Budget 2021: 10 income tax related changes that you should know
The income tax slabs may have remained unchanged in Budget 2021, but that doesn’t mean everything is status quo. In fact, there are 10 key income tax related changes, announced by Finance Minister Nirmala Sitharaman in the budget 2021, that have an impact on your financial life. Here is a quick review.Â
1. Pre-filled info in income tax return forms
The income tax return (ITR) form will now have pre-filled information on dividend, bank and post office interest and capital gains. This will ease compliance.Â
2. Interest tax on high EPF contribution
Targetting high-income earners, the interest on employee’s share of contribution of more than Rs 2.5 lakh a year to EPF on or after April 1, 2021 will be taxable at maturity. This will lead to additional tax liability, especially for HNIs.Â
3. Dividend payments to REIT/ InvIT exempt from TDS
For ease of compliance, the government has proposed to make dividend payments to REIT/ InvIT exempt from Tax Deducted at Source (TDS) . Also, advance tax liability on dividend income will arise only after the declaration/payment of dividend.
4. Higher TDS for income-tax non-filers
Budget 2021 has proposed to insert a new section 206AB in the Income Tax Act as a special provision providing for higher rate for TDS for the non-filers of income tax return.The proposed TDS rate in this section is higher of the followings rates such as twice the rate specified in the relevant provision of the Act; or twice the rate or rates in force; or the rate of 5%.
5. No income tax filing required for eligible senior citizens above 75
Finance Minister Nirmala Sitharaman, in the Union Budget 2021, has announced that senior citizens above the age of 75 years, who only have pension and interest as a source of income will be exempted from filing the income tax returns. The exemption is only in cases where the interest income is earned in the same bank where the pension is deposited.
6. High-premium ULIPs to be taxed at maturity like equity MFs
Proceeds from ULIPs (except when received on death) issued on or after February 1, 2021 will be taxable as capital gains if the aggregate annual premium exceeds Rs 2.5 lakh in any year. The rate of taxation will be same as the Long Term Capital Gains for equity mutual funds, who are taxed at 10% if long term capital gain is more than Rs 1 lakh a year.Â
7. No need to estimate dividend tax on advance tax payment
In a relief, taxpayers will no longer be required to estimate their dividend income while making advance tax payments. Advance tax will now be payable only when a dividend is actually declared or paid by the company.
8. Leave travel concession scheme notified
The Budget for 2021-22 has proposed to provide tax exemption to cash allowance in lieu of Leave Travel Concession (LTC). The scheme was announced by the government last year for individuals who were unable to claim their LTC tax benefit due to Covid-related travel restriction(s).Â
9. Time limit for filing delayed or revised income-tax return cut
The last date to file a revised income-tax return or belated return on voluntary basis now stands at December 31 after the close of the financial year.Â
10. Tax holiday on affordable housing extended
The Finance Minister has announced the extension of tax holidays for the affordable housing segment. Additional interest deduction of Rs 1.5 lakh for loans taken to purchase an affordable house will now be eligible for loans taken up to March 31, 2022. Affordable housing projects can avail a tax holiday for one more year, till March 31, 2022.
