The highly anticipated Budget 2021 was announced by Nirmal Sitharaman on the 21st of February. Except for a few tweaks here and there, personal income tax has been largely left unaltered. These tweaks are projected to boost compliance among taxpayers and tax experts have welcomed the changes.
The approach was of convenience to boost compliance through auto-filled returns with bank details, details of the post office interest as well dividends and capital gains to file and collect income accurately.
Discussed below are the modifications that were made in income tax that a taxable individual should know about.
Auto-filled ITR Forms
ITR forms will already have our information auto-filled on dividend, interest and capital gains. Auto-filling won’t just end with that, details of capital gains from listed securities, income through dividend as well as interests from banks, post offices, etc. would also enjoy the convenience of being auto-filled.
Contribution to EPF
Starting from April 1st, interest on an employee’s share of contribution to EPF will be taxable during withdrawal if the amount surpasses ₹250000 in a year. This is further combined with additional taxation of aggregate employer’s contribution that exceeds ₹750000. This is supposed to add tax liabilities which will make EPFs a less desirable retirement scheme.
REIT/inVIT Dividend Payments
The government proposed a scheme where dividend payments to REIT/inVIT were exempted from TDS. During the last budget, the government had abolished dividend distribution tax to incentivize investment in the country the said dividend was only taxable when it was handed over to shareholders
Higher TDS for non-conforming
Budget 2021 proposed a new provision for higher rates of TDS for those who don’t file their ITR regularly under a new section 206AB of the Income Tax Act. The proposed TDS rate in section 206AB specifies twice the rate of rates in force where rates in force are the rates in accordance with the Income Tax Act of 1961.
ITR filing not required for citizens above 75
Senior citizens above the age of 75 who solely rely on their pensions and interests as their means of sustenance will be exempted from filing income tax returns. This, however, doesn’t mean that every single citizen over the age of 75 is exempted from filing in their ITR. It is proposed by Nirmala Sitharaman in the budget 2021 to make the lives of senior citizens above a certain threshold easier.
Taxation on ULIPs
Proceeds that are generated from ULIPs issued on/after the 1st of February 2021 will be considered as taxable capital gains if the annual premium exceeds the threshold of ₹250000. This proposal seems to end the disparity between ULIPs and equity mutual funds, a demand that was long lobbied for by the mutual funds industry.
KDK Software takes pride in the fact that it’s a leading brand when it comes to adopting the changes and molding its services around it, instead of waiting for others. With KDK, you can assure that you’re ahead of the curve when it comes to filing your taxes.