Finance Minister Nirmala Sitharaman did not propose any change in tax rates or slabs but there are some proposals that can impact the savings of individual taxpayers.
New Delhi: Finance Minister Nirmala Sitharaman did not propose any change in tax rates or slabs means your income tax liability is unlikely to change in the next financial year. But if you are earning high salary or using the voluntary provident fund (VPF) route to earn higher tax-free return, then there is some bad news for you. Here are 10 budget proposals that can impact the savings of individual taxpayers.
1) Interest on employee’s share of contribution to EPF on or after April 1, 2021 will be taxable at the stage of withdrawal if it exceeds 2.5 lakh in any year. This will lead to additional tax liability, especially for HNIs, who make higher contributions, and will also discourage voluntary provident fund (VPF) contributions. This along with taxation of aggregate employer’s contributions in excess of 7.5 lakh to EPF, NPS and superannuation fund and interest thereon introduced last year, may make EPF an even less attractive retirement scheme.
2) Proceeds from ULIPs issued on or after February 1, 2021 will be taxable as capital gains if the annual premium exceeds 2.5 lakh in any year (except when received on death). Where a taxpayer pays premium for more than one ULIP (issued after February 1, 2021) exemption shall apply to those ULIPs where the aggregate premium does not exceed 2.5 lakh. With this proposal, the disparity between ULIPs and equity mutual funds has come to an end, which was a long pending demand of the mutual fund industry.
3) In a relief for senior citizens, the Budget proposed that resident senior citizens, aged 75 or above, earning only pension and bank interest income (from the same bank where pension is credited) are not required to file income tax return. On the basis of declaration submitted by such a taxpayer, bank has to compute taxable income and deduct tax thereon.
4) Tax benefit on affordable housing extended! Tax exemption for affordable housing further extended by 1 year. It will benefit middle-class first-time homebuyers who will get enhanced deduction of 1.5 lakh (over and above the existing deduction of 2 lakh) for interest on housing loan for a house valued up to 45 lakh if the loan is taken before March 31, 2022.
5) Taxpayers will not be required to estimate their dividend income while making advance tax payments. Advance tax will now be payable only when dividend is declared or paid by the company. Till now taxpayers used to pay interest due to underestimation of dividend income in advanced tax calculation. But with the recent proposal, taxpayers will get relief on this front.
6) Income-tax return forms will now come pre-filled with capital gains from listed securities, dividend income, interest from banks, post office etc. in addition to salary income, bank accounts, tax payments and TDS details.
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7) Individuals with overseas retirement funds to get relief! The Centre will announce rules to determine the manner and year of taxability of income from overseas retirement funds opened by a resident taxpayer while he was residing in a foreign country. This will provide relief from hardship faced on account of double taxation due to a mismatch in the timing of taxation in different countries.
8) Time limit for filing delayed (belated) / revised income-tax return to be reduced by 3 months: last date to file a revised income-tax return or belated return on voluntary basis now stands at December 31 after the close of the financial year. The Times of India in a report mentioned that although this will reduce the overall tax compliance timelines, it may create practical difficulties for taxpayers with overseas income in claiming tax exemption or relief where such benefit is dependent on tax filing in the other country.
9) Dispute Resolution Committee (DRC) to be set up to help taxpayers with taxable income of up to 50 lakh, and disputed income up to 10 lakh. All proceedings before DRC to be faceless and jurisdiction-less. This will reduce litigation and provide impetus to small and medium taxpayers to settle disputes at the initial stages.
10) The Centre proposed to set up National Faceless Income-tax Appellate Tribunal for all second-level appeal cases.
