12 Major Direct Proposals in Union Budget of 2021

The Union Budget for the financial year 2021-2022 was presented by our Finance Minister Smt. Nirmala Sitharaman on 1st February, 2021 in the Parliament. Thich is the first budget of this new decade and also first ever digital budget in the backdrop of unprecedented COVID-19 crisis. Laying down the foundation of Atmanirbhar Bharat, this year’s Union Budget has been based on 6 pillars namely:
– Health and Well being,
– Physical and Financial
– Capital and Infrastructure,
– Inclusive Development for Aspirational India,
– Reinvigorating Human Capital,
– Innovation and R&D, and
– Minimum Government, Maximum Governance.

Various proposals to Direct Tax and Indirect Tax were also made. The list of 12 major Direct Tax proposals are as follows:

1.Relief to Senior Citizens above 75 years of age in filing of ITR.
Senior citizens having age above 75 years and have only pension and interest income, are exempted from filing their income tax returns. The paying bank will deduct the necessary tax on their income.

2. Reduction in Time for Income Tax Proceedings
The time limit for reopening of Income Tax Assessment cases has been reduced to three years from six years, on the other hand, for serious tax fraud cases where concealment of income is Rs 50 lakh or more, it would be 10 years.

3. Setting up of Dispute Resolution Committee
in order to reduce litigation for small taxpayers, Dispute Resolution Committee is to be formed. This committee shall be faceless to ensure efficiency, transparency and accountability. The pecuniary jurisdiction of this committee is confined to taxable income up to 50 lacs and disputed income up to 10 lacs.

4. Faceless Income Tax Appellate Tribunal
All the income tax appeals shall be heard by, to be newly established National Faceless Income Tax Appellate Tribunal. All communication between the Tribunal and the appellant shall be electronic. Where personal hearing is needed, it shall be done through video-conferencing.

5. Relaxations to NRIs
When Non-Resident Indians return to India, they have issues with respect to their accrued incomes in their foreign retirement accounts. This is usually due to a mismatch in taxation periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions. The rules are to be notified for removing this hardship of double taxation.

6. Exemption from Audit for turnover less than ₹10 crores
Earlier, the accounts were required to be audited if the turnover exceeded ₹1 crore. During the last year budget of 2020, this turnover limit was increased to ₹5 crores. Through this year’s budget of 2021, this turnover amount of ₹5 crores has been increased to ₹10 crores.

7. Relief for Dividend
The Advance Tax liability on dividend income shall arise only after the declaration/payment of dividend.

8. Affordable Housing for All
Through the July 2019 Budget, an additional deduction of interest, amounting to ₹1.5 lacs, for loan taken to purchase an affordable house was provided. The eligibility of this deduction has been extended by one more year, to 31st March 2022.

9. Auto populated Income Tax Returns
In order to ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. Are auto populated in Income Tax Returns. To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. shall also be auto populated.

10. Relief to Small Trusts
The Union  Budget of 2021 hopes to reduce compliance burden on small charitable trusts running educational institutions and hospitals. So far, there is a blanket exemption to such entities, whose annual receipt does not exceed Rs. 1 crore. This budget has proposed to increase this amount to Rs. 5 crores.

11. Labour Welfare
It has been noticed by the government that some employers deduct the contribution of employees towards Provident funds, superannuation funds, and other social security funds but do not deposit these contributions within the specified time. For the employees, this means a loss of interest or income. In cases where an employer later becomes financially unviable, non-deposit results in a permanent loss for the employees. In order to ensure that employees’ contributions are deposited on time, the late deposit of employee’s contribution by the employer will not be allowed as deduction to the employer.

12. Extension in tax holiday for Start Ups
In order to incentivise start-ups in the country, this budget has proposed to extend the eligibility for claiming tax holiday for start-ups by one more year i.e., till 31st March, 2022. Further, in order to incentivise funding of the start-ups, the capital gains exemption for investment in start-ups is proposed to be extended by one more year i.e., till 31st March, 2022.

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