While presenting the Union Budget 2021, Finance Minister Nirmala Sitharaman has incorporated some changes in the Income Tax rules, slated to be effective from the 1st of April, 2021. Some of the new changes included in the I.T. regime ensure relief to the salaried population. Tax exemption on LTC can be considered an example of this. Moreover, some of the changes cater to people above the age of 75 years. Read on to know about the new income tax rules awaiting to be effective from this financial year.
5 New Tax Rules Slated to be Effective from this Financial Year
Higher TDS
Union Finance Minister has proposed to higher the TCS (Tax Collected at Source) or TDS (Tax Deducted at Source) in Budget 2021. As said by the government, this step will make more people file ITR (Income Tax Returns).
As per the new rules, Sections 206AB and 206CCA of the Income Tax laws have been incorporated in Budget 2021 as a special provision to allow for a higher deduction of TDS and TCS for people who do not file income tax returns.
New Tax Rules Regarding Provident Funds
Effective from the 1st of April, interest earned over Rs. 2.5lakhs on annual employee contributions towards Provident Funds will be taxed. The government has initiated this move to bring into taxation the high-value depositors who tend to park their money in Employee Provident Funds (EPFs) owing to its tax exemption benefits.
Although when questioned if this move can affect the employees, the Finance Minister has reassured that the P.F. will keep on aiming towards the welfare of the employees and people earning less than Rs. 2 lakh will in no way be affected by the new provisions.
Exemption from Filing ITR for Senior Citizens above 75 Years
To lower the compliance burden on the senior citizens, Nirmala Sitharam, while announcing the Budget, has proposed to exempt individuals over the age of 75 years from filing Income Tax returns, slated to be effective from this financial year.
However, one must note that the exemption will only be applicable only for those senior citizens who have no other income sources except pension and interest accrued from the bank holding that pension account.
LTC Allowance
In Budget 2021, the Central Government has proposed to offer tax exemption against cash allowance for LTC (Leave Travel Concession). The government announced this plan last year when employees couldn’t avail of tax exemptions against LTC, given the travel restrictions due to the pandemic. This initiative has been a helpful one as individuals who could not claim their LTCs owing to COVID could still avail of tax benefits, provided they follow some conditions.
Pre-filled ITR Forms
To ease the taxpayer individuals’ compliance, the Central Government has provided the option of pre-filled ITR forms. In these ITR forms, details such as tax payments, salary, TDS, etc., will be provided to the taxpayer in a pre-filled manner. Moreover, details such as dividend income, interest accrued from the post office, banks, information of capital gains from listed securities, etc., will also be pre-filled in the ITR forms. This initiative has been aimed at easing the hassles associated with the ITR filing process.
Key Takeaway
As we progress towards a new financial year, you must stay aware of the modifications regarding the income tax rules, which the government has proposed or intends to incorporate from the 1st of April. Therefore, go through the changes and keep yourself updated to save any future hassles. For any further queries, get in touch with FinGurus today!