A slew of changes in the income tax rules had been announced by the Union Finance Minister Nirmala Sitharaman while presenting the Union Budget 2021. The new financial year begins on April 1 with this, new income tax rules will also come into effect.
New income tax rules that come into effect from April 1. So let's take a look at the changes announced in the Union Budget in February.
-TDS: The finance minister has proposed higher TDS (tax deducted at source) or TCS (tax collected at source) rates in budget 2021 in order to make more people file income tax returns (ITR). New Sections 206AB and 206CCA had been proposed in the budget as a special provision for the deduction of higher rates of TDS and TCS, respectively for the non-filers of an income tax return.
-Option to choose 'New tax regime' instead of Old tax regime: The government had implemented the new tax regime last year in Budget 2020. However, the exercise of choosing one of the tax regimes for FY 2020-21 will be required to be made starting from April 1, 2021. Taxpayers still have time until March 31, 2021, to make tax-saving deductions, however, they will be able to opt for a beneficial regime at the time of filing their tax returns for FY 2020-21.
-Senior citizens above 75 years exempted from filing ITR: Finance minister Nirmala Sitharaman while presenting Budget 2021 had exempted individuals above 75 years from filing income tax returns (ITR) to ease the compliance burden on senior citizens. The exemption will be available to only those senior citizens who have no other income but depend on pension and interest income from the bank hosting the pension account.
-PF tax rules: FM Nirmala Sitharaman capped the tax-free interest earned on provident fund contribution by employees and employers together to a maximum of Rs 2.5 lakh in a year. She then raised the limit for tax exemption on interest earned on provident fund contribution by employees to Rs 5 lakh per annum in specified cases as against the proposed Rs 2.5 lakh. The up to Rs 5 lakh contribution does not include the employer's contribution.
-Pre-filled ITR forms: In order to ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. individual taxpayers will be given pre-filled Income Tax Returns (ITR). To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled. The move is aimed at easing the filing of returns.
-LTC scheme: 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. The central government in Budget 2021 has proposed to provide tax exemption to cash allowance in lieu of Leave Travel Concession (LTC).