During the Union Budget 2021, finance minister Nirmala Sitharaman declared on Monday a number of actions, including those in the healthcare industry, railways, road infrastructure, and many others. The 2021 budget seems to have held the tax rates on taxable income untouched. Below are the major announcements made by FM today which may influence your personal finance.
Elderly people with an age of 75 or more do not have to file IT return
Budget 2021 introduces an exemption from paying income tax returns for elderly people who are 75 years of age or older and have only retirement and interest income in a fiscal year. They will no longer be required to file income tax returns (ITR) as per the provisions under Budget 2021. The bank giving them income will subtract from their bank account the required tax. According to the descriptive memorandum, the gain will only be possible if the following criteria are met:
- Elderly people residing in India and are 75 years of age or older in the previous year.
- That being said, he or she may also get interest income from the same bank where he earns his pension income, in contrast to his pension benefit.
- The Government shall inform the designated bank of a few banks that are a banking company, and the Government shall be obliged to provide a request to the specific bank.
- The statement shall provide such details in such a form and shall be checked in such conditions as may be determined. Once the statement has been prepared, the bank in question will have to measure the income of such a senior citizen after granting access to the deduction permissible under Chapter VI-A and the refund allowable under Section 87A of the Act for the relevant year of taxation and to subtract income tax on the grounds of the rates in effect. After this is completed, there will be no provision for those senior citizens to have income return for this appraisal year. This move will take place on 1 April 2021.
Deposit Insurance Cover to become more regulated
The finance minister stated that the government and the Reserve Bank of India will formulate a better regulatory mechanism for bank investors to seek deposit insurance benefits when their banks face a difficult situation. The deposit insurance cover for bank depositors has raised from Rs 1 lakh to Rs 5 lakh in the Budget last year. So far, though, this is applicable only to banks when they go into bankruptcy. And before the bank went bankrupt, a better and revamped process will now support investors. This may be an optimistic move and prevents depositors from the sort of circumstances we have seen in the recent past where banks and poor accessibility to deposits is enforced by the RBI moratorium.
Social security advantage expanded to many other employees
A few tax-payers who lost their employment due to Covid-19 last year and had to undertake freelancing jobs are getting some support from Budget 2021. In her budget speech today, finance minister Nirmala Sitharaman introduced the release of a platform to gather specific information on gig, buildings and construction workers, among others, to assist the unorganized labour market, in particular migrant workers. She also stated that the government has introduced a One Nation One Ration Card mechanism from which recipients in every part of the country can seek their rations. This will especially benefit migrant workers. Sitharaman noted that 32 states and UTs are introducing the One Nation One Ration Scheme, touching nearly 69 crore recipients, covering a total of 86 percent of recipients.
In the coming months, the leftover states and UTs will be incorporated. For the first time internationally, social security benefits will apply to gig and platform employees, said FM. Some measures to assist workers have been further developed by the government. In her budget statement, the Finance Minister clarified that minimum pay will extend to all types of employees and will be supported by the Employee State Insurance Corporation. She also declared that with single authorisation, and online returns, the compliance pressure on employers will be minimized.
New investor charter for investor protection
On Monday, Union Finance Minister Nirmala Sitharaman declared a raise in the insurance cap for Foreign Direct Investment (FDI) from 49 percent to 74 percent. Chairing the Union budget for 2020-21, she added, "We are proposing to modify the 1938 Insurance Act and introduce a new investor charter for investor protection. A securities market code that covers the SEBI Act, the Government Securities Act and the Depositories Act will also be introduced.
Faceless tax dispute resolution mechanism for small taxpayers
In her speech on Budget 2021 on February 1, finance minister Nirmala Sitharaman stated that the government will establish a faceless tax dispute settlement system for small taxpayers. The FM declared that for those transacting 95 per cent online, the limit for tax audit has been raised to Rs 10 crore vs Rs 5 Cr. For taxable income up to Rs 50 lakh and disputable income of Rs 10 lakh, the faceless dispute resolution committee will be liable. I propose to establish a dispute resolution board to help minimize lawsuits for small taxpayers, which will be faceless in order to ensure consistency and efficiency. For the approach committee with a taxable income up to Rs 50 Lakhs & disputed income up to Rs 10 Lakhs individuals with a taxable income up to Rs 50 Lakhs & disputed income up to Rs 10 Lakhs will be eligible. FM said in her Budget speech. Sitharaman had founded a tax dispute settlement and faceless appeals tribunal in Budget 2020 and had waived off interest and penalty on the disputed tax prior to 31 March 2020.
Pre-filled Income-Tax Return (ITR) forms for taxpayers
On Monday, during the presentation of the Union Budget 2021-22, Union Finance Minister Nirmala Sitharaman stated the Union Finance Ministry will incorporate pre-filled Income Tax Return (ITR) forms for taxpayers with details regarding their mutual fund capital gains, shares, dividend income and interest earned from banks. Last year, via the Finance Bill, the government has also incorporated amendments to the Income Tax Act, which will enable the government to seek information from banks, brokers, depositories on a taxpayer's annual financial transactions. The tax deducted at source (TDS) on dividend income above Rs 5,000 will also be specified in the Form 26AS and will assist in pre-filling your IT returns. All personal details, taxes paid and bank account details are available in the new pre-filled form that taxpayers can download the form using their permanent account number (PAN).
Additional deduction of Rs 1.5 lakh on home loan interest is extended till March 2022
On Monday, the government extended by one more year to March 31, 2022 the additional tax deduction of Rs 1.5 lakh on interest charged on housing loans for the purchase of affordable homes, a bid to improve demand in the stagnant real estate market. The additional Rs 1.5 lakh exemption over and above Rs 2 lakh was incorporated in the budget for 2019. This was permitted for the first time for those purchasing homes for up to Rs 45 lakh. Finance Minister Nirmala Sitharaman stated the government sees 'Housing for All' and affordable housing as focus areas in the budget speech for the fiscal year 2021-22. Today, a person buying a reasonable house is going to get an increased interest exemption of up to Rs 3.5 lakh. Ms Sitharaman stated, "Further, to maintain the availability of subsidized houses, I introduce that subsidized housing projects can receive a tax holiday for one more year - till 31st March 2022," She also stated that the government is geared to incentivising the provision of migrant workers with affordable rental accommodation.
Tax-efficient zero-coupon bonds for infra debt funds
Zero-coupon notes, also called discount bonds, do not pay the bondholders any interest. They get a special offer on the bond's face value respectively. On maturity, the bondholder earns his or her investment's principal amount. On Monday, while unveiling Budget 2021, Finance Minister Nirmala Sitharaman revealed tax-efficient zero-coupon bonds for infra-debt funds.
Relaxation for non-resident Indians (NRIs)
Relaxation for non-resident Indians (NRIs) is declared on Monday by Union finance minister Nirmala Sitharaman while proposing the Union Budget 2021. Sitharaman stated that they face problems relating to their accrued earnings in their overseas retirement accounts whenever NRIs return to India, which mostly happens due to mismatches in taxation dates. She also emphasized their challenges in receiving credit in international jurisdictions for Indian taxes, resulting in double income tax. As per the circular outlining the parameters of the Finance Bill, 2021, a mismatch on withdrawals from retirement funds that were established while staying in foreign countries was reported in the year of taxation. Presently, withdrawals may be taxed in overseas nations on a receipt basis, whereas in India on an accrual basis. The Government also introduced a new section 89A of the Income Tax Act, 1961, to resolve the discrepancy in the taxation of income from the approved foreign retirement fund.