Significant Changes wef 1 April 2021

Union Finance Minister Nirmala Sitharaman presenting Union Budget 2021 had announced some significant changes in the income tax act.

Let’s have a look at the changes which came into effect from 1 April 2021.

A. Tax on Employee Provident Fund Interest

·  Interest on employaee contribution is tax exempt if employeea contributes upto Rs. 2.5 lakh p.a. This is applicable to private sector employees as both employee and employer has to equally contribute to EPF account as per Employees Provident Fund & Miscellaneous Act 1952.

·  However, where there is no employer’s contribution, then interest on employee contribution is tax exempt if employee contributes upto Rs.5 lakhs p.a. This is applicable to government employees as government being as employer do not contribute into PF account.

B. Pre-filled ITR Forms

· To Further ease filing of Income Tax returns, ITR Forms will have information of Capital Gains from Listed Securities, Dividend Income, Interest from Banks/Post Office, etc. prefilled.

C. Belated and Revised Return

· Belated return u/s 139(4) and revised return u/s 139(5) can be filed upto 31 December of the relevant assessment year.
(max time is upto 9 months from the end of previous year for which return is to be filed)

D. Tax deducted at source (TDS) and Tax collected at source (TCS)
TDSTCS

New section 206AB has been inserted in Income Tax Act which is applicable to *specified person. As per this section, new rates of TDS will be applicable as below:

a) Twice the rate specified in relevant provision of act

b) Twice the rate or rates in force c) At the rate of 5%,

whichever is higher

New section 206CCA has been inserted in Income Tax Act which is applicable to *specified person. As per this section, new rates of TCS will be applicable as below:

a) Twice the rate specified in relevant provision of act

b) At the rate of 5% ,

whichever is higher

*specified person will be one who satisfies the following conditions:

i) Person who has not filed Income tax return for each of the 2 years immediately prior to year in which tax is required to be deducted/collected;

ii) Time Limit of filing ITR is expired.

iii) Aggregate TDS/TCS is Rs 50,000 or more in each of 2 years.

E. Exemption from ITR filing for Senior Citizens

Exemption from filing of Income tax return for Senior Citizen is available only if following conditions satisfied:

· Senior citizens who is resident and of age 75 years or more

· Have only pension income and interest income from the same bank receiving his pension income.

· Bank should be specified bank as notified by Govt.

· He is required to furnish declaration to bank and bank would compute income and deduct income tax.

F. Leave Travel Concession (LTC)

LTC exemption can now be availed on cash allowance scheme in lieu of LTC fulfilling certain conditions:

· Employees are required to spend the specified sum on goods and services that attract GST rate of 12% or more.

· Payment should be made in electronic mode.
· Expenditure should be incurred between 12 October 2020 to 31 March 2021.

· Amount of exemption should not exceed Rs.36,000 per person or 1/3 of specified expenditure, whichever is less.

G. E-Invoicing

E-invoicing is a system in which all the invoices generated for supplies made to a registered person (ie B2B supply) and export invoices need to be registered on the Invoice Registration Portal.

  • Currently CBIC notified that e-invoicing will be mandatory for businesses with B2B transactions having turnover of Rs. 50 cr or more.
H. Harmonized System of Nomenclature Code (HSN code)
  • HSN system has been introduced for the systematic classification of goods all over the world.
  • The table below summarise the mandatory requirement for GST taxpayers to furnish HSN code:
Aggregate Turnover in the preceding financial year (in Rs.) Type of Invoice document Number of digits in HSN code
Upto 5 crores Mandatory for B2B 4
Optional for B2C 4
More than 5 crores Mandatory for all invoices 6

Comparative analysis of significant changes before and after 1 April 2021 are as follows:

S.No. Particulars Upto 31 March 2021 From 1 April 2021
1 Tax on PF Interest Interest on employee and employer’s contribution is exempt Interest on employee contribution is taxable over Rs. 2.5 lakh p.a. However, where there is no employer’s contribution, then maximum amount of interest exempt from income tax is Rs.5 lakhs p.a.
2 Pre-filled ITR Forms Only for Salaried person where income was reflected as per Form 16 Now, it will have information of Capital Gains from Listed Securities, Dividend Income, Interest from Banks/Post Office, etc.
3 TDS No such section existed for non-filers of Income Tax return (ITR). New section 206AB has been inserted in Income Tax Act which is applicable to *specified person. As per this section, new rates of TDS will be applicable as below: d) Twice the rate specified in relevant provision o f act e) Twice the rate or rates in force f) At the rate of 5%, whichever is higher *specified person have been mentioned above.
4 TCS No such section existed when collectee fails to furnish IT New section 206CCA has been inserted in Income Tax Act which is applicable to *specified person. As per this section, new rates of TCS will be applicable as below: a) Twice the rate specified in relevant provision of act b) At the rate of 5%, whichever is higher *specified person is same as per section 206AB
5 Belated and Revised Return Belated return u/s 139(4) and revised return u/s 139(5) can be filed upto 31 March of the relevant assessment year. (max time is upto 12 months from the end of Previous year for which return is to be filed) Belated return u/s 139(4) and revised return u/s 139(5) can be filed upto 31 December of the relevant assessment year. (max time is upto 9 months from the end of Previous year for which return is to be filed)
6 Senior Citizens above 75 years All senior citizens above 75 years were required to file Income tax return who had income above basic exemption limit. All resident senior citizens above 75 years are exempt from filing of Income tax return if they have only pension income and interest income
7 Leave Travel Concession (LTC) (Cash allowance scheme only available for FY 20-21) LTC Exemption was available on Actual Travel Cost. LTC exemption can now be availed on cash allowance scheme in lieu of LTC by fulfilling certain conditions mentioned above.
8 E-Invoicing E-invoicing is mandatory for business with B2B transactions having turnover of Rs. 100cr or more Is mandatory for business with B2B transactions having turnover of Rs. 50 cr or more
9 HSN Code Turnover (in Rs.) No. of Digits Turnover (in Rs.) Type of Invoice document No. of digits
Upto 1.5 crores 0 Upto 5 crores Mandatory for B2B 4
1.5cr to 5 crores 2   Optional for B2C 4
More than 5 crores 6 More than 5 crores Mandatory for all invoices 6

Leave a Comment

Your email address will not be published. Required fields are marked *