FM keeps rates unchanged, lifts double taxation burden on NRIs, halves I-T proceedings time limit
The Budget comes as a relief for seniors above 75 years of age. Finance Minister Nirmala Sitharaman has exempted them from filing income tax returns if the paying bank deducts the entire dues from pension and interest incomes.
Once a 75-plus citizen gives a declaration to her bank, it will compute her income after giving effect to the deduction under Chapter VI-A and rebate under Section 87A of the Income-Tax Act for the assessment year and deduct the tax payable. Once this is done, she won’t be required to furnish the income tax return (ITR) for the assessment year. This amendment will take effect from April 1.
Sitharaman’s proposal is an extension of several announcements made in the Budget 2018, when the government proposed to amend laws for giving tax benefits to senior citizens.
While dishing out her goodies on the direct taxes front, the finance minister offered a sigh of relief to taxpayers by not raising the rates. She also halved the time limit for income tax proceedings for re-opening of assessment to three years from the end of the relevant assessment year.
“The most important relief for all businesses would be the reduction in time limit for reopening of assessment to three years for normal cases, and only in case of concealment of income of over Rs 50 lakh, it has been retained at 10 years. This would also go a long way in boosting the investor confidence and ensuring tax certainty,” says Divakar Vijayasarathy, Founder and Managing Partner at DVS Advisors LLP.
For Non-Resident Indians, the government has proposed to remove the element of double taxation to simplify issues arising out of their accrued incomes in their foreign retirement accounts as a result of mismatch in taxation periods.
The Budget 2021 also proposes that the advance tax liability on dividend income would arise after declaration or payment of dividend. “While the expectations were rife for a cut in the personal income tax rate and also an increase in the deduction limit under Section 80C and 80D to boost consumption, the government decided to provide some relief to NRIs, senior citizens and also dividend investors this time,” says Ajit Mishra, VP-Research at Religare Broking.
To make filling up of income tax returns easier and simpler, the details of capital gains from listed securities, dividend income and interest from banks would come pre-filled, while the details of salary income and tax payments would need to be filled up.
The Budget 2021 also announced to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to Rs 2.5 lakh annually. This restriction would be applicable only for the contribution made on or after 01.04.2021. The proposed change is to rationalise tax exemption for the income earned especially by the high-income employees.