Impact of budget 2021–22 on Taxes
The Union Budget 2021–22 was one of the most anticipated and most important budgets of Indian history because of the Coronavirus pandemic. The government did not introduce any new tax or any increase in the tax rates in this budget. The following are some of the changes brought about in the taxation by the Finance Minister Mrs.Nirmala Sitaraman on February 1, 2021.
Real Estate:
With this current financial budget, the finance minister has tried to give a boost to the real estate industry to bring it out of the slump created by the COVID 19 pandemic. With the many incentives given to the new house owners a surge in home buying can be expected.
· On the personal tax front, the tax exemption given to people planning home under the affordable housing scheme of 45 Lakh rupees was extended one more year to March 31, 2022. This is applicable up to 1.5 Lakh rupees on the interest paid on housing loans. Though to avail of this benefit, the homeowner should not own any other residential property as of the sanction date.
· To help the migrant workers, the tax holiday provided to the affordable renting house projects has been extended by a year.
· The safe harbor ordinance, which did not tax up to 10% higher value of the stamp price than the purchase price, was increased to 20%. It applies to all houses purchased from November 12, 2020, to June 13, 2021.
Income tax filing:
The income tax return filing procedure has been made a little easier this year, with new technological upgrades
· Senior citizens above the age of 75 will be exempted from income tax filling.
· To ease the return filling process, the pre-fill facility has been upgraded to automatically include details of capital gains on listed securities, dividends, bank, and post office deposits.
· A Dispute Resolution Committee has been formed by the government for small and medium tax owners having income up to 50 Lakh rupees and tax adjustment up to 10 Lakh rupees. This will greatly reduce the time taken for income tax dispute resolution.
Investments:
There were high expectations for an increase in the investment limit or medical expenditure spend. But they have not been addressed under this budget. On the contrary, several new restrictions have been imposed on the exemptions from many investment avenues.
· Amendments have been made to section 234C so that, the advance tax liability on dividends would only raise when they are received. This follows the amendment that the dividends received after April 1, 2020, will be taxed.
· Unit-linked policies with a yearly premium of more than 2.5 Lakh rupees will no longer be tax-exempt. They will be taxed similar to equity-oriented mutual funds. The same rule has been extended to include provident funds with annual contributions of more than 2.5 Lakh rupees.
Work:
· Tax exemptions can be availed for one-third of the leave travel concession (LTC) expenditure or rupees 36000 whichever is less for the financial year 2020–21.
· Interest on the employee’s contribution share to the Employee Provident Fund (EPF) will be taxable at the time of withdrawal effective from April 1, 2021, if it exceeds 2.5 Lakh rupees a year. Also, the employer’s aggregate contribution above 7.5 Lakh rupees is taxable.
Corporate Tax:
· The government has clarified that there will be no tax depreciation on goodwill in the corporate tax.
· The Authority of Advance Rulings has been replaced by the Board of Advance Rulings (BFAR), which will be headed by the revenue officials. This will be a faster route to reach the High court for any rulings.
Conclusion:
This year’s taxation changes have both pros and cons to the common man. The huge allowances which are given to the real estate industry will boost it overall and provide a small amount of relief for those looking for investments. Also, the tax return filings process has been made a little easier. But the removal of the tax exemptions for several investment opportunities will discourage people from investing in these opportunities. So the taxation changes of the Union Budget 2021–22 could be considered a mixed bag.
By Srimathi.S
Class of ’22 | Indian Institute Of Management Tiruchirappalli
