Income Tax Rules Change From April 2021

Under the Union Budget 2021-22, Finance Minister Nirmala Sitharaman proposed new income tax rules that will come into effect from 1st April 2021. Though the new budget did not change any of the income tax slab rates for individual taxpayers, it did modify a few rules related to income tax.Now that the new financial year (1st April 2021) is fast approaching, these rules will soon be implemented.Let us take a look at some of the rule changes applicable from next month:

ITR forms will now be pre-filled in certain sections to improve compliance from individual taxpayers. Capital gains from listed securities, dividend income, interest from bank accounts etc., will already be filled in the ITR forms. Other details like salary, TDS, tax payments will also be pre-filled in the form.

As announced in the Union Budget 2021-22, the Employee Provident Fund (EPF) investments will come under the ambit of income tax. If an individual's EPF contributions exceed Rs. 2.5 lakh in a year, it will be taxable in the hands of an employee. This means additional tax liability in terms of interest income for High Net-worth Individuals (HNIs) who deposit more than Rs.2.5 lakh in their EPF account.

Senior citizens above the age of 75 years will be exempted from filing ITR from 1st April 2021, provided that they receive their pension and interest income from the same bank. For senior citizens who have a source of income in addition to the pension, ITR filing is crucial. This will help super senior citizens to avoid double TDS interest rate.

The Union Budget 2021-22 proposed to levy higher Tax Deducted at Source and Tax Collected at Source to discourage the practice of non-filing of Income Tax Returns (ITR) . In the new financial year, non-ITR filing individuals will face a higher TDS and TCS rate under new sections 206AB and 206CCA, respectively. Individuals who do not file ITR but have TDS deductions of more than Rs. 50,000 in the last two years will have to pay TDS at a rate of 5%.

The LTC cash voucher scheme was proposed in October 2020 since individuals could not claim LTC tax exemption due to Covid-related travel restrictions. As a taxpayer, to claim the benefit, you need to fulfil certain conditions.The foremost being taxpayers should have spent the specified amount on goods or services with a GST of 12% or more. Only electronic payments made between the period 12th October 2020 and 31st March 2021 are acceptable for LTC tax claims. One can claim the benefit only under the old tax regime.

The new tax regime was introduced in Budget 2020, and taxpayers were given the option to choose a suitable tax regime. Taxpayers will now have to plan their tax-saving deductions until 31st March 2021. Though they can still choose the old or new regime when filing IT returns for 2020-21.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.