Budget 2021 has left personal income tax rates unchanged. Here are the top 10 announcements that can affect your personal finances.
Senior citizens need not file income-tax returns
In a relief to senior citizens, those aged 75 or more and only have pension and interest income will not have to file income tax returns. But if you earn dividend income or any other income, then you have to file your income-tax returns, as usual. There are other clauses here as well; both interest income and pension income must be credited to your saving bank accounts belonging to specific banks that the government will soon notify.
Deposit insurance cover to be better structured
Sitharaman said that a better policy framework will be devised by the government and the Reserve Bank of India for bank depositors to claim the deposit insurance cover, when their banks get into trouble. Last year's Budget had hiked the deposit Insurance cover for bank depositors from Rs 1 lakh to Rs 5 lakh. However, so far, this is only available for banks when they go into liquidation. A better and a revised mechanism would now help depositors even before the bank goes into liquidation. “This is a positive development and protect bank customers from the kind of situations we had seen in the recent past when the RBI had imposed moratorium on banks and limited access to deposits,” according to Adhil Shetty, CEO, BankBazaar.com
Social security benefit extended to many more workers
Several tax-paying citizens who lost their jobs last year due to COVID-19 and had to take up freelancing assignments get some relief in Budget 2021. Social security benefits will be extended to gig and platform workers. E-commerce workers will now be brought under Employees’ State Insurance Scheme (ESI), Employees’ Provident Fund (EPF) and the minimum wage rule. Women will be allowed to work in all categories in night shifts too.
Faceless assessment gets a boost
Budget 2021 has given a further push to faceless assessment and aims to make it more robust. A (faceless) dispute resolution committee will be set up. Anyone with a taxable income of up to Rs 50 lakh and disputed income up to Rs 10 lakh can approach this committee.
Investment charter for financial products
In order to reduce mis-selling of financial products, the minister announced the setting up of an investment charter. This charter would pertain to investors of all products across the financial sector. Details are awaited on this, but this charter is expected to lay down rights of investors, the grievance mechanism in case they have a complaint and so on. The charter is also expected to make all current financial products’ grievance resolution mechanism more robust.
Faster tax resolutions
The timeline for reopening of assessment under income tax returns will now go down to three years from six years. Serious tax evasion cases, too, would only pertain to cases where there is evidence of income concealment of Rs 50 lakh or more in a year. The reassessment can be opened in 10 years in such cases. This will ease the burden on the tax authorities and tax-payers and pave the way for faster resolution of cases.
Detailed pre-filled tax forms
Sitharaman said that apart from tax deduction at source, now details of capital gains and interests from banks and post offices would be pre-filled. Pre-filled forms improve tax compliance and also help tax-payers in file their taxes quickly and efficiently as the data is already captured.
The rich cannot invest in Provident Fund and ULIPs and escape tax net
Budget 2021 has said that contribution made in provident funds beyond Rs 2.5 lakh a year, will now attract tax on interest it earns for you. The interest will be calculated on the excess amount. Additionally, Unit-Linked Insurance Plans (ULIP) will now attract long-term capital gains tax at maturity or redemption, if your annual premium exceeds Rs 2.5 lakh. These measures have been introduced to tax the rich who, the finance minister said in hero press conference post her Budget speech, invested large amounts in these investments to escape paying tax.
To be sure, interest earned on EPF has been otherwise tax-free. Similarly, ULIPs, till date, do not attract LTCG tax.
Tax-efficient zero-coupon bonds for infra
Soon, retail investors will have a new instrument to invest in. In order to spur infrastructure growth, Budget 2021 announced that infrastructure debt funds would now be able to raise funds by issuing tax-efficient zero coupon bonds. Further details are awaited as to the extent of income-tax benefits that these bonds would give.
Sops for Non-Resident IndiansThere is a change in double taxation on NRIs, especially those who return to India. Relief is also being looked at for those who face difficulty in getting credit for taxes paid in India.