Nirmala Sitharaman, India’s finance minister, announced some significant changes in income tax rules while presenting the Union Budget 2021. The changes are expected to bring relief to India’s salaried population and will come into effect starting April 1, 2021. Let’s take a look at some of these Significant Changes in Income Tax.
Income tax rates
As per the change, no income tax would be levied on income not exceeding Rs. 2,50,000. A tax rate of 5% is going to be applicable to income earned between Rs. 2,50,000 – Rs. 5,00,000. A rate of 20% plus Rs. 12,500 would be applicable in case an individual’s income falls between the Rs. 5,00,000 – Rs. 10,00,000 bracket. An amount of Rs. 1,12,500, plus an income tax rate of 30%, would be applicable on income exceeding Rs. 10,00,000.
Tax on EPF contributions
As per the Significant Changes in Income Tax effective from April 1, 2021, the interest on employee contributions to their PF account exceeding Rs. 2.5 lakhs would be taxable. The change aims to tax high-income earning individuals and people who voluntarily contribute to their PF to save on paying taxes.
A Higher TDS Rate
The change aims at encouraging more people to file income tax returns or ITR, as it is popularly known. A new section, 206AB, will be added to the Income-tax act. According to the new rules, if a person with a TDS deduction of Rs. 50,000 and above in the past two years does not file a return; a rate double than the current rate of 5% would be applicable. However, the provision is not applicable for transactions where the total amount of tax is deducted at one go.
Senior Citizens above 75 years exempt from filing ITR
To ease the burden on senior citizens, the Union finance minister Nirmala Sitharaman has announced that individuals above 75 years of age will be exempted from filing income tax returns. However, one should note that the exemption will only apply to senior citizens whose only income source is their pension and the interest earned from the bank account in which their pension is credited.
Exemption Under the LTC Cash Voucher Scheme
Under the new provisions, for the assessment year 2020-21, the government would provide the tax exemption to an employee who receives a cash allowance in return for the expenditures incurred under the Leave Travel Concession (LTC) scheme.
Pre-filled ITR Forms
Presently, the information pre-filled in ITR forms includes personal data, details of donations made u/s 80G, bank details, salary details as mentioned in Form 16, TDS and advance taxes paid, and self-assessed tax per the form 26AS.
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