Here's how Budget 2021 will simplify life of small tax payers
3 min read 01 Feb 2021, 03:15 PM IST10 budget proposals by the FM, Nirmala Sitharaman which will make the life of small tax payers easier
PremiumWhile the budget does not bring about too many tax amendments, certain underlying messages in the statements made by the Finance Minister, could very well be the reason for providing some relief to the small tax payers. Investments and tax experts welcome these measures. "The income tax filing exemption granted to senior citizens, who rely on only pension and interest income, will significantly reduce their tax compliance burden. The announcement of a faceless dispute resolution system should help taxpayers by fast-tracking the resolution process. The pre-filled capital gains and interest income in ITRs will make income tax filing easier for retail investors. Overall, these measures announced in the budget will simplify the lives of small taxpayers and are welcome," says Lalit Keshre, Co-founder and CEO, Groww.
Here are the key budget proposals which will ease the process for small tax payers:
> The FM, Nirmala Sitharaman, in her budget speech proposed to reduce compliance burden on senior citizens who are 75 years of age and above. :For senior citizens who only have pension and interest income, I propose exemption from filing their income tax returns. The paying bank will deduct the necessary tax on their income," she said in her budget speech.
> The Government noticed 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, I reiterate that the late deposit of employee’s contribution by the employer will not be allowed as deduction to the employer," says the FM in Budget 2021 speech.
Experts cheer the proposal. "Delayed deposit of employee provident fund contribution by employers will lead to deduction not being available for employers. This will benefit employees and ensure more timely compliance by employers and protect employees interests," says Bhavik Narsana, Partner, Khaitan & Co.
> Presently, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years. As a result, taxpayers have to remain under uncertainty for a long time. The budget proposes to reduce this time-limit for re-opening of assessment to 3 years from the present 6 years. In serious tax evasion cases too, only where there is evidence of concealment of income of `50 lakh or more in a year, can the assessment be re-opened up to 10 years. Even this reopening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department.
> The FM proposed to constitute a Dispute Resolution Committee for small tax payers, which will be faceless to ensure efficiency, transparency and accountability. Anyone with a taxable income up to ₹50 lakh and disputed income up to ₹10 lakh shall approach the Committee.
> Faceless Income Tax Appellate Tribunal (ITAT) centre will be set where personal hearings will be conducted through video conference.
> As proposed in the Budget, additional deduction of interest, amounting to ₹1.5 lakh, for loan taken to purchase an affordable house will be allowed for one more year, till 31st March 2022.
> In order to ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. already come pre-filled 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. will also be pre-filled.
> Tax incentive of affordable renting housing project.
> Exemption from audit: To incentivise digital transactions and to reduce the compliance burden of the person who is carrying almost all of their transactions digitally, the FM proposed to increase the limit for tax audit for persons who are undertaking 95% of their transactions digitally from ₹5 crore to ₹10 crore.
> The FM proposed that the advance tax liability on dividend income shall arise only after the declaration/payment of dividend.
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