Budget 2021 – Important Things Individual Taxpayers Should Know

  1. No change in tax rates or slabs .

2. Interest on EPF contribution above Rs 2.5 Lakh to be taxable.

E.g. Monthly PF contribution of Rs 20,833/-  ( Annually Rs 2.5 Lakh ) will be in safe zone and will not be taxed . However your PF contribution is Rs 25,000/- per month ( Annually Rs 3 Lakh ), then tax will be payable on the amount above Rs 2.5 lakh, that is on Rs 50,000 in this case. At the current PF interest of 8.5%, that means Rs 4,250 would become taxable. 

Please note : Only Employees contribution is to be considered . 

3. Taxpayers will not be required to estimate their dividend income while making advance tax payments. 

Advance tax will now be payable only when dividend is declared or paid by the company. This will save payment of interest by taxpayer due to underestimation while paying advance taxes. 

4. Maturity Proceeds from ULIP will be taxable if the yearly premium is more than Rs 2.5 Lakh per year.

The tax exemption to ULIP with premium of more than Rs 2. 5 Lakh annually has been removed . Gains will now get taxed in the same rate as equity -oritented mutual fund . 

Notably , the Rs 2.5 Lakh ceiling will be calculated on aggregate premium in case of an investor holds multiple ULIPs . This removes the option of investing in multiple policies to stay below the tax threshold . 

Importantly , this ULIP measure comes into effect immediately i.e. for the policies purchased on or after Feb 1, 2021.

5. Resident senior citizens, aged 75 or above, earning only pension and bank interest income (from the same bank where pension is credited) are not required to file income tax return. On the basis of declaration submitted by such a taxpayer, bank has to compute taxable income and deduct tax thereon.

6. In addition to salary income, bank accounts, tax payments and TDS details, pre-filled income-tax returns will now also include details of capital gains from listed securities, dividend income, interest from banks, post office etc. 

7. Reduced timelines for belated returns and revised returns 

Presently, belated returns (i.e. where a return is not filed within the original due date specified) and revised returns (i.e. where a taxpayer seeks to file a return to correct any omission or mistake in the original return) can be filed before the end of the subsequent financial year or completion of assessment whichever is earlier. For example, a belated return or revised return for financial year 2019-20 could be filed on or before 31 March 2021 or completion of assessment, whichever is earlier. 

It has been proposed to reduce the timeline for belated returns and revised returns by 3 months. For example, a belated return or revised return for financial year 2020-21 would need to be filed on or before 31 December 2021 or completion of assessment, whichever is earlier. 

8. Extension of date of sanction of loan for deduction in relation to affordable residential house property 

Section 80EEA of the Income-tax Act 1961 provides for an additional deduction of up to Rs 1,50,000 in relation to interest on loan taken to purchase residential house property subject to satisfaction of specified conditions. The conditions include the sanction of loan between 1 April 2019 and 31 March 2021, stamp duty value of the house property not exceeding Rs. 45,00,000 and the individual not owning any residential property on the date of sanction of the loan. 

It has been proposed to extend the outer date for sanction of loan to 31 March 2022 for the purpose of claiming this deduction. 

Happy Investing !!

26AS Reloaded

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Recently, the Income Tax Department introduced some key changes in Form 26AS  . What used to be a simple tax credit statement available to every taxpayer is now a complete blueprint of your high-value financial transactions. Let’s see what all these changes are .

What is the Form 26 AS?

This is a statement from the tax department which mentions the tax deducted on behalf of a taxpayer. It also mentions income for which an individual might have sought tax exemption during the year. All taxpayers are given a Form 26AS.

What is added from this year ?

From this year, the Form 26AS has a new Section E which mentions specified high-value transactions conducted by an individual during the financial year. These transactions include:

  • Open FDs of more than Rs 10 lakh.

  • Pay credit card bill of more than Rs 10 lakh by cheque and more than Rs 1 lakh by cash.

  • Buy bonds of more than Rs 10 lakh.

  • Buy mutual funds of more than Rs 10 lakh.

  • Buy shares of more than Rs 10 lakh.

  • Offer shares for buyback of more than Rs 10 lakh.

  • Buy foreign exchange of more than Rs 10 lakh.

  • Buy Property worth more than Rs 30 lakh.

  • Get bank drafts made of more than Rs 10 lakh with cash.

  • Deposit more than Rs 10 lakh in cash in savings bank account.

  • Deposit or withdraw more than Rs 10 lakh in cash from current account.

Please note that these are cumulative amounts. You could be doing separate transactions, but the total amount for the financial year will be taken into account.

E.g. If you have SIPs of Rs 20,000 in five different funds, the entire Rs 12 lakh invested in a year will get reported.

Where can you get it ?

You can log in to your tax filing account and view it. You can also access it through your Netbanking account if the account is linked to your PAN.

What are the implications?

  • The aim of income tax department is to match the consumption & investment patterns with the returns filed by the taxpayer .
  • The taxpayer now can view the information in a consolidated manner which helps in filing the returns in error free manner and to avoid further questions from income tax department.
  • Honest tax payers need not to worry now .

And lastly , since it carries lot of financial information , suggest not to share it with unknown person .

Happy Tax Filing !