Budget 2021: Cheer for Senior Citizens, PF Contributors to be Hit The interest income on PF contributions above INR 2.5 lakh per annum will now be taxed at the normal rates
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In an otherwise disappointing budget for salaried taxpayers, pensioner senior citizens have a reason to cheer. Finance minister Nirmala Sithraman on Monday announced senior citizens above 75 years of age with only pension income will now be exempted from filing income tax returns.
Tabling the Union Budget 2021, she said "We shall reduce compliance burden on those above 75 years. This means people above 75 years, who get pension and earn interest from deposits need not file IT returns."
Applicable tax on income from deposits will be directly deducted by banks from their bank accounts.
While the budget made no changes to the tax slabs or tax deductions and exemptions, tax relief on Provident Fund (PF) will take a hit. The interest income on PF contributions above INR 2.5 lakh per annum will now be taxed at the normal rates. This move is expected to affect the high-income salaried taxpayers.
Additionally, the FM sitharaman said some employers deduct PF contributions from employees but do not deposit on time, which results in permanent loss of interest income for the employees. "In order to ensure timely deposit of employee's contribution to these funds by the employers, late deposit of employee's contribution shall never be allowed as deduction to the employer," she said.
In another move, premium on Unit-linked Insurance Plans (ULIPS) above INR 2.5 lakh will now not get any tax benefit. The death benefits on ULIPS will continue to be tax exempt.
To ease filing of returns, the Budget proposed that details of capital gains from listed securities, dividend income and interest from banks, post office etc. will be pre-filled in the ITR form. This is in addition to the details of salary income, tax payment and TDS that come pre-filled in returns.
On the home loan front, those buying a house under the affordable housing scheme are slated to get additional relief. The FM proposed to extend the eligibility period for claim of additional deduction for interest of INR 1.5 lakh paid for loan taken for purchase of an affordable house to 31st March, 2022.
"As anticipated, affordable housing and rental housing got a big boost with the government extending the period for extra deduction of INR 1.5 lakh available for loans up to 31st March 2022. This will keep demand buoyant for affordable housing in 2021 as well," said Anuj Puri, Chairman, ANAROCK Property Consultants.
"As per ANAROCK Research, affordable housing already accounts for more than 35 per cent of the supply across the top seven cities in the country."
Resolving Tax Disputes To Get Easier
In a major relief to taxpayers, FM Sitharaman in Budget 2021 reduced the time limit for reopening of income tax assessment cases to three years from the current six years. This move aims to reduce compliance burden and free taxpayers of uncertainty over reopening of their past assessment cases, she said in her speech.
For serious tax evasion cases, where concealment of income is INR 50 lakh or more a year, the assessment can be reopened upto 10 years but only after the approval of the Principal Chief Commissioner.
For small taxpayers, the FM announced a Dispute Resolution Committee in a bid to reduce the burden of litigation in the taxation system. "Anyone with a taxable income upto INR 50 lakh and disputed income upto INR 10 lakh shall be eligible to approach the Committee," she said.
As part of the government's effort towards faceless appeals for resolving tax disputes without personal contact between the taxpayer and IT official, she also announced the setting up of the National Faceless Income Tax Appellate Tibunal Centre.
In last year's budget, FM Sithraman had announced Vivad se Vishwas Scheme to reduce litigations in direct tax under which a taxpayer was required to pay only the disputed amount and get a waiver of interest and penalty.
She said the scheme has been received well as until 30th January, 2021, over one lakh ten thousand taxpayers have opted to settle tax disputes of over INR 85 thousand crore under the scheme.
Experts say online appeals when implemented will lead to transparency in the dispute resolving process. "The announcement of a faceless dispute resolution system should help taxpayers by fast-tracking the resolution process," said Lalit Keshre, Co-founder and CEO, Groww.