Taxpayers in India are demanded to stay in tandem with all new developments in the realm of Income Tax simply because they affect their earnings, in one way or another.
New Income Tax Rules which will be effective from 1 April 2021
The Finance Minister of India Nirmala Sitharaman had announced the Union Budget for 2021 on 1 February 2021. On the basis of the announcements made during the Budget, there are a few new rules which will be effective from 1 April 2021. The rules can be summed up as follows:
1. Provident Fund (PF) Tax Rules
As per the new announcement, the interest on the employee contribution made on an annual basis would be taxed when it passes the limit of Rs.2.5 lakh. With this move, the government aims at taxing the high-value depositors in the Employee Provident Fund or EPF. The Finance Minister said that the new rule will not affect the individuals who earn less than Rs.2 lakh per month.
2. Tax Deducted at Source (TDS)
The Finance Minister has proposed higher rates for tax deducted at source (TDS) and tax collected at source (TCS) in the 2021 Budget. This move is aimed at making more people file their income tax returns (ITR).
3. Senior Citizens (above the age of 75 years) will not be required to file ITR
In the 2021 Budget announcement, the Finance Minister said that senior citizens above the age of 75 years will be exempted from filing their income tax returns (ITR). This has been aimed at easing the compliance pressure on the senior citizens. However, this rule will apply only to people whose sole source of income is pension and income from interest from the bank which hosts its pension account.
4. Pre-filled ITR forms
The Finance Minister has also announced during Budget 2021 that the individual taxpayers will be provided with pre-filled ITR forms to making the whole compliance process easier. Details such as the income from salary, TDS, tax payments online, income from capital gains from listed securities, interest from bank, income from dividends, and so on will be readily furnished in the ITR forms.
5. Leave Travel Concession (LTC)
In the 2021 Union Budget, the Finance Minister has also proposed the tax exemption for cash allowances against the Leave Travel Concession or LTC. The scheme has been announced to benefit the individuals who could not claim the tax benefits on their LTC owing to the travel restrictions following the breakout of the COVID-19 pandemic.