Direct Tax Amendments by Finance Bill 2021

Direct Tax Amendments by Finance Bill 2021

• No change in Minimum threshold limits of Income Tax Exemptions under old Income Tax Regime;
• No change in Health & Education Cess maintained at 4% for all categories of Taxpayers;
• Standard deduction u/s 16 is maintained at Rs.50,000/- for all the salaried employees;
• Rebate u/s 87A is continued amounting to Rs.12500/- for all Assessee having taxable income up to Rs.5,00,000/- under the old regime of taxation; (Refer to Table given below)
• No changes in Tax Rates for Companies, Firms, and Co-operative Societies.
• Senior Citizens – Age 75 years and above are not required to file Income Tax Returns if they have only Pension and Bank Interest Income from the specified Income and provided that Bank has deducted appropriate tax as applicable as per the provisions of Income Tax Act 1961. (Really doubtful how many senior citizens can enjoy such benefits) (01/04/2021)
• The importance of AI, ML, and DA expanded to all the aspects of system monitoring and revenue detections;
• Equalisation Levy provisions u/s 163 rationalized to exclude consideration received or receivable for specified services and consideration received or receivable for e-commerce supply or services shall not include consideration which is taxable as royalty or fees for technical services in India under the Income-tax Act read with the agreement notified by the Central Government under section 90 or section 90A of the Income-tax Act.

Advance Tax Changes

Section 234C has been amended to provide for exclusion for levy of Interest @ 1% p.m. on the dividend receipt of the taxpayers.

Tax Audit Changes

• Tax Audit limit increased to 10 crores from existing 5 years in the cases where transactions are done digitally and electronically in excess of 95% or equal to 95% on revenue as well as expenditure limbs of business operations of the Assessee;
• In view of the Increase in Tax Audit Limits of 10 crores, the due date of filing Income Tax Returns u/s 139(1) in cases of Individual, HUF, Firm, Partners of Firm, etc., new due date would be 31st July for each previous year;
• In view of the Increase in Tax Audit Limits of 10 crores, the due date for a claim of deduction u/s 43(VAT, Excise, GST, TDS, etc.) in cases of Individual, HUF, Firm, Partners of Firm, etc., new due date would be 31st July for each previous year;
• For Corporate Tax Audit Reports and Transfer Pricing Reports, one needs to be upload on or before one month of the Normal due date specified u/s 139(1) of the Income Tax Act 1961;
• LLP is excluded from the definition of Section 44ADA of the Income Tax Act 1961
• If Employees contribution towards Provident Fund and ESIC is not deposited on or before the due dates specified as per respective laws then such contribution would be disallowed u/s 43B and also it would be termed as Income of the Assessee;
• Goodwill won’t be considered as part of Block of Assets u/s 32 of the Income Tax Act 1961. Thus, no depreciation on Goodwill u/s 32 can be claimed in the computation of Total Income. Consequent changes would be introduced in Section 45(4A), Definition of Capital Asset, Capital Gains definition, Period of Holdings, and Section 50 of the Act would be introduced. Suitable guidelines would be introduced.
• Section 2(29A) introduced to provide for the definition of the term Liable to tax which was not provided under the law.

Partnership Firms

Provisions of section 45(4) are rationalized to plug the leakage of tax revenue due to revaluation of business and distribution of benefits to the Partners due to business reorganizations.

Fake Invoices

Provisional attachment in the cases of Fake Invoices provided u/s 281B of the Act and such attachment is also extended Penalty recoveries u/s 271AAD of the Income Tax Act 1961.

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