With the impact of the pandemic in the background and the economy still in recovery phase, focus was high on this year’s Budget. The pressure on the government to confront fiscal deficit and at the same time come up with balanced tax reforms was the need of the hour. Even though there were discussions that there could be increase in surcharge/cess for high income earners, there is no change in the income tax slabs/surcharge/cess. There will be a relief from the burden of tax return filing to senior citizens and the tax deduction will be taken care by the bank.
With an intent to revitalise the real estate sector, benefits under Section 80EEA for first time home buyers has been proposed to be extended till March 31, 2022.
The existing provision provides for an exemption from capital gains on sale of residential property until March 31, 2021, by investment into equity shares of an eligible start-up. This benefit has now been proposed to be extended till March 31, 2022.
The FM has proposed to amend the provisions by making the advance tax payable only from the date of declaration/payment of dividend. It has been proposed to tax the returns on ULIPs where the annual premium for any year exceeds Rs 2.5lakh. This change would be applicable for policies issued on or after February 01, 2021. Proposals have also been made to offer the redemption of these policies to capital gains tax similar to equity MFs. To reduce the hardship of Non-resident Indians faced due to double taxation of income on withdrawal from overseas retirement funds, it has been proposed to prescribe the manner of taxation for granting relief. This is a welcome move.
It is proposed to reduce the time limit for filing the belated and the revised tax return by 3 months. The assessment proceedings will now have to be completed by December 31. It has been proposed to revamp the re-assessment timelines as belwo:
No notice to be issued beyond 3 years for normal cases . No notice to be issued beyond 10 years unless there is sufficient evidence of concealment of income amounting to Rs 50 lakh or above and an approval is granted by the Principal Chief Commissioner.
It has been proposed that a faceless scheme be launched for ITAT. The personal interaction will be limited to video conferencing.
A new DRC will be constituted for small taxpayers having taxable income upto Rs 50 lakh and disputed income up to Rs 10 lakh. To further provide ease to taxpayers, it has been proposed to include details such as capital gains (listed securities), dividend income, interest from banks & post office, etc., in the pre-filled returns.
The government has proposed to tax interest accrued on contributions exceeding Rs 2.5 lakh to provident fund and public provident funds. This may have wider implications.
Given the pandemic and economic conditions, no change in tax rates has been a big plus for the taxpayers. The increased focus on providing world class infrastructure and healthcare facilities, provides an opportunity to every
Indian to gain in the long run. Some of the changes announced will require taxpayers to rework their investments plans, in order to continue building their retirement corpus.
The author is Tax Partner, EY India
(Shanmuga Prasad, senior tax professional with EY, also contributed to this article)