As we are aware of the fact that 31st March is end of current financial year and 1st April would be the beginning of a new financial year.
As the new financial year comes, it brings few changes in Taxation. In this article we will discuss in brief regarding changes in taxation, which were announced in Union Budget 2021.
Below is the brief of changes applicable from 1st April 2021.
TDS at a higher rate
To make more people file income tax returns, Finance minister in budget 2021 proposed Higher rate of TDS / TCS for specified person.
Specified Person –
- A person who has not filed the ITR for 2 previous years immediately prior to the previous year in which tax is required to be deducted;
- The time limit of filing ITR is expired;
- In each of the 2 previous years, the TDS / TCS is Rs 50,000 or more.
For this new sections 206AB and 206CCA of the IT Act 1961 has been inserted, which are applicable from 1st April 2021.
The said sections provide for higher rate of TDS / TCS to be applied if the transactions are done with the non-filers of income tax return i.e. specified persons.
The provisions of section 206AB(1) of the Act, provides for TDS rate to be applied if the amount is paid or credited to a specified person being higher of the below rates –
(i) At double the applicable rates or
(ii) At twice the rates in force; or
(iii) At the rate of 5%.
Similarly, section 206CCA of the IT Act provides for TCS rate to be collected from the specified person being higher of the below rates –
(i) At double the applicable rates or;
(ii) At the rate of 5%.
New EPF Rules
In Union Budget 2021, Finance Minister proposed that interest on EPF should be taxable if interest income exceeds Rs 2.5 lakh per annum. The same is applicable from 1st April 2021.
This will mainly affect the person of higher tax bracket, who deposits more than Rs 2.5 lakh in EPF account.
Persons above 75 years of age or above are not required to file ITR in certain cases
According to budget 2021, individuals who are 75 years or above age and have income from pension and interest are exempted from filing ITR. One this is required to be ensured that interest and pension should be received in same bank.
Pre-filled ITR Forms
To ease the compliance for the taxpayer, the Income Tax Department will now provide pre-filled ITR.
The information, which is auto-populated from external sources, is known as pre-filled data.
Earlier also, few fields of ITR Forms were used to be pre-filled. Now-onwards the ITR Form will have more pre-filled details which include the salary income column. In the Budget 2021 it was announced that over a period of time some more details including capital gain arising from the sale of listed securities, dividend income and interest income received from the bank or post office would be pre-filled in income tax return.
The whole process is intends to make the filling of the ITR easier as well as encourage more persons to disclose their incomes, and deliver better transparency in the procedure.
LTC Cash Voucher Scheme
To provide tax benefit to individuals who are unable to claim the usual LTC tax benefit due to covid-related travel restrictions, it was proposed in budget to provide tax exemption to cash allowance in lieu of LTC.
In union budget 2021, the LTC cash Voucher scheme has been notified
Second proviso in clause 5 of section 10 of the IT Act has been inserted according to which for the AY 2021 – 22 the value in lieu of any travel concession or assistance received by, or due to, an individual shall also be exempt under this clause subject to fulfillment of conditions to be prescribed.
Advance tax liability on Dividend Income
The advance tax liability on dividend income will arise only after the declaration or payment of the dividend.
Option to choose ‘New tax regime’ instead of Old tax regime
In Budget 2020, Finance minister Nirmala Sitharaman, announced a new tax regime for Income tax payers. The option to choose between new or old tax regimes is applicable for FY 2020 – 21 i.e. from 1st April 2021.