10 income tax changes announced in Budget taxpayers should know

Finance Minister Nirmala Sitharaman did not announce big changes in income tax rules in Budget 2021 But she announced many changes that will ease compliance for taxpayers

10 income tax changes announced in Budget taxpayers should know

In Budget 2021, Finance Minister Nirmala Sitharaman announced some tweaks in income tax rules that will help ease the compliance for taxpayers. Tax experts have welcomed the move. "No increase in taxes and no Covid cess. However, no increased deductions either," said Asrujit Mandal, Partner - Tax & Regulatory Services, BDO India. Pre-filled tax returns with details of bank and post office interest, capital gains and dividends will help taxpayers in capturing income more accurately, he said.

Here are 10 changes announced in Budget 2021 taxpayers should know:

1) To ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. already come pre-filled in income tax returns. To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also come pre-filled.

2) For ease of compliance, the government proposed to make a dividend payment to REIT/ InvIT exempt from TDS. Further, as the amount of dividend income cannot 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. In the previous budget, the government had abolished dividend distribution tax to incentivise investment and dividend was made taxable in the hands of shareholders.

Higher TDS for non-filers of income tax returns: Budget 2021 proposed to insert a new section 206AB in the Income Tax Act as a special provision providing for a higher rate for TDS for the non-filers of an income tax return.

The proposed TDS rate in this section is higher of the followings rates:-

Twice the rate specified in the relevant provision of the Act; or

twice the rate or rates in force; or

the rate of 5%

3) To ease the compliance for senior citizens, the government exempted individuals above 75 years of age from filing income tax returns (ITR), subject to some conditions: In cases where the senior citizen is earning pension income and interest income. The government will be notified a few banks where account holders will be eligible for this exemption. The individual will be needed to furnish a declaration to the specified bank.

4) Once the declaration is furnished, the specified bank would be required to compute the income of such senior citizen after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A of the Act, for the relevant assessment year and deduct income tax based on rates in force. Once this is done, there will not be any requirement of furnishing return of income by such senior citizen for this assessment year.

5) Budget 2021 has brought Unit Linked Insurance Plans (ULIPs) under tax bracket. Currently, the redemption of ULIPs is tax-exempt provided the total premium payable for the policy does not exceed 10% of the assured sum.

Under the new proposals, the redemption of ULIPs issued on or after 1 February 2021 where the annual premium payable by the individual exceeds 2.5 lakh would be subjected to capital gains tax, at par with equity-oriented mutual funds.

6) Interest income on own contributions made by an employee above 2.5 lakh in a year on or after 1 April 2021 to provident fund is now taxable. Currently, any accumulated balance is treated as tax-exempt underprovided the employee has rendered continuous service of five years or more.

7) Employees can still avail exemption for leave travel concession (LTC) of one-third of specified expenditure or 36,000 whichever is less, for the block of 2018-21, if they have incurred expenditure on purchase of goods/ services liable to GST @ 12% or more, provided the payment is made via non-cash mode and incurred during the period 12 October 2020 to 31 March 2021. The amendment is proposed to be for FY20-21 only.

8) "As a measure to reduce litigation for small taxpayers where returned income is up to 50 lakh and the aggregate amount of variation is up to 10 lakh in a specified order, a separate dispute resolution committee to be set-up," said Aditya Hans, Partner, Dhruva Advisors LLP.

9) "Time limit for filing belated or revised returns curtailed by three months i.e. For AY 2021-22, the last date for belated/revised return would be 31 December 2021 (instead of 31 March 2022)," he added.

10) To give a fillip to the housing sector, the government extended the additional tax deduction of 1.5 lakh on interest paid on housing loan 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.

Source: LiveMint