Income Tax Rules Will Change From April, 2021

The financial year is ending soon. Budget 2021 has left personal income tax rates unchanged, however, it came with some changes, majorly on the compliance front. Some changes are proposed to be effective from the financial year 2021-22, and some will be implemented from the start of the coming financial year itself i.e 1st April 2021. The changes applicable from the coming year are as below:

1) The income tax department has further extended pre-filled sections in ITRs from 1st April 2021. Archit Gupta, Founder and CEO of Cleartax said, “Taxpayers need to make sure that the pre-filled ITRs containing the details of salary, TDS, interest and dividend income, capital gains from listed securities, is accurate.”

2) Nirmala Sitharaman has announced in the Union Budget 2021-22 that PF contributions over ₹2.5 lakh in a financial year will be taxable from the next financial year. “Taxpayers in the higher tax bracket, who deposit more than ₹2.5L in their EPF account as an employee contribution, need to consider that the interest portion on such excess shall become taxable,” Gupta said.

3) Senior citizens above the age of 75 shall be exempted from filing ITR. Cleartax spokesperson Archit Gupta explained, ” Senior Citizens need to make sure that they receive a pension and interest income from the same bank, or else they may not be eligible for this exemption. Also, senior citizens with any other type of income (other than pension and interest income) will not be eligible.

4) TDS applicability-Onwards 1st April 2021, new sections 206AB and 206CCA shall become applicable. “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,” said Gupta.

5) LTC cash voucher scheme: The government notified the LTC cash voucher scheme’s exemption in place of a leave travel concession (LTC). Under this scheme, an employee can claim an exemption under LTC allowance against the purchase of specified goods/services. This scheme is only available till 31st March 2021, i.e. money must be spent by this date to avail of the scheme.

6) Option to choose ‘New tax regime’ instead of Old tax regime: “The government had implemented 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,” he said.

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