“Key Tax Law Changes 2021 – Top 10 Key Aspects”
- EPF Contribution–
From April 1, 2021, interest on employee contributions to provident fund above Rs 2.5 lakh per annum will be taxable. The changeover was made with the intention of taxing high-income earners who contribute towards the Employees’ Provident Fund (EPF), but the government has argued that it will affect less than 1% of contributors.
The EPF is for the benefit of employees, and those receiving less than Rs 2 lakh per month will be unaffected by the move.
- Pre-filled Income Tax Returns–
Individual taxpayers will receive pre-filled ITR forms. The step is intended to allow filing returns easier. The department will introduce pre-filled Income-Tax Return (ITR) forms for taxpayers with data on their capital gains from mutual funds, shares, dividend income and interest received from banks.
Also, the tax deducted at source (TDS) on dividend income beyond Rs 5,000 will be captured in the 26AS form and will help in pre-filling the returns forms.
- LTC Voucher:
The Leave Travel Concession (LTC) cash Voucher scheme was announced by the central government in Budget 2021. The scheme was launched last year to improve market demand and offer a tax advantage to individuals who were unable to seek the standard LTC tax credit due to travel constraints amid COVID-19.
Employees can still avail exemption for leave travel concession (LTC) of one-third of specified expenditure or ₹36,000 whichever is less, for the block of 2018-21 if they have incurred expenditure on purchase of goods/ services liable to GST @ 12% or more, provided the payment is made via non-cash mode and incurred during the period October 12, 2020, to March 31, 2021.
- Higher TDS:
Higher TDS for non-filers of income tax returns:
Non-filers with an income tax return will face a higher TDS rate under a proposed section 206AB of the Income Tax Act.
The proposed TDS rate in this section will have twice the rate specified in the relevant provision of the Act, or twice the rate or rates in force, or the rate of 5%.
- Senior citizens above the age of 75 do not have to file a tax return:
Individuals over 75 years old with pension income and interest from a fixed deposit in the same bank, as well as those with only interest income, do not have to submit ITR. The individual must only have pension income and all fixed deposit interest must be deposited in the same bank to take benefit of this rule.
- Dispute Resolution Committee (DRC)
Dispute Resolution Committee (DRC) proposed to be set up in the Budget will have multiple benches which will give opportunity to small taxpayers to settle tax matters without going through the appellate process.
Finance Minister Nirmala Sitharaman in her 2021-22 Budget speech said a Dispute Resolution Committee (DRC) would be set up to help reduce litigation for small taxpayers. Taxpayer with a taxable income up to Rs 50 lakh and disputed income up to Rs 10 lakh can approach the committee.
- REIT/ InvIT exemption:
The government has proposed to make dividend payment to Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) exempt from TDS. The government has proposed that advance tax liability on dividend income shall arise only after the declaration/payment of dividend as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax.
- Unit Linked Insurance Plans (ULIPs)
The government has brought Unit Linked Insurance Plans (ULIPs) under tax bracket. The redemption of ULIPs issued on or after 1 February 2021 where the annual premium payable by the individual exceeds ₹2.5 lakh would be subjected to capital gains tax, at par with equity-oriented mutual funds.
- Delayed ITR Timelines
Time limit for filing delayed ITR reduced:
The last date to file a revised income-tax return or belated return on a voluntary basis will now be December 31 after the close of the financial year instead of March 31, 2022.
- Extension of home loan interest tax break
In order to encourage first time homebuyers, deduction on account of home loan interest up to Rs 1.5 lakh which was available on loans taken up to March 31, 2021, has now been extended by one year to March 31, 2022.
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