Presenting the first ever digital Union Budget, Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman stated that India's fight against COVID-19 continues into 2021 and that this moment in history, when the political, economic, and strategic relations in the post-COVID world are changing, is the dawn of a new era - one in which India is well-poised to truly be the land of promise and hope.
The following are the major Direct Tax Proposals of the Budget 2021, as announced by FM Nirmala Sitharaman:
- Relief to Senior Citizen : The budget proposes exemption from filing of income tax return for senior citizen (aged 75 years and above) having only pension and interest income.
- Exemption from Audit : Tax Audit Limit to be increased to Rs.10 crores from Rs.5 crores for those carrying out 95% of their transactions digitally.
- Relief for Dividend : Dividend to be be exempt from TDS (payment to REIT/ InvIT). Also, advance tax liability on dividend income to arise only after declaration of dividend.
- Affordable Housing/Rental Housing : Additional Interest deduction of Rs.1.5 lakhs to be extended for loans taken till 31st March, 2022.
- Pre-filling of Returns : Details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled along with details of salary income, tax payments, TDS, etc.
- Relief to Small Trusts : Exemption under section 10(23C) increased from Rs. 1 crore to Rs. 5 crore for educational institutions and hospitals.
- EPF Employee Contribution : Employee contribution not paid by employer will not be allowed as a deduction under the head Income from business and profession.
- Reduction in Time for Income Tax Proceedings : Re-opening of Assessment to be reduced to 3 years from present 6 years. Assessment be re-opened up to 10 years only under serious tax evasion cases where there is evidence of concealment of income of Rs. 50 lakh or more in a year (only after the approval of the Principal Chief Commissioner).
- Presumptive Taxation : It is proposed to clarify that Limited Liability Partnership shall not be eligible for presumptive tax for professionals.
- Dispute Resolution Committee : Proposed constitution of Dispute Resolution Committee, which will be faceless to ensure efficiency, transparency and accountability. Anyone with a taxable income up to Rs. 50 lakh and disputed income up to Rs. 10 lakh shall be eligible to approach the Committee.
- Faceless ITAT Centre : A National Faceless Income Tax Appellate Tribunal Center to be constituted, wherein all communication between the Tribunal and the Appellant shall be electronic. Where a personal hearing is needed, it shall be done through video conferencing only.
- Relaxation to NRI : Rules to remove hardship of Double Taxation to reduce difficulties in getting credit for Indian taxes in foreign jurisdictions.
- Incentives for Start-ups : Tax holiday for Start-Ups extended to 31st March, 2022. Additionally, Capital Gains exemption on investment in start ups also extended to 31st March, 2022.
- Levy of TDS on Purchase of Goods : Proposition to levy a TDS of 0.1% on a purchase transaction exceeding Rs. 50 lakh in a year to be made applicable only on the persons whose turnover exceeds Rs.10 crore.
- Carry Forward of loss by Charitable Organisations : In order to provide certainty, it is proposed to clarify that charitable trusts shall not be permitted to claim carry forward of loss. However, the loan repayment and replenishment of corpus shall be allowed as application.
- Depreciation on Goodwill : It is proposed to clarify that no depreciation on Goodwill shall be allowed. However, the deduction for the amount paid for acquiring Goodwill shall be allowed on sale of Goodwill.
- Exemption for Leave Travel Concession (LTC) cash Scheme : It is proposed to provide tax exemption to the amount given to an employee in lieu of LTC subject to incurring of specified expenditure.
