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Highlights of Budget 2021-22

Feb 04, 2021 by GBC Group in Finance Minister

Table of Contents

Highlights of Budget 2021-22

As we all are aware that the Budget for 2021-22 was announced on 1 st 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 Rates.

b) Exemption for LTC Cash scheme – Section 10(5)

Due to COVID 19, many individuals could not avail of 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 the employer for LTC, whichever is less, subject to a maximum of Rs 36000 per family member.

c) Section 80EEA- Deduction of interest on housing loan

The individuals, who have availed loans for the 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., up to 31st March 2022.

Hence, all loans sanctioned up to 31 March 2022 shall be eligible for a 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 have 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.

Author Remark

This is applicable only if your pension and bank interest are receiving in the 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 the amount received from ULIPs issued on or after 1st Feb 2021 and have an annual premium payable of more than Rs. 2,50,000. Thus, the 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).

Author Remark

Any amount received from such ULIP(s) on the death of the assessee shall be exempted.

f) Interest on short payment of advance tax on Dividend income – Section 234C

If the shortfall in the advance tax installment 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 installments after the dividend is declared or distributed.

In the case where no subsequent installments 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.

Author Remark

Now the loophole of tax planning is completely plugged.

• For Business Entities

a) There is no change in Tax Rates.

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 that assessee, where the amount received in cash is less than 5% of total receipts and the 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 the digital economy and to reduce the compliance burden.

c) Section 36(1)(va) and Section 43B – Delay in payment of the contribution of PF and ESI

In case of delay in payment of employee’s contribution of PF and ESI from the due date of the respective act (PF and ESI Acts), it is not allowed under section 36(1)(va). It has been clarified that the 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, an employee’s contribution if deposited after the due date prescribed in PF and ESI acts, shall never be allowed as deduction.

Author Remark

By this amendment, all ambiguity has stopped. Since there was the various judgment of Courts wherein employee’s contribution deposited after the due dates of the respective act but deposited before the 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.

Applicability

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.