS for the non-filers of Income Tax Return. The proposed TDS rate will be higher of the
a) twice the rate specified in the relevant provision of the act or b) twice the rate or rates in force or c) rate of 5%
Read Full Details Here-
Senior citizen exemption- In Budget 2021, it is announced that senior citizens above the age of 75 years, who only have pension and interest as a source of income will be exempted from filing the Income Tax Returns but they are not exempted from payment of tax.
Read Full Article Here- Section 194P- No ITR Filing for Senior Citizen aged above 75 years
Tax on Unit Linked Insurance Plan (ULIPs)- As per the changes, proceeds from ULIPs issued on or after February 1, 2021, will be taxable as capital gains (except when received on death), if the annual premium exceeds Rs. 2.5 Lakh in any year.
Where a taxpayer pays the premium for more than one ULIP, the exemption shall apply to those ULIPs where the aggregate premium does not exceed Rs. 2.5 Lakh.
Budget 2021 Announcement of LIC IPO- The Initial Public offering of LIC may hit the market in the fourth quarter of 2021
EPF Contribution- Interest on employers’ share of contribution to EPF on or after 1st April 2021 will be taxable at the stage of withdrawal if it exceeds Rs. 2.5 Lakh in any financial year.
LTC Scheme- The budget 2021 has proposed to provide tax exemption to cash allowance in lieu of Leave Travel Concession (LTC). The scheme was announced by the government in the last year for individuals who were unable to claim their LTC tax benefit due to covid-related restrictions on traveling.
Separate Dispute Resolution Committee- As a measure to reduce litigation for small taxpayers where returned income is up to ₹ 50 lakh and the total amount of variation is up to ₹ 10 lakh in a specified order, a separate dispute resolution committee to be set-up.
Time Limit for Bleated/revised return reduced- As per the amendments, the last date to file a revised income-tax return or belated return on a voluntary basis now stands at December 31 after the close of the financial year.
Tax Holidays on affordable housing extended- To give a boost to the housing sector, the government extended the additional tax deduction of ₹ 1.5 lakh on interest paid on housing loans for the purchase of affordable homes by one more year to March 31, 2022. The additional deduction of ₹ 1.5 lakh over and above ₹ 2 lakh was introduced in the 2019 budget. This was allowed for those buying homes for the first time and of up to ₹ 45 lakh cost.
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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)