The global (along with the Indian) economy, has had a tumultuous journey in the past year due to the setbacks from the global COVID-19 pandemic. However, with the vaccination process underway, we’re returning back to normal and all activities are resuming in full swing. In the midst of this, the BJP-led Government announced its Union Budget for the Year 2021-22. To us, perhaps what was more relevant was – what changed for our taxes this year?
As discussed in detail by our Finance Minister Dr. Nirmala Sitharaman, the budget for the next financial year has brought about a few significant changes in the practices related to the area of Income Tax returns and its filing process. Even though there was no respite or change so far as the Income-tax slabs are concerned, several other positive changes were brought forth so as to provide some respite to a lot of vulnerable classes such as the senior citizens.
Some of the most significant changes that were introduced by the Union budget are listed as follows:
- No income tax return filing for persons above the age of 75 years
Senior citizens do not need to file the Income Tax Return upon meeting a certain set of conditions such as
- Their source of income should exclusively be Pension and Interest payments
- The interest payment should be from the same bank in which the pension is being deposited
- Bank has to be within the list of banks which will be notified by the government to claim this exemption
- A declaration to the effect of allowing the bank to perform the necessary functions will have to be furnished by the Assessee.
This essentially means that the senior citizens are not exempted from filing income tax returns in toto. Rather, the bank will fill it on their behalf and give them the benefits under Chapter VI A and Section 87A of the Income Tax Act, 1951.
- Pre-filled information in the Income Tax return forms:
In order to simplify the Tax filing procedure for the Taxpayers, a lot of information such as the dividend from listed securities, salary income, TDS among other things, will be prefilled in the Income Tax return forms. This would make the filing of Income Tax returns much easier for even the people who are not from the finance industry and thus will positively impact compliance.
- Reduction in time to file delayed Income Tax Return
The time frame to file the belated or the revised income tax returns has been shortened by 3 months. It essentially means that for the upcoming financial year, it has to be filed by 31st December 2021 instead of March 2022.
- Additional Tax liability upon Employee Provident Fund
From the next financial year, the interest upon the Employee’s share to EPF exceeding the amount of 2.5 Lacs will also be taxed. This was done with the motive to discourage the practice of Voluntary Provident fund contributions and to increase the flow of money in the economy.
- Changes in the Tax Audit system
In the last budget, the tax audit limit for an individual carrying on a business was increased from one crore to five crores annual turnover in cases wherein the total cash receipts and payments did not exceed its 5%. This threshold has again been increased to 10 crores in the upcoming financial year. This was done so as to give digital payments a boost in the business sector and to give a push towards a digital economy.
- Exemption of trusts from TDS
The payment of TDS on dividend coming from either the Real Estate Investment Trusts or Infrastructural investment trusts has been exempted so as to simplify the procedure of payment of advance tax as well as to incentivize investment in the economy.
- Exemption of LTC Cash Schemes from Income Tax
Exclusively for the next financial year, the union budget has declared that any sum received as Leave Travel Concession Allowance will be exempt from taxation so as to give tourism a much-needed boost within the country.
- Increase TDS and TCS for Income Tax filing defaulter
With the insertion of Section 206AB in the Income Tax Act, 1961 by the union budget, double the amount of TDS will be charged from the people who default in the filing of Income Tax returns. A similar provision is also inserted by way of Section 206AA for the increase in the TCS in such a scenario. This has been done to increase the rate of compliance.
The union budget in the post-COVID times needed to bring about several significant changes to resurrect the Indian economy. Even though this budget has proposed several such changes which will help in boosting the economy, its success or failure still largely is dependent upon its overall compliance.
The budget has proposed several ways through which money can be injected back into the economy along with providing impetus to investment activities. With the new changes, there are several ways by which an individual can get more money back from its Income Tax Return filing or save on tax legally.
It is pertinent to mention here that personal loans can also be used as a tool for decreasing your tax liability and it is one such way to save your money.
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