As March 31 is here, the Indian economy is gearing up for the beginning of the new financial year from April 1. However, there are a few things that citizens must look out for in the upcoming financial year. While presenting the Union Budget 2021 in the Parliament, Financial Minister Nirmala Sitharaman had announced a series of changes in the income tax rules. This set of new rules will be applicable from April 1, 2021.
Among the first changes is the change in TDS (tax deducted at source) or TCS (tax collected at source) rates in Union Budget 2021. It was done in order to make more people file income tax returns (ITR). For which the Finance Minister of India had proposed higher TDS or TCS rates. The budget has proposed the insertion of Sections 206AB and 206CCA in the Income Tax Act as a special provision. It is for the deduction of higher rates of TDS and TCS, respectively for the non-filers of ITR.
As per the reports, "The individuals who have not filed the income tax returns, however, have a TDS or TCS deduction of more than ₹50,000 in the last 2 years, will have to pay TDS or TCS subject to a minimum of 5%. Here the deductor will now become responsible for collecting the ITR proof from the individuals for compliance.”
The second change to look up to is the option to choose ‘New Tax Regime’ instead of ‘Old Tax Regime’. For those who don’t know, the government implemented the new tax regime last year in Union Budget 2020. Meanwhile, the exercise of choosing one of the tax regimes for Financial Year 2021-22 is required to be made starting from April 1, 2021.
However, the taxpayers still have time until March 31, 2021 (Today), to make tax-saving deductions. But they will be able to opt for a beneficial regime at the time of filing their tax returns for Financial Year 2020-21.
The highlight of the Union Budget 2021 was senior citizens above 75 years will be exempted from filing Income Tax Returns. According to Nirmala Sitharaman, it has been done to ease the burden of compliance on senior citizens. However, the exemption will be available to only those senior citizens who have no other source of income other than pension and interest income from the bank hosting the pension account.
The changes in the Provident Fund (PF) rule is also something the citizens must take into consideration. In the Union Budget of 2021, Ms. Sitharaman capped the tax-free interest earned on provident fund contribution by employees and employers together of Rs 2.5 lakh in a year.
The Finance Minister has now raised the limit for tax exemption on interest earned on PF contribution by employees to Rs 5 lakh per annum. But it is in specified cases as against the proposed Rs 2.5 lakh. The newly introduced cap of Rs 5 lakh contribution does not include the employer’s contribution.
There has been a slew of changes in the pre-filled ITR forms, the individual taxpayers will be given pre-filled Income Tax Returns (ITR). It is also done in order to reduce the compliance burden on taxpayers, details of salary income, tax payments, TDS among others already come pre-filed in ITR.
The further ease also has filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc will also be pre-filed. The move has been initiated to ease the filing of returns.
Some changes also have been applicable to the Leave Travel Concession (LTC). In the Union Budget 2021, the central government has proposed a tax exemption to cash allowance in lieu of LTC. The scheme was announced last year by the government for individuals who were unable to avail their LTC tax benefit due to the on-going health crisis and the travel restrictions imposed because of it. However, this scheme is available only till March 31, 2021. It means that the money must be spent by this date to reap the benefit of the scheme.