While proposing the Union Budget 2021, Union Finance Minister Nirmala Sitharaman proposed a new streamlined income tax system to provide support to the salaried elite. The reforms to the income tax system that concern the salaried class will come into force on April 1, 2021. For the unenlightened, Sitharaman claimed in her February 1 statement that senior citizens aged 75 and above, who get pension income and interest from a fixed deposit in the same bank would not be allowed to submit income tax returns for the fiscal year beginning from April-1. In addition, FM Sitharaman released statements about pre-filled ITR forms, TDS deduction at higher rates for those who do not file their ITR, and the reported LTC scheme and more. Furthermore, in her Union Budget 2021, Finance Minister Nirmala Sitharaman declared that, effective from April 1, interest on employee contributions to the provident fund of over Rs 2.5 lakh per annum will be taxable. The annual contribution limit of Rs. 2.5 lakh has been set as the deposit limit for a tax deduction. Hence, the new rules that will be effective from April-1, 2021 are as follows.
1. EPF Contribution- From April 1, 2021, interest on employee contributions to provident fund above Rs 2.5 lakh per annum will be taxable. The changeover was made with the intention of taxing high-income earners who contribute towards the Employees' Provident Fund (EPF). According to Sitharaman, the EPF is for the benefit of employees, and those receiving less than Rs 2 lakh per month will be unaffected by the move.
2. Pre-filled Income Tax Returns- Individual taxpayers will receive pre-filled ITR forms. The step is intended to allow filing returns easier.
3. LTC Voucher: The Leave Travel Concession (LTC) cash Voucher scheme was announced by the central government in Budget 2021. The scheme was launched last year by the Modi-government to improve market demand and offer a tax advantage to individuals who were unable to seek the standard LTC tax credit due to travel constraints amid COVID-19.
4. Higher TDS: Non-filers with an income tax return will face a higher TDS rate under a proposed section 206AB of the Income Tax Act.
5. Senior citizens above the age of 75 do not have to file a tax return: Individuals over 75 years old with pension income and interest from a fixed deposit in the same bank, as well as those with only interest income, do not have to submit ITR. The individual must only have pension income and all fixed deposit interest must be deposited in the same bank to take benefit of this rule.