As we all are aware that the Budget for 2021-22 was announced on 1st February 2021. Here is the complete compilation of all major amendments.
1. Income Tax Act
• For Individual Taxpayers
a) There is no change in Tax
b) Exemption for LTC Cash scheme - Section 10(5)
Due to COVID 19, many individuals could not avail LTC exemption for block 2018- 2021. To provide the benefit of same, Section 10(5) has been amended. The amendment is applicable for AY 2021-2022 only and can be availed by individuals on expenditure done between 12 October 2020 and 31 March 2021 for purchase of goods or services which attract GST @ 12% or more.
The payment of such expense should be made by account payee cheque/draft/ECS and other prescribed modes. However, the exemption is restricted to 1/3rd of expense or Amount received from employer for LTC, whichever is less, subject to maximum of Rs 36000 per family member.
c) Section 80EEA- Deduction of interest on housing loan
The individuals, who have availed loans for purchase of residential property, which was sanctioned between 1st April 2019 and 31 March 2021, can avail the deduction of interest payment on such loan.
The government has proposed to extend the deduction u/s 80EEA by one year i.e., upto 31st March 2022.
Hence, all loan sanctioned upto 31 March 2022 shall be eligible for deduction of interest u/s 80EEA i.e., Rs. 1,50,000/- subject to other conditions.
d) Relief to Senior-citizen (Age more than 75 years) Section 139
Senior citizens of age of 75 years or more has an option not to file their return of income if their income comprise of Pension and/or interest income only.
To avail this benefit, the assessee must give a declaration to the bank where his/her income is credited. The bank shall compute tax liability and deduct the tax u/s 194P. This will be applicable from 1 April 2021.
This is applicable only if your pension and bank interest is receiving in same bank account. It means if you have more than one bank account then this option will not attract.
e) Withdrawal of exemption for Unit Linked Insurance Plans - Section 10(10D)
It has been proposed to exclude amount received from ULIPs issued on or after 1st Feb 2021 and have annual premium payable of more than Rs. 2,50,000. Thus, same shall be taxable.
Further, where more than one ULIPs are issued in the name of a person on or after 1st Feb 2021 and aggregate of premiums payable on the same exceed Rs. 2,50,000, are also excluded from the benefit of Section 10(10D).
Any amount received from such ULIP(s) on death of assessee shall be exempted.
f) Interest on short payment of advance tax on Dividend income - Section 234C
If the shortfall in the advance tax instalment or the failure to pay the same on time is on account of the dividend Income, Other than dividend referred to in section 2(22)(e), no interest under section 234C shall be charged provided the assessee has paid full tax in subsequent advance tax instalments after the dividend is declared or distributed.
In case where no subsequent instalments are due, advance tax on such dividend income is paid on or before 31st March.
g) Taxability of Provident fund Interest
It is proposed that an exemption shall not be available for the interest income accrued during the previous year to the extent it relates to the employee's contribution exceeding Rs 2,50,000 deposited in a previous year.
Now the loophole of tax planning is completely plugged.
• For Business Entities
a) There is no change in Tax
b) Income Tax Audit Limit Increased (Section 44AB)
The threshold limit for tax audit under section 44AB has been proposed to increase from Rs. 5 Crore to Rs. 10 Crore for those assessee, where amount received in cash is less than 5% of total receipts and amount paid in cash is less than 5% of Aggregate payments during the year.
This amendment will take effect from 1st April 2021 and will accordingly apply for the assessment year 2021-22 and subsequent assessment years.
This amendment is made to promote digital economy and to reduce compliance burden.
c) Section 36(1)(va) and Section 43B - Delay in payment of contribution of PF and ESI
In case of delay in payment of employee's contribution of PF and ESI from the due date of respective act (PF and ESI Acts) it is not allowed under section 36(1)(va). It has been clarified that provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the due date under section 36(1)(va). Thus, employee's contribution if deposited after due date prescribed in PF and ESI acts, shall never be allowed as deduction.
By this amendment, all ambiguity has stopped. Since there was various judgment of Courts wherein employee's contribution deposited after the due dates of respective act but deposited before due date of filing Income Tax Return u/s 139(1) of Income Tax Act, 1961 was allowed under section 43B.
d) TDS on purchase of Goods - Section 194Q
With Effect from 1 July 2021, TDS is required to be deducted at the rate of 0.1% in case of purchase of goods.
This is applicable where total sales, gross receipts or turnover of buyer exceed Rs. 10 Crore during the financial year immediately preceding the financial year in goods is purchased and goods purchased from the seller exceed Rs. 50 Lakh in the previous year.
However, TDS is not required to be deducted under this section if TDS / TCS is deductible or collectible under any other the provisions of Income Tax Act Except TCS under section 206C(1H). Thus, in case TCS is collectible under section 206C(1H), TDS under this section shall be applicable and deducted by buyer.
Practically, TCS under section 206C(1H) become irrelevant because TDS is to be deducted and deposited, Expenses booked or paid whichever is earlier.
Further, with due respect to government decision, this section is not required, since GST is applicable on this transaction, and GST is already migrated with income tax. Hence the basic concept of introducing TDS is already meet.
e) Amendment in section 206AA
It is also proposed to amend sub-section (1) of section 206AA of the Act and insert second proviso to further provide that where the tax is required to be deducted under section 194Q and Permanent Account Number (PAN) is not provided, the TDS shall be at the rate of 5%.
f) TDS on divided to Business Trust is exempt - Section 194.
Section 194 of the Act provides for deduction of tax at source (TDS) on payment of dividends to a resident. It is proposed to amend second proviso to section 194 of the Act to further provide that the provisions of this section shall not apply to dividend credited or paid to a business trust by a special purpose vehicle or to any other person as may be notified.
g) Deduction to Start-up Extended by one year - Section 80IAC.
Section 80-IAC of the Act provides for a deduction of 100% of the profits of an eligible start-up for 3 consecutive assessment years out of 10 years at the option of the assessee.
This is subject to the condition that eligible start-up is incorporated on or after 1st April 2016 but before 31st March 2021.
Now section 80- IAC proposed to amend the last date of incorporation of eligible start-up before 31st March 2022. Hence, one more year is granted to start-ups.
h) Deduction to affordable housing extended by one year - Section 80IBA.
Deduction of 100% of profit derived from affordable housing projects is allowed under section 80IBA. To take this deduction , there was a condition that the project should be approved by the competent authority after the 1st of June 2016 but on or before the 31st of March 2021.
Now section 80-IBA is proposed to amend the last date of approval of project before 31st March 2022. Thus, exemption to companies providing affordable housing has been extended if project is approved by competent authority till 31st March 2022.
i) No depreciation on goodwill - Section 32
It has been proposed that goodwill of a business or profession will not be considered as a depreciable asset and there would not be any depreciation on goodwill of a business or profession in any situation.
In a case where goodwill is purchased by an assessee, the purchase price of the goodwill will continue to be considered as cost of acquisition for the purpose of computation of capital gains under section 48 of the Act subject to the condition that in case depreciation was obtained by the assessee in relation to such goodwill prior to the assessment year 2021-22, then the depreciation so obtained by the assessee shall be reduced from the amount of the purchase price of the goodwill.
In case of self-generated goodwill, the cost of acquisition shall be taken as NIL.
j) Presumptive Taxation not application on LLP - Section 44ADA
Section 44ADA provides for presumptive taxation in case of professional income. There was an ambiguity whether the section applies in case of LLP or other assessee.
Now amendment has been proposed in section 44ADA specifying the assessee on which this section shall be applicable. Now section 44ADA shall be applicable in case of individual, HUF and Partnership firms other than LLP.
Practically, an HUF cannot do business of Profession.
k) Higher rate of TDS and TCS on non-filing of return - Section 206AB and 206CCA
Section 206AB and 206CCA has been inserted to provide for higher rate for TDS and TCS, respectively, for the non- filers of income-tax return.
As per these sections, TDS and TCS shall be deducted at twice the rate specified or rate in force or 5% whichever is higher in case of a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit of filing return of income under sub-section (1) of section 139 has expired.
These provisions shall be applicable on in case of deductee / collectee where the aggregate of tax deducted at source and tax collected at source is Rs. 50,000/- or more in each of these two previous years for which return is not filed.
Proposed section shall not apply where the tax is required to be deducted under sections.
- 192 (Salaries),
- 192A (PF),
- 194B (Winning from lottery etc),
- 194BB (Winning from horse rates),
- 194LBC (income received from a securitisation trust) or
- 194N (Cash withdrawal exceeding Rs 20 lakh) of the
Practically, it is exceedingly difficult for an assessee to identify whether the person has filed its return or not.
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