Sunday, July 3, 2022

10 INCOME TAX CHANGES ANNOUNCED IN BUDGET TAXPAYERS SHOULD KNOW

In Budget 2021, Finance Minister Nirmala Sitharaman declared some tweaks in income tax rules that will help ease the assent for taxpayers. Tax experts have embraced the move. “No increase in taxes and no Covid cess. However, no extra deductions each,” 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 benefit taxpayers in getting income more precisely, he said.

HERE ARE 10 CHANGES STATED IN BUDGET 2021 TAXPAYERS SHOULD KNOW:

1) In order to ease assent for the taxpayer, details of salary income, tax payments, TDS, etc. already come pre-filled in income tax returns. To considerably 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 assent, the government offered to make a dividend payment to REIT/ InvIT exempt from TDS. Further, as the amount of dividend income cannot be calculated 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 removed dividend distribution tax to incentivize investment and dividend was made taxable in the hands of shareholders.

3) 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 the income tax return.

The proposed TDS rate in this section is higher than 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%

4) 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.

5) 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 on the basis of rates in force. Once this is done, there will not be any requirement of furnishing return of income by such senior citizens for this assessment year.

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6) Budget 2021 has brought Unit Linked Insurance Plans (ULIPs) under the 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 published on or after 1 February 2021 where the annual award payable by the individual passes ₹2.5 lakh would be subjected to capital gains tax, at par with equity-oriented mutual funds.

7) Interest income on own contributions made by an employee in excess of ₹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.

8) 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.

9) “As a measure to decrease litigation for small taxpayers where returned income is up to ₹50 lakh and the aggregate amount of variety is up to ₹10 lakh in a particular order, a separate dispute resolution committee to be set-up,” said Aditya Hans, Partner, Dhruva Advisors LLP.

10) “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.

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