Budget 2021 Direct Tax announcements: Tax slabs remain same; relief for pensioners & NRIs

Finance Minister Nirmala Sitharaman on Monday while presenting the Union Budget 2021-2022 said that the number of income tax return filers has increased to 6.48 crore now from 3.31 crores in 2014. The government reduced the time limit for reopening of income tax assessment cases to three years from six years, while for serious tax fraud cases where concealment of income is Rs 50 lakh or more it would be 10 years. The first Budget of the decade also left the direct taxes unchanged.

These are the tax incentives announced:

• Relief to Senior Citizens

"I begin my direct tax proposals by offering my pranam to our senior citizens. Many of them, despite having foregone several basic necessities of their own, have strived to build our nation. Now in the 75th year of Independence of our country, when we continue our endeavour with renewed vigour, we shall reduce the compliance burden on our senior citizens who are 75 years of age and above. For senior citizens who only have a pension and interest income, I propose exemption from filing their income tax returns. The paying bank will deduct the necessary tax on their income," FM said. 

• Reduction in Time for Income Tax Proceedings

Finance Minister Nirmala Sitharaman on Monday reduced the time limit for reopening of income tax assessment cases to three years from six years, while for serious tax fraud cases where concealment of income is Rs 50 lakh or more it would be 10 years. She said to end the uncertainty in the minds of taxpayers over reopening of assessment cases, the time limit for a reduction in limit for reopening to assessment to three years from six years earlier.

• Setting up the Dispute Resolution Committee

"Honourable Speaker, it has been the resolve of this Government to reduce litigation, which mars the present taxation system. 156. The Government came out with the Direct Tax Vivad Se Vishwas Scheme to give taxpayers an opportunity to settle long-pending disputes and be relieved of further strain on their time and resources. The response from the taxpayers has been the best ever as over 1 lakh ten thousand taxpayers have already opted to settle tax disputes of over `85,000 crores under this Scheme," she said. 

"To further reduce litigation for small taxpayers, I propose to constitute a Dispute Resolution Committee for them, which will be faceless to ensure efficiency, transparency and accountability. Anyone with a taxable income up to `50 lakh and disputed income up to `10 lakh shall be eligible to approach the Committee," FM added.

The Budget also proposed to start faceless Income Tax Appellate Tribunal (ITAT).

• Relaxation for NRI with respect to double taxation

"When Non-Resident Indians return to India, they have issues with respect to their accrued incomes in their foreign retirement accounts. This is usually due to a mismatch in taxation periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions. I propose to notify rules for removing their hardship of double taxation," Nirmala Sitharaman announced.

• Pre-filling of Returns

"Honourable Speaker, in order to ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. already come pre-filled in income tax returns. To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled," FM said. 

• Exemption from Audit

"Currently, if your turnover exceeds 1 crore, you have to get your accounts audited. In the February 2020 Budget, I had increased the limit for tax audit to 5 crores for those who carry out 95% of their transactions digitally. To further incentivise digital transactions and reduce compliance burden, I propose to increase this limit for tax audit for such persons from 5 crores to 10 crore," FM Sitharaman said.

Also, pre-filled income tax returns with details on capital gains from listed securities, dividend income and interest income from banks and post offices would be available soon, she said.

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• Affordable Housing/Rental Housing

Nirmala Sitharaman gave a boost to the housing sector and home-buyers and proposed to extend exemption available for the purchase of affordable houses and to provide tax exemption for affordable rental housing projects. "This government sees housing for all and affordable housing as priority areas. In July 2019 Budget, I provided an additional deduction of interest amounting to Rs 1.5 lakh for a loan taken to purchase an affordable house. I propose to extend the eligibility of this condition by one more year to 31st March 2022," Sitharaman said.

The additional deduction of 1.5 lakh shall therefore be available for loans taken up to 31st March 2022, for the purchase of the affordable housing, Sitharaman said. "Further to keep up the supplies of affordable houses, I propose that the affordable housing projects can avail a tax holiday for one more year till 31st March 2022," she added. Sitharaman further said that the Central government is committed to promoting affordable rental housing for migrant workers. "We are committed to promoting affordable rental housing for migrant workers. For this. I propose to allow tax exemption for notified rental housing project," she added.

• Relief to Small Trusts

"We hope to reduce the compliance burden on small charitable trusts running educational institutions and hospitals. So far, there is a blanket exemption to such entities, whose annual receipt does not exceed `1 crore. I now propose to increase this amount to `5 crores," FM said.

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