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Latest Income Tax Rules 2021 – 2022
Union Budget 2021 has been announced in the parliament by Finance Minister Nirmala Sitharaman. There have been some changes in the income tax rules that will come into effect from 1st, April 2021. These new Income Tax rules 2021 are very significant and have targeted some special category of income taxpayers.
Budget 2021 has updated Income Tax rules for senior citizens, now the senior citizens of 75 and above age whose income source is pension and interest from fixed deposits in the same bank will be exempted to file ITR. Those senior citizens whose annual income source is from the bank only, now according to changes in section 194P, banks are supposed to deduct tax on senior citizens of 75 and above & they are free to file for the ITR.
The Finance Minister also proposes higher TDS on the taxpayers who are not filing their ITR and also tax will be deducted on the annual EPF contribution of more than Rupees 2.5 lakh. Also, some other new PF tax rules and LTC rules have been updated in the Union Budget 2021.
These new income tax rules 2021 will come into effect from 1st April, so before you get worried about how to calculate your Income tax and how to file for Income tax returns you must know about the latest updates in the Income Tax rules. Let’s discuss these 5 new Income tax rules 2021 that will come into effect from next month (1st April 2021).
New PF Tax Rules
New Income Tax rules on employees provident fund have been introduced in the union budget 2021 presented by Finance Minister Nirmala Sitharaman. According to the government now, those employees whose annual interest on EPF is more than Rs. 2.5 lakh would be taxed from 1st April 2021. It will not affect the common man; this new Income Tax rule is introduced to target the high-value depositors in the Employee Provident Fund (EPF).
The Govt. has set a limit of 12% contribution from employer and employee in the EPF account. Whereas, people who have volunteer provident fund account contribute more than this percentage to save the taxes. This rule is introduced to put a cap on the high-earning employees who are taking the advantage of workers’ welfare schemes for their self-interest. This new PF rule will not impact any person who is earning below 2 lakh per month.
New TDS Tax Rules
Budget 2021 has brought forward some stringent policies regarding TDS (Tax Deducted at Source) and TCS (Tax Collected at Source). Again this new Income Tax rule regarding TDS will not harm the common man in any way. It will only apply to the people who are not filing their ITR. Now, according to the new TDS/TCS policy people who have not filled in for Income Tax Return for the last 2 years will pay the higher TDS or even TCS.
The current rate of TDS and TCS is between 5%-10% which will increase up to 10%-20% for those who have not filed for ITR in the last 2 years and now the last date of filing for ITR has passed. These new TDS/TCS rules come under the new section 206AB and 206CCA in the Income-tax Act, 1961. Also, it is the responsibility of the deductor to deduct the double or 5% TDS whichever is higher according to the new TDS/TCS section 206AB and 206CCA.
However, there is one more condition to fulfill before deducting the tax according to the new rule. A deductor must check if the person is paying more than Rs 50,000 TDS/TCS annually. If both conditions are met then the deductor will deduct the TDS according to the new policy, if it fails, then the deductor must pay the penalty at 1% per month of the withholding tax amount.
Income Tax Rules For Senior Citizens
This Income Tax Rule is only applicable to the Senior Citizens of or above the age of 75 whose sole source of income is through the pension from the bank and interest collected on pension or fixed deposit from the same bank. Senior citizens who fall under this category are exempted from filing the Income Tax Return (ITR). The rest of the other senior citizen’s category can file for ITR like before if needed. This policy is introduced to ease the compliance burden on senior citizens.
Changes in Pre-Filled ITR Forms
The concept of a pre-filled Income Tax return form is introduced in the union budget 2021 to ease the compliance burden on every individual. For the last 5 years, the income tax department has undergone many significant changes for the ease of taxpayer and tax officers. Now, an individual can submit their tax online and file for the ITR at the same time from anywhere in the world. This all is possible due to the technological advancement in the Income-Tax department.
To further ease the structure of filing for ITR for every taxpayer has improved. Now, you can see the pre-filled ITR form which already contains the details of your salary, capital gains from securities, bank interest, dividend income, tax deduction, etc. This information may vary from person to person. It is implied to check the accuracy of the data and to smooth the ITR process.
In the union budget 2019, the finance minister presented the concept of leveraging the technology for the benefit of every taxpayer and the department itself. Therefore, the concept of interlinking PAN and Aadhaar, faceless e-assessment, and now pre-filled ITR forms have been introduced. This will fast forward the process; reduce the tax frauds and discrepancies in the govt. data.
Changes in LTC (Leave Travel Concession)
In October 2020, the Finance minister announces the LTC or Leave Travel Concession scheme to boost the morale of the employee. Due to the novel Coronavirus outbreak, people were not able to travel and thus all their LTC was converted into cash vouchers to boost the morale of the central govt. employees. Later, this scheme was further extended to the private, public, and state govt. employees.
Now, a new LTC clause has been introduced in the budget for the benefit of the employees so that they can take full advantage of the LTC cash voucher. All the employees with the LTC scheme are exempted to pay tax on the LTC cash voucher and this will come in effect from the assessment year 1st April 2021. The Govt. proposed any individual who claims the LTC with prescribed expenditure shall be exempted from any tax liability for the same whereas any other individual who doesn’t come under these criteria is eligible to pay the tax.
Income Tax Rule Changes in 2020
Finance Minister Nirmala Sitharaman had earlier in March 2020 also announced various reliefs related to GST and income tax to all taxpayers. But now as the outbreak of COVID-19 infection continues and is increasing day by day, due to this, The time limit has been extended further.
To provide relief to taxpayers amid the transition to COVID-19, the Income Tax (I-T) department of India has extended various deadlines for the second time, from investing in tax-savings to filing income tax returns (ITR).
Changes in Income Tax Rules due to COVID-19
- The deadline for filing a belated income tax return (ITR) and revised tax return (ITR) for FY 2018-19 was 31st March 2020. But It was extended until 30th June, and now this has been extended till July 31st, 2020.
- Usually, 31st July is the last date for filing of income tax returns for the salaried class, which has now been extended to 30th November 2020. For this reason, income tax returns will now be filed by 30 November 2020 which was to be filed by 31 July 2020 and 31 October 2020.
- The Income Tax Department stated that due to the extension of the date of ITR, as a result, the date of submission of the income tax audit report has also been extended to 31 October 2020.
- Due to the nationwide lockdown, many taxpayers still have not received Form 16 to file their tax. That is why the government has extended the deadline for making various investments and expenditures to claim tax breaks under section 80C, 80D, and 80G till 31 July 2020. This extension can be beneficial for those who have not yet invested in any tax-saving scheme.
- Due to the COVID-19 epidemic, the government has provided some relief to small and middle-class taxpayers. This relief relates to the date of payment of self-assessment tax for the financial year 2019-20. For taxpayers for whom self-assessed tax liability is less than Rs 1 lakh, the last date for depositing their tax has now been extended to 30 November 2020. This expansion will enable taxpayers to fulfill their compliance amid this epidemic.
- The government has extended the investment or construction or purchase deadline to 30 September 2020 to claim the deduction in respect of roll-over profit or capital gain under sections 54 to 54 GB of the Income Tax Act.
- The last date for furnishing of TDS and TCS statements for FY 19-20 is extended to 31st July 2020 and the issuance of TDS and TCS certificate pertaining for FY 2019-20 has been extended to 31st to 15th August 2020.
- The last date for PAN – AADHAAR linking has also been extended till 31 March 2021.
