On February 1, 2021, the Finance Minister of India Nirmala Sitharaman presented the Union Budget 2021. During the presentation of the budget at the Parliament, she introduced a few changes in the income tax rules. The slew of changes that Ms. Sitharaman introduced will come into effect from April 1, 2021, which marks the start of the new financial year.
As per the new income tax rules, senior citizens of the age 75 and above having their source of income from pension and interest from fixed deposit in the same bank would be exempted from filing Income Tax Return (ITR) from April 1.
Apart from this, the FM of India also has proposed higher Tax Deduction at Source (TDS) for those who are not filing their ITR and announced to tax people contributing above Rs 2.5 lakh annually to EPF (Employee’s Provident Fund) account.
Speaking of the Provident Fund (PF) Tax Rules, interest on annual employee contributions to provident fund over Rs 2.5 lakh would be asked to pay tax from April 1, 2021. The government says that the move is aimed at taxing high-value depositors in the EPF.
FM Nirmala Sitharaman also added that EPF is aimed at the welfare of workers. She also placed emphasis on the fact that anyone earning less than Rs 2 lakh per month will not be affected by the new proposal.
Now coming to the TDS, in order to make more people file the Income Tax Return, Nirmala Sitharaman put forth higher TDS or TCS rates in budget 2021. The new budget has proposed the insertion of new Section 206AB and 206CCA in the Income Tax Act.
The insertion of these new sections will act as a special provision for the deduction of higher rates of TDS and TCS respectively for those who don’t file the INR.
As mentioned earlier, senior citizens of and above the age of 75 will be exempted from ITR filing. However, this exception will only be for those senior citizens who do not have any other income and depend on pension and interest income from the bank in which they have their pension account.
The new Union Budget also introduced pre-filled ITR forms, individual taxpayers will be provided with a pre-filled ITR. It will be done in order to ease compliance for the taxpayers, details of salary income, tax payments, TDS among others.
Furthermore, the individual taxpayer will have their details of capital gains from listed securities, dividend income, and interest from banks, post office, etc pre-filed. The move is an initiative to ease the filing of returns.
The Union Budget 2021 also had the mention of Leave Travel Concession (LTC), the central government will be providing an exemption to cash allowance in lieu of LTC. The particular scheme was introduced last year for individuals who were unable to claim their LTC tax benefit due to the on-going worldwide health crisis and the travel restrictions imposed because of it.