Budget 2021: Income Tax Announcements

In a relief to senior citizens, finance minister Nirmala Sitharaman announced that no income tax filing required for seniors citizens above 75 years of age and have income only from pension and interest income. The aim is to reduce the compliance burden on the elderly people, finance minister mentioned. There was no major changes in the direct tax front in the Union Budget 2021.

Presenting the Budget 2021, Sitharaman said, “We shall reduce the compliance burden on our senior citizens who are 75 years of age & above — for senior citizens who only have pension and interest income, I propose exemption from filing their Income Tax return.”

In a boost real estate sect, finance minister extended the additional relief of ₹1.5 lakh for home loans for affordable housing. The scheme was first announced in July 2019 Budget. Later finance minister extended the period till March 2021. Now, homebuyers can avail additional tax relief on home loans till 31 March, 2022.

The central government also reduced the timeline for reopening tax cases tox three years from six years. “Backed by data and analytics, this is a step in the right direction. It demonstrates the intent to reduce litigation and uncertainty for taxpayers. This was much needed,” commented Ritesh Kumar, Partner IndusLaw.

In order to rationalise tax exemption for the income earned by high income employees, Budget 2021 proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of ₹2.5 lakh. This restriction shall be applicable only for the contribution made on or after 1 April, Sitharaman announced.

“In serious tax evasion cases as well, only where ₹50 lakh or more has been concealed, the assessment can be reopened up to 10 years and that too after the consent of principal chief commissioner,” finance minister announced.

To further ease of income income tax filing, capital gains from listing securities and interest income to come pre-filled in income tax returns (ITR), Sitharaman said. Exemption from tax audit limit doubled to ₹10 crore turnover for companies doing most of their business through digital modes, finance minister added.

“The good thing about the Budget is that there is no increase in tax rates announced so far in the speech. There is significant relief in compliance for small companies with the companies act as well as with compliance for tax audits for small businesses. Relaxation in advance tax compliance for those who earn dividend income will make things easy for shareholders. With pre-filling of ITR, the focus seems largely on easing compliance for taxpayers,” said Archit Gupta, founder and chief executive officer – ClearTax.

The central government also proposed to make income tax appellate tribunals faceless and set up national income tax appellate tribunal centre, finance minister said in Union Budget 2021.

“The Finance Minister also mentioned to provide some relief from double taxation for NRI taxpayers in respect of their income accrual outside India in the foreign retirement accounts,” said Parizad Sirwalla, partner and head, global mobility services- Tax, KPMG in India.

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