The finance bill 2021 was awaited as the pandemic badly hit business and industries a lot. Individuals too, especially the salaried ones lived under a fear of losing jobs and pay cuts. When it comes to a change in tax rates or reliefs from taxes, there has been no such change. Any individual going for the old or new tax regimes, the same slabs are going to continue for FY 2021-22.
Few major changes include the following:
- If an individual makes a contribution in excess of Rs.2.5 lakh in Provident Fund PF (via EPF or VPF), the interest accrued on it during the FY 2021-22 will now be taxable. The contribution covers only the employee’s contribution. An individual earning basic salary maximum upto Rs.1.73 lakh a month contributing upto Rs. 20,833 towards PF will be able to evade tax.
- ULIPs issued after 1st February,2021 with a premium amount more than Rs.2.5 lakh shall be treated on par with equity mutual funds. Any gain arising therefrom shall be treated as Capital Gains. Such a premium was fully exempt earlier if it did not exceed 10 % of the sum assured. Many HNIs used this provision under section 10(10D) to earn tax free income.
Obviously, the fiscal deficit but good news is that tax rates for individuals have not gone up.
The salaried individuals expected a few changes which haven’t taken place. They expected a standard deduction for work from home expenses. Medical expenses for those below 60, on actual basis for individuals and their families amid pandemic. Higher tax deductions for housing loan interest too were expected.
Other important changes to be taken account of:
- The senior citizens of 75 years and above shall be exempt from filing income tax returns if their annual sources of income comprise only of pension income and interest income. For this purpose, section 194P has been inserted to enforce banks to deduct the tax for the senior citizens described here.
- There shall be prefilled ITRs for salary, tax payments, TDS etc. And also for Indian sourced investment income like capital gains from prelisted securities, dividend income etc.
- To reduce the cost of compliance for taxpayers and increasing the transparency in the disposal of appeals before the Income Tax Appellate Tribunals, provision is made for faceless proceedings in a jurisdiction less manner. By doing so work shall be distributed in different benches of tribunals leading to their effective administration.
- Under section 245MA, those assessed with a taxable income up to Rs.50 lakh and any disputed income of Rs.10 lakh, (covering small and medium taxpayers) can approach the committee formed under this section for that purpose. This is to prevent new issues from surfacing and resolving the issues faster.
- In case where the employee’s PF contribution was deducted but not deposited by the employer, it will not be allowed as a deduction for the employer.
- LTC benefit available on spending on specified goods/services for FY 2020-21.
- Deduction in respect of interest on affordable housing loan scheme is proposed to be extended till March 2022. This exemption is granted for affordable rental projects.
- There is a proposal to notify rules for removing double taxation for NRIs and thereby relaxing them from unnecessary hardships.
- Dividend income to be considered only on declaration thereof reducing the interest burden to individuals which was otherwise applicable on estimated dividend of the full year.
- The stamp duty value to go up from 110% to 120% of the consideration of the transfer of residential unit meaning an independent housing unit is made between 12th November 2020 and 30th June 2021.