Income Tax rules in India in 2021
According to the new rules, senior citizens of the age 75 and above with income from pension and interest from fixed deposit in the same bank would be exempted from filing ITR from April 1
The new financial year starts on 1 April. Union Finance Minister Nirmala Sitharaman presenting Union Budget 2021 had announced a number of changes in the income tax rules. These changes will come into effect from tomorrow, 1 April 2021. So let’s take a look at the changes announced in the Union Budget in February for income tax which will come into effect from tomorrow.
New Income Tax rules
Let’s take a look at income tax changes that will come into effect from 1 April:
In order to make more people file income tax returns (ITR), the finance minister has proposed higher TDS (tax deducted at source) or TCS (tax collected at source) rates in budget 2021. The budget has proposed the insertion of new Sections 206AB and 206CCA in the Income Tax Act as a special provision for the deduction of higher rates of TDS and TCS, respectively for the non-filers of an income tax return. “The individuals who have not filed the income tax returns, however, have a TDS or TCS deduction of more than ₹50,000 in the last 2 years, will have to pay TDS or TCS subject to a minimum of 5%. Here the deductor will now become responsible for collecting the ITR proof from the individuals for compliance,” Archit Gupta, Founder and CEO of Cleartax said.
Option to choose ‘New tax regime’ and not Old tax regime:
The government had inititated the new tax regime last year in Budget 2020. “However, the exercise of choosing one of the tax regimes for FY 2020-21 will be required to be made starting from 1st of April 2021. Taxpayers still have time until 31st March 2021 to make tax-saving deductions, however, they will be able to opt for a beneficial regime at the time of filing their tax returns for FY 2020-21,” Archit added.
Senior citizens above 75 years exempted from filing ITR
To reduce the compliance burden on senior citizens, government had exempted individuals above 75 years from filing income tax returns (ITR). The exemption will be available to only those senior citizens who have no other income but depend on pension and interest income from the bank hosting the pension account.
PF tax rules:
In the Budget for 2021-22, FM Nirmala Sitharaman limited the tax-free interest earned on PF contribution by employees and employers together to a maximum of ₹2.5 lakh in a year. Government then raised the limit for tax exemption on interest earned on provident fund contribution by employees to ₹5 lakh per annum in specified cases as against the proposed ₹2.5 lakh. The up to ₹5 lakh contribution does not include the employer’s contribution.
Pre-filled ITR forms:
Individual taxpayers will get pre-filled Income Tax Returns (ITR). In order to reduce compliance for the taxpayer, details of salary income, tax payments, TDS, etc. already come pre-filled in income tax returns. To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled. The move is to ease the filing of returns.
The central government in Budget 2021 has proposed to provide tax exemption to cash allowance in exchange 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 restrictions on travelling. This scheme is available to citizens till 31st March 2021, i.e. money must be spent by this date to avail of the scheme.