Multi functional information to Essential Finances 2021-22 Proposals

Union finance minister Smt Nirmala Sitharaman introduced the Union Finances 2021 in Parliament on Monday (02-Feb-2021).

The finance minister offered a serious enhance to healthcare and infrastructure sectors in Union Finances 2021. There was no change in Earnings Tax slabs this 12 months.

Nevertheless, sure necessary proposals have been made, which may have an effect on a person’s Private Finance & taxation elements.

On this publish, I’ve tried to checklist down the necessary Finances 2021-22 proposals, all at one place.

In case, you wish to add or appropriate any of the under factors, kindly be at liberty to go away a remark and I’ll replace this checklist accordingly.

Complete checklist of Finances 2021-22 Proposals for FY 2021-22 / AY 2022-23

1) Newest Earnings Tax Slab Charges FY 2021-22

Under is the revenue tax slab construction as per the brand new tax regime. People opting to pay tax beneath the brand new decrease private revenue tax regime must forgo virtually all tax breaks that you’ve been claiming within the previous tax construction.

Income Tax Slab Rates FY 2021-22 budget 2021-22 latest IT slabs for Assessment Year 2022-23
Earnings Tax Slab Charges FY 2021-22 (New Tax Regime construction) | Finances 2021

In case, you want to declare your IT deductions and exemptions then your revenue will probably be topic to tax as per the previous revenue tax slab charges (as under);

Income Tax Slab Rates FY 2021-22 budget 2021-22 if tax deductions exemptions are claimed
Earnings Tax Charges FY 2021-22 (if tax deductions / exemptions are to be claimed)

2) Taxation of EPF Curiosity

As of now (FY 2020-21), the curiosity revenue earned on contributions to EPF made by the worker are fully TAX-FREE.

Nevertheless, with efficient from 1st April, 2021, no extra tax free curiosity on greater than Rs 2.5 lakh a 12 months contribution in the direction of EPF/VPF (solely worker contribution). That is relevant to Pvt PF trusts as effectively.

From 1st April 2021 onwards, the curiosity on any contribution above Rs. 2.5 lakh by an worker to a acknowledged provident fund is taxable as per the provisions of the Finance invoice 2021.

  • If worker contribution is greater than Rs 2.5 lakh, the curiosity earned on the surplus quantity is taxable wef 1st April 2021 onwards.
  • Instance – If worker share EPF + VPF is Rs 4.5 lakh in FY 2021-22 then the curiosity earned on extra Rs 2 lakh (Rs 4.5 L – Rs 2.5 L) will probably be taxable in FY 2021-22 / AY 2021-22.
  • You’ll then want to find out the curiosity quantity similar to the surplus, that’s Rs. 2 lakh and declare it as revenue and pay tax as per relevant revenue tax slab fee.
  • Observe that the extra curiosity on this quantity (Rs 2 lakh) in subsequent evaluation years isn’t taxable.

3) Taxation of Maturity proceeds from ULIPs

Maturity proceeds from ULIP insurance policies (taken on or after 1st feb, 2021) will probably be tax free provided that the whole annual premium on them doesn’t exceed Rs 2.5 lakh.

So, positive factors on ULIP fairness funds (for such non-exempt ULIPs) will probably be taxed at 15% (quick time period) or 10% (long-term). If it’s a ULIP debt fund (for non-exempt ULIPs), the positive factors will probably be taxed at your relevant slab fee (quick time period) and 20% after indexation for long run positive factors.

Dying Profit from ULIP will nonetheless be exempt from tax, no matter the quantum of ULIP premium paid. The proposal doesn’t have an effect on the tax therapy of loss of life profit.

4) No ITR Submitting for Senior Residents

Senior Residents of age 75 years and above who’ve solely Pension and Curiosity revenue from Banks/Submit workplace needn’t file their Earnings Tax Returns. The banks will deduct the relevant taxes although. The circumstances for exemption from submitting ITR from 1st April, 2021 are:

  • The senior citizen ought to be a resident and ought to be 75 years of age or extra through the monetary 12 months for which tax needs to be paid.
  • He / She should obtain a pension and curiosity revenue from the identical financial institution.
  • Your banker will deduct the relevant taxes in your Earnings.
  • Solely sure specified banks are allowed for this objective.
  • A declaration ought to be given to the financial institution on this regard.

5) Belated Earnings Tax Returns – New Timeline

It has been proposed to cut back the time-line for Belated Returns and Revised Returns by 3 months.

For instance, a belated return or revised return for FY 2020-21 would must be filed on or earlier than 31-December 2021 or completion of evaluation, whichever is earlier.

6) No TDS on Dividends from REITs & InvITs

To supply ease of compliance, Finances 2021 has proposed to make dividend cost to REIT (Actual Property Funding Trusts) and InvIT (Infrastructure Funding Trusts) exempt from Tax Deduction at Supply (TDS). However, observe that such revenue continues to be a taxable revenue.

7) IT Deduction on House Mortgage Curiosity Cost (Sect 80EEA)

The Rs 1.5 lakh Further Earnings Tax deduction on reasonably priced residence loans will probably be prolonged for another 12 months, u/s 80EEA. The Curiosity deduction (Sec 80EEA) of Rs.1.5 lakhs to be prolonged for loans taken until thirty first March, 2022. This deduction can’t be claimed when you go for new tax slabs.

  • The extra tax deduction of Rs 1,50,000 is for first-time residence debtors solely. In case, you have got an present residential property, you can’t declare tax profit u/s 80EEA.
  • Do observe that your property ought to have a stamp obligation worth of most Rs 45 lakh (Stamp Obligation Worth). Solely such properties fall beneath ‘reasonably priced housing’ class. Discover that its the Registration worth and never the ‘settlement worth’. In majority of the property offers, there will probably be white and black cash proportion (although that is legally not allowed).

Associated Article : Is Rs 1.5 lakh further House Mortgage Tax Deduction actually useful? | New Part 80EEA

8) Faceless Assessments & Scrutiny

Earnings Tax Appellate Tribunal to grow to be Faceless. It has been proposed to make proceedings earlier than the Earnings-Tax Appellate Tribunal (ITATfaceless, solely digital communication will probably be finished.

9) Pre-filled ITR Varieties

The small print of your Capital Features (Long run & Quick Time period), Dividend Earnings and Curiosity revenue will probably be pre-filled within the Earnings Tax Return Varieties.

10) Cess on Gold & Silver

In a bid to spice up agriculture infrastructure, the federal government has introduced a cess on sure objects, together with petrol, diesel, gold and a few imported agricultural merchandise.

Gold & Silver, each will appeal to 2.5% of agriculture infrastructure and improvement cess.

11) Re-opening of Tax Assessments – Timeline

The reopening of your earlier years’ tax assessments can now occur until 3 years versus, besides in critical instances. The present time restrict is 6 years.

12) Car Scrapping Coverage

  • The primary goal of this coverage is to part out vehicles and industrial autos that are older than 20 or 15 years, respectively. 
  • A health check will probably be performed at automated health centres, which is able to decide whether or not the car in query is certified to run on roads, or headed for the scrap heap.
  • Every health check would value roughly Rs 40,000. That is along with the street tax, and attainable “Inexperienced Tax” that it’s important to pay whereas mandatorily renewing your personal car’s registration after the 15-year interval.
  • Every health certificates is relevant for 5 years, after which the proprietor of the car will probably be required to get one other health check, costing the identical. 
  • The coverage, which will probably be in impact from April 1, 2022, can also supply a financial incentive to the homeowners sending their autos to the scrap heap, though if the car fails the health check thrice, they wouldn’t be left with a lot of a alternative.

13) NRIs & Double Taxation

As per the Govt – “When Non-Resident Indians return to India, they’ve points with respect to their accrued incomes of their international retirement accounts. That is normally as a result of a mismatch in taxation durations. In addition they face difficulties in getting credit score for Indian taxes in international jurisdictions.”

In accordance with the memorandum explaining the provisions of Finance Invoice, 2021, a mismatch was recorded within the 12 months of taxability of withdrawal from retirement funds that have been opened whereas residing in international international locations. At present, the withdrawal could also be taxed on receipt foundation in international international locations, whereas on an accrual foundation in India.

Therefore, the Govt will quickly notify sure guidelines with a view to take away hardship of Double Taxation wrt NRI’s revenue. (NRIs allowed to function One Particular person Corporations in India.)

14) EPF dues not deposited by Employer

Solely 321,800 firms paid their statutory staff provident fund dues in April 2020, virtually 178,000 fewer than people who paid within the earlier interval, newest information from the Staff Provident Fund Group (EPFO) confirmed.

Taking a cue from this, the finance invoice clarifies that if there’s a delay in depositing the Provident Fund of staff, this sum won’t be allowed as a deduction within the arms of Employer.

This  will come into impact from April 1, 2021 and can apply to the businesses/employers submitting ITR for FY 2020-21.

15) Tax Legal responsibility on Dividends

Advance tax legal responsibility on dividend revenue will come up solely after declaration or cost of dividend by the Corporations.

I hope you discover this publish informative and helpful. Do share your feedback, cheers!

Proceed studying :

  1. Earnings Tax Deductions Listing FY 2020-21 | New Vs Previous Tax Regime AY 2021-22
  2. Earnings Tax Exemption Vs Tax Deduction Vs Tax Rebate Vs TDS | Key Variations
  3. How Earnings Tax Division tracks the Excessive Worth Monetary Transactions?

(Kindly observe that proposals are introduced earlier than both home of the Parliament of India within the type of a invoice. A invoice is the draft of a legislative proposal, which, when handed by each homes of Parliament and assented to by the President, turns into an Act of Parliament.)

(Submit first printed on : 02-February-2021)