Presenting the Union Budget 2020-21 in the Parliament on Monday, Union Finance Minister Nirmala Sitharaman announced major tax relief for senior citizens across the country. Senior citizens, those above 75 years of age and whose sole income is pension and interest, have been exempted from filing Income Tax Returns. The Finance Minister noted that the paying banks will deduct the necessary tax on the income of senior citizens.
"We shall reduce compliance burdens 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 Income Tax returns. The paying bank will deduct the necessary tax on their income," Nirmala Sitharaman said in her budget speech.
In a relief for NRIs, the Finance Minister proposed relief on double taxation for NRIs. Generally, an NRI is liable to pay tax on his income in the country where he has earned it (source country) and in the country of his residence (residence country). For example: If a resident of the UK has a source of income in India, then the said person will be liable to tax in India and the UK on the same income. Noting the issues faced by NRIs with the accrued taxes, Sitharaman asserted that the difficulties are faced due to the mismatch in the taxation period between the two countries.
"When Non-residents return to India, they have issues with their accrued incomes in their foreign retirement accounts. This is usually due to mismatch in the taxation period, they also face difficulties in credit for Indian taxes in a foreign jurisdiction. I propose to notify rules for removing their hardship of double taxation," the Finance Minister said.
In Budget 2021-22, the Centre has also announced relief for shareholders' income obtained through dividends. While the Centre had abolished Dividend Distribution Tax (DDT) in 2020, in a bid to provide ease of compliance, the Finance Minister on Monday proposed to exempt dividend payments from TDS (Tax Deducted at Source). Currently, withholding provisions apply to the company distributing dividends in case the amount of dividend exceeds ₹5,000 per shareholder, the withholding rate being 10%(for resident shareholders) and 20% (for non-resident shareholders).
However, since the amount of dividend income cannot be estimated correctly by shareholders, the Finance Minister proposed that advanced tax liability on the said dividend income shall arise after the declaration of payment of dividend.
"Now in order to provide ease of compliance, I propose to make a dividend payment to rate and inhibit exempt from TDS. Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advanced tax, I propose to provide that advanced tax liability on dividend income shall arise only after the declaration of payment of dividend. Also, for the foreign portfolio investors, I propose to enable deduction of tax on dividend income at lower treaty rate," Sitharaman said.
On the issue of tax audited, the Finance Minister proposed to increase tax limit from the existing 5 crore to 10 crore. "Currently if your turnover exceeds one crore, you have to get your tax audited. In February 2020 budget, I had increased the audit limit to 5 crore for those who carry out 95% of their transactions digitally. To further intensives digital transactions and to reduce compliance burdens, I propose to increase this tax limit for such persons from 5 crore to 10 crore," Sitharaman noted.