New Policy & Law in India in April: Five Changes in Income Tax Rules To Know
PF tax rules
Interest on annual employee contributions to provident fund over ₹2.5 lakh would be taxed from 1 April 2021. The govt said that the move is aimed at taxing high-value depositors in the Employee Provident Fund (EPF).
As per law, both the employer and the employee need to contribute 12% of their wages towards the provident funds. Till March 2020, employer contributions up to 12% enjoyed a tax exemption. Any contributions in excess of 12% were liable to tax, according to Timesnownews.
However, as per Budget 2020, the aggregate employer contribution to Provident Fund, National Pension System and Superannuation Fund in excess of Rs 750,000 per annum and the interest thereon would be considered as a prerequisite in the hands of the employee in the year of contribution. The employer has an obligation to consider such excess amount as perquisite in the hands of the employee and withhold taxes thereon. As is obvious, this amendment impacts high-income earning employees who meet the above criteria.
The government has notified the perquisite valuation rules for this purpose recently which provide that for taxation of the employer contributions in excess of Rs 750,000 to retiral funds and also the interest accruing thereon. There is a specific formula provided by the government to enable this calculation for the employer.
TDS (Tax Deducted at Source)
In order to make more people file income tax returns (ITR), the finance minister has proposed higher TDS (tax deducted at source) or TCS (tax collected at source) rates in budget 2021. The budget has proposed the insertion of new Sections 206AB and 206CCA in the Income Tax Act as a special provision for the deduction of higher rates of TDS and TCS, respectively for the non-filers of an income tax return.
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government, according to Tax Guru.
The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor. The payment includes salary, commission, professional fees, interest, rent, etc.
Citizens 75 years exempted from filing ITR
To ease the compliance burden on senior citizens, finance minister Nirmala Sitharaman, while presenting Budget 2021, senior citizens above 75 years of age with only pension income will now be exempted from filing income tax returns. The bank paying income to them will deduct the necessary tax from their bank account.
This has come afterBudget 2018 had announced tax law changes to provide more tax benefits to senior citizens. These include tax benefits such as the introduction of a new section 80TTB in the Income Tax Act, 1961, the deduction for medical expenditure in case of no health insurance coverage, etc.
Under section 80TTB, seniors can claim up to Rs 50,000 interest income received from banks and post offices as a deduction from their income thereby making this type of interest income for senior citizens effectively tax-exempt up to Rs 50,000.
Pre-filled ITR forms:
Transaction details of individual tax filers with respect to capital gains, dividend income and interest income will soon become a standard of the pre-filled Income Tax return (ITR) form. Taxpayers will have to verify records of income accruing to them from such investments without having to source it individually before filling up the ITR form.
The details of an individual's capital gains on the transfer of listed securities or units of mutual funds will be provided by the recognised stock exchange, depository, recognised clearing corporation, or registrar to an issue and share transfer agent. Similarly, details of dividend income will have to be provided by the company that has given dividend to an individual while details of interest income will be provided for pre-filled ITR forms by banking companies and cooperative banks, the Postmaster General and Non-banking financial institutions (NBFCs).
Currently, ITR Forms come pre-filled with details of salary income, tax deducted at source, tax payments, etc.
“The income tax department has further extended pre-filled sections in ITRs from 1st April 2021 containing details of salary, TDS, interest and dividend income, capital gains from listed securities auto-populated from different authorized sources. Taxpayers need to make sure this data is accurate,” says Archit Gupta, Founder and CEO of Cleartax.
The central government in Budget 2021 has proposed to provide tax exemption to cash allowance in lieu of Leave Travel Concession (LTC). The scheme was announced by the government last year for individuals who were unable to claim their LTC tax benefit due to covid-related restrictions on travelling.
“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 the scheme,” says Archit.
| New Policy & Law in the UK in April: Employment Law Changes and Five Things to Note |
New Policy- New Law in UK starting April, 2021: The new and updated employment law in the UK will come into force in April 2021 ...
| India vs England cricket 2021: Time, TV Schedule & How to watch |
Attention! India vs England T20 cricket series will begin from March 12. More information about this would be introduced below by Knowinsiders: Time, TV Schedule ...
| UK Budget 2021: Visa reforms, Future Fund for Startups and Tech Support |
Announcing the Budget 2021 this afternoon, Sunak unveiled a raft of new measures aimed at boosting both startups and established tech firms.
| New Policy in the US in 2021: New laws on Higher Education to reduce worries of rising tuition |
New Policy - New Law in the US in 2021: Amidst the rising of college studying costs, the US release new law of Higher Education ...
| New Policy in the US in 2021: Police reform law soon to take effect |
New Policy - New Law in the US in 2021: This year is for police reform. After a series of unexpected events, from George Lloyd ...
| New Policy in India: The Reason Why Take Home Salary Likely to Cut Down Under New Rule in April 2021 |
New compensation rules as a part of Code on Wages 2021 in India stipulates that the allowance component cannot exceed 50 percent of the total ...