Budget 2021 appears to have left personal income tax rates unchanged. As the fine print reveals more details, here is a first take announcements that could affect your personal finance.
Senior citizens need not file income-tax returns
There is massive relief extended to a section of senior citizens. For those aged 75 or more, and who only have pension and interest income, filing their income tax returns will not be required. The finance minister didn’t specify whether dividend income is also included to help senior citizens qualify. Many senior citizens also invest a portion of their portfolios in equities. The budget fine print is likely to provide greater clarity.
Deposit insurance cover to be better structured
The finance minister said that a better policy framework will be devised by the government and the Reserve Bank of India for bank depositors to claim the deposit insurance cover, when their banks get into trouble. Last year's Budget had hiked the deposit Insurance cover for bank depositors from Rs 1 lakh to Rs 5 lakh. However, so far, this is only available for banks when they go into liquidation. A better and a revised mechanism would now help depositors even before the bank goes into liquidation. “This is a positive development and protect bank customers from the kind of situations we had seen in the recent past when the RBI had imposed moratorium on banks and limited access to deposits,” according to Adhil Shetty, CEO, BankBazaar.com
Social security benefit extended to many more workers
Several tax-paying citizens who lost their jobs last year due to Covid-19 and had to take up freelancing assignments get some relief from Budget 2021. Social Security Benefits will be extended to gig and platform workers. E-commerce workers will now be brought under Employees’ State Insurance Scheme (ESI), Employees’ Provident Fund (EPF) and the minimum wage rule. Women will be allowed to work in all categories in night shifts too.
Faceless assessment gets a boost
Budget 2021 has given further push to faceless assessment and aims to make it more robust. A (faceless) dispute resolution committee will be set up. Anyone with a taxable income of up to Rs 50 lakh and disputed income up to Rs 10 lakh can approach this committee.
Investment charter for financial products
In order to reduce mis-selling of financial products, the FM announced the setting up of an investment charter. This charter would pertain to investors of all products across the financial sector. Details are awaited on this, but this charter is expected to lay down rights of investors, the grievance mechanism in case they have a complaint and so on. The charter is also expected to make all current financial products’ grievance resolution mechanism more robust.
Faster tax resolutions
The timeline for reopening of assessment under income tax returns will now go down to three years from present six years. Serious tax evasion cases, too, would only pertain to cases where there is evidence of concealment of income concealment of Rs 50 lakh or more in a year. The reassessment can be opened in 10 years in such cases. This will ease the burden on the tax authorities and tax payers and pave the way for faster resolution of cases.
Detailed pre-filled tax forms
This year, Sitharaman said that apart from tax deduction at source, now details of capital gains and interests from banks and post offices would be pre-filled. Pre-filled forms improve tax compliance and also help tax payers to file their taxes quickly and efficiently as the data is already captured.
Deduction on home loan interest extended
Affordable housing gets a boost. The benefits available to those who avail deduction for buying an affordable home will now be extended to those who take a housing loan until March 31, 2022.
Tax-efficient zero coupon bonds for infra
Soon, retail investors would have a new instrument to invest in. In order to spur infrastructure growth, Budget 2021 announced that infrastructure debt funds would now be able to raise funds by issuing tax-efficient zero coupon bonds. Further details are awaited as to the extent of income-tax benefits that these bonds would give.
Sops to Non-Resident Indians
There is a change in double taxation on NRIs, especially those who return to India. Relief is also being looked at for those who face difficulty in getting credit for taxes paid in India.