Finance Minister Nirmala Sitharaman on Monday presented Union Budget 2021-22 in the Parliament in which she has not announced any changes in the income tax slab. However, the budget contains various relief measures and proposals to facilitate ease of compliance for the taxpayers. Senior citizens who are aged 75 or above, earning only pension or bank interest income, are not required to file income tax return. The budget also proposes taxing certain income such as interest accruing in relation to Provident Fund contributions exceeding specified limit, which are presently not subject to tax. Tax exemption for affordable housing further extended by 1 year. Central government will announce rules to determine the manner and year of taxability of income from overseas retirement funds opened by a resident taxpayer while he was a residing in a foreign country.
Here are 10 things an individual tax-payer should know-
1. Advance tax will now be payable only when dividend is declared or paid by the company. This will save payment of interest by taxpayer due to underestimation while paying advance taxes.
2. Proceeds from ULIPs issued on or after February 1, 2021 will be taxable as capital gains. if the amount of premium exceeds Rs 2.5 lakh in any year (except when received on death). Where a taxpayer pays premium for more than one ULIP (issued after February 1, 2021) exemption shall apply to those ULIPs where aggregate premium does not exceed Rs 2.5 lakh.
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3. Senior citizens, aged 75 or above, who are residents of the country, earning only pension and bank interest income (from the same bank where pension is credited) are not required to file income tax return. On the basis of declaration submitted by such a taxpayer, bank has to compute taxable income and deduct tax thereon.
4. In addition to salary income, bank accounts, tax payments and TDS details, pre-filled income-tax returns will now also include details of capital gains from listed securities, dividend income, interest from banks, post office etc.
5. Interest on employee’s share of contribution to EPF on or after April 1, 2021 will be taxable at the stage of withdrawal if it exceeds Rs 2.5 lakh in any year. This will lead to additional tax liability, especially for HNIs, who make higher contributions, and will also discourage voluntary EPF contributions. Coupled with taxation of aggregate employer’s contributions in excess of Rs 7.5 lakh to EPF, NPS and superannuation fund and interest thereon introduced last year, this may make EPF an even less attractive retirement scheme.
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6. Middle-class first-time home buyers will get enhanced deduction of Rs 1.5 lakh (over and above the existing deduction of Rs 2 lakh) for interest on housing loan for a house valued up to Rs 45 lakh if the loan is taken before March 31, 2022 (earlier March 31, 2021) as tax exemption for affordable housing further extended by 1 year.
7. Central government will announce rules to determine the manner and year of taxability of income from overseas retirement funds opened by a resident taxpayer while he was a residing in a foreign country. This will provide relief from hardship faced on account of double taxation due to mismatch in timing of taxation in different countries
8. Time limit for filing delayed / revised income-tax return is reduced by 3 months. The last date to file income-tax return now is December 31 after the close of tax year. Similarly, timeline for completion of assessment has been reduced by 3 months. While this will reduce the overall tax compliance timelines, it may create practical difficulties for taxpayers with overseas income in claiming tax exemption or relief where such benefit is dependent on tax filing in the other country.
9. Dispute Resolution Committee (DRC) to be set up to help taxpayers with taxable income of up to Rs 50 lakh, and disputed income up to Rs 10 lakh. All proceedings before DRC to be faceless and jurisdiction-less. This will reduce litigation and provide impetus to small and medium taxpayers to settle disputes at initial stages.
10. National Faceless Income-tax Appellate Tribunal Centre proposed to be set up for all second-level appeal cases.
