The Union Budget 2021 was laid down in the parliament on 1st February 2021 by Finance Minister Smt. Nirmala Sitharaman and several changes were made. Thus, in this article, we will be discussing 10 major direct tax proposals which were made in this year’s budget.
1. Relief to Senior Citizens
In order to ease the compliance burden on senior citizens, it is proposed to exempt pensioners who are of 75 years of age or above, from the requirement of filing of income tax if the full amount of tax payable has been deducted by the paying bank.
2. Reduction in Time for Income Tax Proceedings
Presently an assessment can be re-opened in 6 years, and in serious tax fraud cases for up to 10 years. In this year’s budget the FM has proposed to revise this limit for reopening of assessments to 3 years from the present 6 years, and in serious fraud cases, only when there is evidence of concealment of income of 50 lakh or more in a year, can the assessment be reopened up to 10 years. This can only be done after the approval of the Principal Chief Commissioner.
3. Setting up of Dispute Resolution Committee (DRC)
For reducing litigation and to give an impetus to the dispute resolution for small taxpayers, a Dispute Resolution Committee is proposed to be constituted. A taxpayer having taxable income up to 50 lakh and disputed income up to 10 lakh shall be eligible to approach the Committee.
4. Faceless Income Tax Appellate Tribunal (ITAT)
In order to provide transparent tax appellate mechanism, it is proposed to make the Income Tax Appellate Tribunal faceless and jurisdiction-less. A National Faceless Income Tax Appellate Tribunal Centre shall be established and all the communication between the Tribunal and the appellant shall be made electronically. Wherever personal hearing is needed, it shall be done through video-conferencing.
5. Tax incentives for Affordable Housing
In order to incentivize the purchase of an affordable house, it is proposed to extend the eligibility period for a claim of additional deduction for the interest of Rs. 1.5 lakh paid for the loan taken for the purchase of an affordable house to 31st March 2022.
Furthermore, in order to increase the supply of affordable house, it is proposed to extend the eligibility period for claiming tax holiday for an affordable housing project by one more year to 31st March 2022.
In order to promote the supply of Affordable Rental Housing for the migrant workers, it is also proposed to allow a new tax exemption for the notified Affordable Rental Housing Projects.
6. Tax benefits for Start-Ups
In order to incentivize setting-up of more start-ups in the country, it is proposed to extend the eligibility period to claim tax holiday for the start-ups by one more year to 31st March 2022. Furthermore, in order to incentivize investment in a start-up, it is proposed to extend the eligibility period of claiming capital gains exemption for the investment made in the start-ups by one more year to 31st Match, 2022.
7. Tax benefits to NRIs
In order to remove the genuine hardship faced by the NRIs in respect of their income accrued on foreign retirement benefits account, due to mismatch in taxation, it is proposed to notify rules for aligning the taxation of income arising on foreign retirement benefits account.
8. Exemption from Audit
To incentivize digital transactions and to reduce the compliance burden of the person who is carrying almost all of their transactions digitally, it is proposed to increase the limit for tax audit for persons who are undertaking 95% of their transactions digitally from 5 crores to 10 crores.
9. Rationalization of Tax-free Income on Provident Funds
In order to rationalize tax exemption for the income earned by high-income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of ` 2.5 lakh. This restriction shall be applicable only for the contribution made on or after 01.04.2021.
10. Levy of TDS on Purchase of Goods
In order to widen the scope of TDS, it is proposed to levy a TDS of 0.1% on a purchase transaction exceeding 50 lakhs in a year. In order to reduce the compliance burden, it is also proposed to provide that the responsibility of deduction shall lie only on the persons whose turnover exceeds 10 crores.
These were the 10 major tax proposals laid down in the Union Budget 2021. Let us know in the comments section on what do you think about these provisions and whether or not you are satisfied with the Union Budget 2021.
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