Union Budget 2021-22: The Finance Minister presented the initially paperless Union Budget 2021-22 in the Parliament yesterday. While no structural alterations have been proposed to the individual tax prices, it introduced some relief measures and proposals to facilitate ease of compliance for the taxpayers explained hereunder:
Senior Citizens (aged 75 years or above) exempt from ITR filing
It has been proposed that taxpayers, who are aged 75 years or above, obtaining pension revenue and interest from the exact same specified bank exactly where pension revenue is credited, would be exempt from filing the revenue-tax returns. The specified bank will be necessary to deduct the needed taxes at supply at the time of payment basis particular particulars furnished by the mentioned taxpayer.
Extension of cost-effective housing deduction
The added interest deduction of up to INR 1.5 lakh p.a. at present accessible for interest on a loan for acquire of an cost-effective residence (whose stamp worth does not exceed INR 45 lakh) by initially-time residence purchasers has been extended to circumstances exactly where the loan shall be sanctioned on or just before 31st March 2022.
Constitution of Dispute Resolution Committee
Recently, the government had introduced slew of measures to expedite resolution of previous litigation with schemes like Vivad-se-Vishwas. As a step additional in this path is the proposal to constitute a DRC for smaller and medium taxpayers. Any taxpayer with a taxable revenue up to INR 50 lakh and disputed revenue up to INR 10 lakh shall be eligible to method the Committee. Of course particulars of the scheme requirements to be evaluated separately.
Exemption on interest earned on Provident fund contribution capped
Under the current tax provisions, interest received/accrued from employee’s provident fund (EPF) contributions as properly as Public Provident Fund (PPF) is exempt from tax. With a view to curb exemption for higher revenue taxpayers, it is proposed that the interest earned by way of such contributions (each EPF and PPF) above INR 2.5 lakh a year will now be taxable. This will only apply to the employee’s contribution in respect of EPF. Hence, each PPF and EPF interest on person/ employee contribution above the specified limit for each will be taxable in the hands of the person.
Relaxation from payment of advance tax for dividend revenue
From FY 2020-21 dividends are taxable in the hands of the person investors. While there is TDS on such dividend in case if the dividend quantity is huge there was a possible liability for investors to spend advance tax on such revenue (just after factoring the TDS). The government recognized difficulty of estimating dividend revenue accurately for paying needed advance taxes by way of specified installments (it is dependent upon the investee organization declaring/ paying the dividend). Hence, it has been proposed that advance tax liability on dividends shall arise only just after the declaration/ payment by the organization.
Relief to Non-Resident Indians
In order to assist Non-Resident Indians returning to India, who commonly face concerns for their accrued incomes in foreign retirement accounts due to mismatch in timing of taxation of such revenue in the foreign nation and India a new provision is added for manner of taxation of such revenue. The government will quickly notify guidelines with regards to the taxability in the hands of such NRIs relating to revenue from foreign retirement accounts which had been opened while getting non-resident in India.
Exemption on Unit Linked Insurance Plans (ULIPs) proceeds capped
Proceeds received on withdrawal/ maturity of ULIPs had been totally exempt from tax at present as compared to units of equity oriented mutual funds (which suffered capital gains on transfer). In order to bring parity it has been proposed that for ULIPs bought on or just after Feb 1st, 2021, the maturity proceeds of policy with an annual premium of more than INR 2.5 lakh will be taxable equivalent to equity oriented mutual fund. In case of person holding several ULIPs, the exemption shall be accessible only with respect to such policies aggregate premium whereof does not exceed INR 2.5 lakh for any of the prior years in the course of the term of any of the policy.
For ease of filing of returns, the Budget has proposed that particulars of capital gains from listed securities, dividend revenue and interest from banks and post offices will also be pre-filled in revenue-tax return types.
The government’s intent and thrust this time round seems to be on enhancing transparency, minimize litigation/ disputes and ease the burden of compliance for the taxpayers. With that in thoughts and the unprecedented occasions, the FM has produced restricted alterations to the individual tax regime.
(By Parizad Sirwalla, Partner and Head, Global Mobility Services – Tax, KPMG in India)