With the starting of new financial year, many changes are expected in the Income Tax rule. Some of these changes were earlier announced in February by Nirmala Sitharaman, the Union Finance Minister of India while presenting the Union Budget 2021. The changes in the income tax rules announced this February are set to come into effect from tomorrow April 01, 2021. Here are some of the things that are going to change.
As per the new budget, up to a maximum of Rs. 2.5 Lakh will be exempt on the interest applicable on the employee contribution towards the Provident Fund (PF). Any interest gained from the contribution above this limit will be taxable in the hands of the employee. This change in the EPF tax rule will be applicable from or after April 1st 2021.
In the new budget of 2021, the individuals with the age of 75 years or above having a pension income and the interest from any of the accounts maintained in the same bank in which he/she receives pension will exempt from filing income tax returns. This proposal is made to ease regulatory burden of the senior citizens.
In order to encourage more people to file Income Tax Return, a higher tax collected at source (TCS) and tax deducted at source is proposed by the Finance Minister of India. This means that, even if an earning individual does not fall in the income tax slab, and if he/she does not file the ITR, the TDS rate applicable on them will be doubled.
Higher TDS deduction rates in budget 2021 with two new Sections in the Income Tax Act i.e. 206AB and 206CCA have been introduced. It applies to the individuals who have not filed their ITR, and have a TDS or TCS deduction higher than Rs 50,000 over the past two years; they will now have to pay a minimum of 5% of TDS or TCS.
The deductor is responsible to collect the ITR proofs from the individuals for compliance.
The new tax regime was implemented by the government last year in budget 2020. However, from April 2021, the exercise of choosing the one of the tax regimes of FY 2020-21 will be made. The taxpayers can make tax saving deductions until 31 March 2021; however, the taxpayers will be able to choose a beneficial regime while filing income tax return for financial year 2020-21.
As per the new budget, the taxpayers will be provided with pre-filled ITR form. This proposal is made to ease the regulations for the taxpayers. The details like tax payment, details of the salary income; TDS, etc. will be pre-filled in the ITR. Moreover, to further ease the process of ITR filing, details of dividend income, capital gains from listed securities, interest from post office and banks, etc. will also be pre-filled. This is proposed in order to simplify the process of filing Income Tax Return.
In the new budget of 2021, the government has proposed to provide tax exemption in place of Leave Travel Concession (LTC). The government announced this scheme last year for the people who were not able to make the claim for their LTC tax benefit because of the restrictions on travelling because of COVID. This scheme is only available until 31 March 2021; this means that in order to avail the scheme, an individual will need to spend the money by this date.
Once the payment or declaration of the dividends is made by the tax payer, there will be a rise in the advance tax liability levied on the income from dividends.