The 2021 budget has placed the tax rates on taxable income untouched. FM Sitharaman, meanwhile, revealed certain adjustments to the income tax laws that will hopefully facilitate taxpayer’s enforcement. The top 10 revenue tax reforms reported in Budget 2021 that taxpayers must consider are as follows:
1. ITR forms that are pre-filled: In order to simplify compliance, ITR will have pre-filled details on dividend, interest & capital gains. Details of capital gains from listed securities, dividend revenue, and interest income from banks, the post office, and so on. will also be pre-filled in order to help simplify the submission of returns.
2. Contribution towards EPF: At the withdrawal time, interest on the employee’s portion of the contribution to the EPF on or after April 1, 2021 will be subject to taxation if it surpasses 2,5 lakh in a year. This will result in increased tax obligation, particularly for HNIs that render higher contributions, which will also deter contributions from the voluntary provident fund (VPF). This may render EPF a much less appealing retirement fund, along with taxes of cumulative employer contributions in lieu of 7.5 lakh to EPF, NPS and superannuation fund and interest accretion levied last year.
3. Payments of dividends towards REIT/ InvIT: The government announced allowing dividend payments to REIT/InvIT exempted from TDS for convenience of enforcement. Furthermore, because the amount of dividend payments cannot be properly calculated by the owners in respect of the payment of the advance tax, the government has announced that the advance tax obligation for dividend income should only occur after the dividend declaration/payment has been made. In the former budget in order to stimulate investment, the government abolished the dividend payment tax and the dividend was rendered taxable in the hands of owners.
4. Higher TDS for non-filers of tax filings on wages: Budget 2021 introduced the enactment of a separate section 206AB in the Income Tax Act as a specific clause allowing for a higher threshold for income tax returns for non-filers of TDS. In this clause, the projected TDS rate is higher than as follows: Multiple times the rate stated in the Act’s applicable clause; or twice the rate or rates in force; or the 5 percent rate. As per the Income Tax Act, 1961 or Relevant DTAA rate, the term “Rate in force” implies rate, whichever is more advantageous.
5. No income tax filing is necessary for seniors over 75 years old: In an attempt to render life simpler for individual taxpayers, Finance Minister Nirmala Sitharaman declared in the 2021 Union Budget that senior citizens above 75 years of age who only have a pension and an interest benefit as a source of income will be exempted from filing of IT returns. No exemption from paying tax is given to senior citizens aged 75 years of age. That being said, once they satisfy certain guidelines, they are excluded from submitting an income tax return (ITR). Only in the situation where interest income is received in the same bank where the pension is held will the exemption from submitting income tax returns be necessary.
6. Tax is necessary on ULIPs: Revenues received on or after 1 February 2021 from ULIPs will be taxable as capital gains if the annual premium of either year reaches 2.5 lakh. If a taxpayer spends a premium for more than one ULIP given after the exemption of 1 February 2021, those ULIPs are entitled to the exemption if the cumulative premium does not surpass 2,5 lakh. The distinction between ULIPs and equity mutual funds, a lengthy requirement of the mutual fund sector, has come to a close with this initiative.
7. Tax in advance: While making advance tax payments, taxpayers won’t be forced to forecast their dividend revenue. Advance tax will now be due only when the corporation reports or dividend yield. Here before, taxpayers used to incur interest in the advanced tax estimate owing to the undervaluation of dividend profits. Yet taxpayers are going to get assistance on this aspect with the latest initiative.
8. Tax exemption on LTC scheme: Instead of the Leave Travel Concession, the Union Budget for 2021-22 introduced a tax break for cash allowances. For citizens who were unable to assert their LTC tax gain due to covid-related travel limitations, the scheme was introduced by the government last year. Individual employees can also disallow one-third of the specified expenditure from the leave travel concession (LTC) or INR 36,000, whichever is less, for the 2018-21 period, if they have experienced expenditure on the purchasing of goods/services liable to GST @ 12% or more, providing that the payment is made in the non-cash mode and incurred between 12 October 2020 and 31 March 2021.
9. The overdue (belated)/revised income-tax return time period for filing shall be shortened by 3 months: The last day for the voluntary filing of a new income tax return or late return is now 31 December, until the conclusion of the fiscal year. Since this will shorten the total deadlines for tax compliance, it may cause additional difficulties for taxpayers with foreign profits to claim tax deduction or tax relief where it relies on the other nation’s income tax return.
10. Extended tax holiday on subsidized housing: The extension of tax holidays for the affordable housing division was declared by FM Sitharaman. The 2019 budget declared an additional interest benefit of Rs 1.5 lakh for loans obtained for the acquisition of an affordable home. For loans taken up to March 31, 2022, this waiver will now be available. In order to sustain the availability of affordable homes, the Finance Minister indicated that subsidized housing projects, before 31 March 2022, could benefit from a tax holiday for one more year. This declaration may help retain the impetus for recovery and encourage more members to join the sector of affordable housing. The drooping real estate industry surely needs to collaborate with the government and central officials side and foot to revive it quicker and affordably. Extending tax holidays for affordable housing projects may also encourage development in this field. This ongoing allocative efficiency will drive potential members entrants and new ventures coming up nationally in FY22. For this emerging section, the tax deduction for identified affordable housing for migrants and the allowance on the payment of interest for affordable housing being extended by one year may provide a boost. Since subsidized housing in the state of Maharashtra draws just 1% of GST and Rs 1,000 stamp duty, this may increase the state’s development of subsidized accommodation respectively.
