Budget 2021-22 presented some pleasant surprises for individual taxpayers by making the whole process simpler and virtual. Moreover, other proposals were also made, thereby positively impacting taxpayers.

Union Budget 2021-22 – Impact on individual taxpayers

Budget 2021-22 presented some pleasant surprises for individual taxpayers by making the whole process simpler and virtual. Moreover, other proposals were also made, thereby positively impacting taxpayers.

Here are the key highlights:

1. Change in EPF rules

• If the employee’s contribution to PF exceeds Rs.2.5 lakhs in a year, the returns earned on the excess contribution would be taxed. This taxation would be in addition to the tax applicable if the contributions to the EPF, NPS and superannuation fund exceed Rs.7.5 lakhs in a year.

2. Advance tax liability on dividend income

• No Advance Tax to be paid by taxpayers for dividend income till its receipt

3. Extension of outer time for investment in Affordable Housing Scheme

• Now, first-time home buyers, under the affordable housing scheme, are allowed to claim an enhanced tax deduction on the home loan interest paid up to Rs.1.5 lakhs on loans availed till 31st March 2022, as against existing date of 31-Mar-2021.

4. Pre-Filled Income Tax forms

• For making tax filing easy, income-tax return forms would be pre-filled with details of dividend income, capital gains from listed securities, interest income earned from bank or post-office deposits, etc.

5. Ease of settling tax related disputes

• The budget has also proposed the setting up of a Dispute Resolution Committee (DRC) for small and medium taxpayers with returned taxable incomes up to Rs.50 lakhs and disputed incomes up to Rs.10 lakhs.
• Moreover, a Faceless Income-tax Appellate Tribunal would be created for second-level appeal cases.

6. Relief for Senior Citizens

• The budget has also provided income tax filing relief for senior citizens aged 75 years and above. If such taxpayers have incomes only from pension and interest from the same Bank in which pension is being received, they are no longer required to file their income tax returns.

7.  Benefits for NRIs

• Resident taxpayers with an overseas retirement fund can avoid double taxation on such funds. The Central Government would devise the manner of taxability of such funds so that it is not taxed twice.

8. Parity of ULIPs with Mutual Funds

• The concept of capital gains tax has been introduced in ULIPs. For policies issued on or after 1st February 2021, if the aggregate premium exceeds Rs.2.5 lakhs, the maturity proceeds would attract capital gains tax, like equity mutual funds.

These are the major highlights which impact an individual taxpayer.

*Above proposals are subject to assent by the Hon’ble President.

Kindly consult your tax consultant before taking any action on the above.