FM keeps income tax slabs intact, exempts senior citizens from filing returns
05 February 2021
The finance minister has decided against tax exemptions and tax reliefs to individual taxpayers, but provided relief to senior citizens in filing of income tax returns, reduced time limit for income tax proceedings, announced the setting up of a Dispute Resolution Committee, a faceless ITAT, relaxation to NRIs, increase in exemption limit from audit and relief for dividend income.
She also announced steps to attract foreign investment into infrastructure, relief to affordable housing and rental housing, tax incentives to IFSC, relief to small charitable trusts, and steps for incentivising start-ups in the country.
Nirmala Sitharaman, in her Budget speech, said that post-pandemic, a new world order seems to be emerging and India will have a leading role therein. In this scenario, she said, the tax system has to be transparent, efficient and should promote investment and employment in the country. At the same time, she said, it should put minimum burden on the tax payers. She said the government had introduced a series of reforms for the benefit of tax payers and the economy, including slashing of corporate tax rate, abolition of dividend distribution tax, and increasing of rebate for small tax payers. In the year 2020, the income tax return filers saw a dramatic increase to 64.8 million from 33.1 million in 2014.
The Budget seeks to reduce compliance burden on senior citizens who are of 75 years of age and above. Such senior citizens having only pension and interest income will be exempted from filing their income tax return. The paying bank will deduct the necessary tax on their income.
The budget proposes to notify rules for removing the hardship of non-resident Indians returning to India on the issue of their accrued incomes in their foreign retirement account. The Budget proposes to make dividend payment to REIT/InvIT exempt from TDS. For foreign portfolio investors, the Budget proposes deduction of tax on dividend income at lower treaty rate.
The Budget provides that advanced tax liability on dividend income shall arise only after the declaration or payment of dividend. The minister said that this was being done as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax.
Sitaraman proposed to extend the eligibility period for claim of additional deduction for interest of Rs1.5 lakh paid on loan taken for purchase of an affordable house to 31 March 2022. In order to increase the supply of affordable houses, she also announced extension of eligibility period for claiming tax holiday for affordable housing projects by one more year to 31 March 2022. For promoting supply of affordable rental housing for the migrant workers, the minister announced a new tax exemption for the notified affordable rental housing projects.
In order to incentivise start ups in the country, Sitharaman announced extension in the eligibility for claiming tax holiday for start ups by one more year till 31 March 2022. In order to incentivise funding of start ups, she proposed extending the capital gains exemption for investment in start-ups by one more year till 31 March 2022.
The finance minister said that delay in deposit of the contribution of employees towards various welfare funds 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, she announced that late deposit of employee’s contribution shall never be allowed as deduction to the employer.
In order to reduce compliance burden, the Budget provides for reduction in the time-limit for reopening of income tax proceeding for three years from the present six years. In serious tax evasion cases, where there is evidence of concealment of income of Rs50 lakh or more in a year, the assessment can be reopened up to 10 years but only after the approval of the Principal Chief Commissioner.
Stating the resolve of the government to reduce litigation in the taxation system, the finance minister said that the Direct Tax Vivad se Vishwas Scheme announced by the government has been received well. Until 30 January 2021, over 1,10,000 tax payers have opted to settle tax dispute of over Rs85,000 crore under the scheme. To further reduce litigation of small tax payers, she proposed to constitute a Dispute Resolution Committee. Anyone with a taxable income up to Rs50 lakh and disputed income of up to Rs10 lakh shall be eligible to approach the committee. She also announced the setting up of Faceless Income Tax Appellate Tibunal Centre.
To incentivise digital transaction and to reduce the compliance burden of the person who is carrying almost all of the transactions digitally, the budget proposes to increase the limit for tax audit for persons who are undertaking 95 per cent of their transaction digitally from Rs5 crore to Rs10 crore.
To attract foreign investment into infrastructure sector, the budget proposes to relax certain conditions relating to prohibition on private funding, restriction on commercial activities and direct investment in infrastructure. In order to allow funding of infrastructure by issue of zero coupon bonds, the budget proposes to make notified infrastructure debt funds eligible to raise funds by issuing tax efficient zero coupon bonds.
In order to promote International Financial Services Centre (IFSC) in GIFT City, the budget proposes more tax incentives.
The budget proposes that details of capital gains from listed securities, dividend income and interest from banks, post office etc will also be pre-filled to ease filing of returns. Details of salary income, tax payment, TDS etc already come pre-filled in returns.
In order to reduce compliance burden on the small charitable trust running educational institutions and hospitals, the budget proposes to increase the limit on annual receipts for these trusts from present Rs1 crore to Rs5 crore for non-applicability of various compliances.