Finance Minister Nirmala Sitharaman revealed some modifications to the Income tax rules in Budget 2021 that will help to ease tax compliance. Tax professionals have welcomed the modifications.
“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.
List Of Major Changes In Income Tax
- In order to encourage the taxpayer’s enforcement, descriptions of salaries, tax refunds, TDS, etc. are already included in the income tax returns in advance. Information of capital gains from listed shares, dividend profits, and interest from banks, the post office, etc. will also be pre-filled in order to further ease the filing of returns.
- The government suggested making the dividend payment to REIT/InvIT excluded from TDS for ease of compliance. Furthermore, the amount of dividend income cannot be accurately calculated by the shareholders in respect of the payment of the advance tax. The government has suggested that the advance tax liability for dividend income should only occur after the dividend declaration/payment has been made.
- The government has excluded persons over 75 years of age from filing of returns (ITRs) to ease enforcement for senior citizens. This is under certain conditions: in cases where the senior citizen receives payments from pensions and interest income. A few banks where bank customers will be qualified for this waiver will inform the government.
- After the statement has been furnished, the bank in question will have to measure the earnings of this kind of senior citizen. It will be after giving effect to the deduction allowable pursuant to Chapter VI-A and the refund allowable pursuant to Section 87A of the Act for the year in question and to subtract the income tax on the grounds of the rates in place.
- The 2021 budget has put Unit Related Insurance Policies (ULIPs) in the tax bracket. The redemption of ULIPs is currently excluded from tax, provided that the cumulative premium charged for the policy does not exceed 10% of the amount guaranteed.
- Interest income on own contributions made to the Provident Fund by an employee in excess of ₹2.5 lakh per year on or after 1 April 2021 has become taxable. Presently, any accrued balance is regarded as tax free if the worker has served five years or more on an ongoing basis.
- Employers can still be exempted from one-third of the defined spending for the leave travel concession (LTC) or ₹ 36,000, whichever is less, for the 2018-21 block, if they have incurred expense on the purchasing of goods/services subject to GST @ 12% or more.