The Union Budget 2021 was announced on February 1 by Finance Minister Nirmala Sitharaman. The central government did not change the revenue tax slabs for tax returns for the 2021-22 financial year. There are, however, several tweaks that have been made.
In comparison to the rates on the current tax slabs introduced in the previous budget, the key distinction being that different deductions have been removed, while the old/existing tax slabs offer multiple tax rebates. In both cases, 4% of health and education cess are also charged with income tax liability.
Here are some of the income tax changes announced in the Union Budget 2021:
Higher TDS for non-filers of income tax returns
A new amendment is proposed in the Income Tax Act in Budget 2021- Section 206AB, which allows for a higher rate of a tax deduction at source (TDS) for non-filers of income tax returns. In this part, the proposed TDS rate would be higher, twice the rate defined in the relevant clause of the Act, or twice the rate.
TDS is withheld from the salary on the basis of the income tax slab that applies to you.
TDS is deducted at the source as a fee. If the tax is excluded from the source of your salary, just believing that you have taxable income. In a given year, TDS is deducted at the source periodically.
Tax holiday on affordable housing
The Government has extended by one more year until 31 March 2022 the 1.5 lakh additional tax exemption on interest paid on a housing loan for the purchase of affordable housing. The central government offered an extra income tax allowance of up to Rs 1.5 lakh for home loans to buy an inexpensive home in the July 2019 budget. The eligibility for this tax deduction was extended until 31 March 2022 by Sitharaman.
Availability of pre-filled ITR forms
The last day for the revised filing of the amended Union Budget 2021 income tax return or late return will now be 31 December 2021, instead of 31 March 2022, at the end of the financial year.
EPF and its interest
At the time of withdrawal, interest on the employee's share of the contribution to the Employers' or Employee Provident Fund (EPF) on or after 1 April 2021 shall be taxable if it exceeds Rs 2,5 lakh in any year. In fact, those making a greater contribution to the VPF account would also be affected. As of today, EPF interest is actually excluded from tax consequences. Note that only the employee's contribution and not the employer's part is taken into account for the said tax consequences.
Exemption from REIT/InvIT
The Government has agreed to allow Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) dividend payments to be exempt from TDS. The Government has indicated that only after the declaration/payment of the dividend does the advance tax liability emerge on dividend income. In order to stimulate spending, the government scrapped the dividend distribution tax and the dividend was made taxable in the hands of owners in the budget last year.
ULIPs in the tax bracket
The refund of ULIPs is tax-exempt, given that the gross insurance premium charged would not surpass 10% of the amount covered by the policy. Earlier, any amount payable under the ULIP scheme on the death of the insured was also completely tax-free, regardless of the premium amount charged. When redeeming the ULIP scheme, the STT or securities transaction tax will also apply.
Employees may also exclude one-third of the defined expenditure from the leave travel concession (LTC) or Rs 36,000, whichever is less, for the 2018-21, block if they have incurred expenditure on the purchasing of goods/services liable to GST @ 12% or more, providing that the payment is made in non-cash mode and incurred during the period from 12 October 2020 to 31 March 2021. It is recommended that this amendment is only for 20-21 financial years.
Pre-filled ITR forms
In order to make it easier for individual taxpayers to comply, the ITR form will also contain pre-filled dividend, interest, and capital gains information. There may also be pre-filled reports on capital returns from traded shares, dividend profits, and interest from banks, post offices, etc. Details can also be given in the ITR forms on wage revenue, tax payments, TDS, etc.
Delayed income tax return
Delayed or revised returns which now be filed three months before the applicable assessment year or before the end of the assessment, whichever is sooner. The final day for filing a new income tax return or a late return voluntarily will now be at the end of the financial year instead of the earlier date of 31 March 2022.
A senior citizen from filing return of income-tax
It stated in the 2021 Union Budget that senior citizens over 75 years of age with only benefits and interest as a source of income will be exempt from filing their tax return on income (ITR). He has a pension or interest income from the same bank and the bank is specified as notified by the Government, he will be eligible for this benefit.