Hyderabad: The Union Budget 2021-22 presented in the Parliament on 1 February by finance minister Nirmala Sivaraman seeks to further simplify the tax administration, litigation management, and ease the compliance of direct tax administration.
In the Budget speech, the finance minister provided relief to senior citizens in the filing of income tax returns, a reduced time limit for income tax proceedings, announced setting up of the dispute resolution committee, faceless ITAT, relaxation to NRIs, increase in exemption limit from audit and relief for dividend income. She also announced steps to attract foreign investment into infrastructure, relief to affordable housing and rental housing, tax incentives to IFSC, relief to small charitable trusts, and steps for incentivizing start-ups in the country.
Here are some of the major announcements made by the minister.
Relief to senior citizens
The Budget seeks to reduce the compliance burden on senior citizens who are of 75 years of age and above. Such senior citizens with only pension and interest income will be exempted from filing their income tax return. The paying bank will deduct the necessary tax on their income.
Relaxation to NRIs, relief for dividend
The Budget proposes to notify rules for removing the hardship of non-resident Indians returning to India on the issue of their accrued incomes in their foreign retirement account. It proposes to make a dividend payment to REIT/InvIT exempt from TDS. For foreign portfolio investors, the Budget proposes deduction of tax on dividend income at a lower treaty rate. The Budget provides that advanced tax liability on dividend income shall arise only after the declaration or payment of dividend. The minister said that this was being done as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax.
Affordable housing/rental housing
The finance minister proposed to extend the eligibility period for a claim of the additional deduction for the interest of Rs. 1.5 lakh on loan taken for the purchase of an affordable house to 31 March 2022. In order to increase the supply of affordable houses, she also announced the extension of the eligibility period for claiming tax holiday for affordable housing projects by one more year to 31 March 2022. For promoting the supply of affordable rental housing for migrant workers, the minister announced a new tax exemption for the notified affordable rental housing projects.
Tax benefits for start-ups
In order to incentivize start-ups in the country, Ms. Sitharaman announced the extension in the eligibility for claiming tax holiday for start-ups by another year till 31 March 2022. In order to incentivize funding of start-ups, she proposed extending the capital gains exemption for investment in start-ups by one more year till 31 March 2022.
Timely deposit of employees' contribution to labour welfare funds
The finance minister said that delay in depositing the contribution of employees towards various welfare funds results in permanent loss of interest/income for the employees. In order to ensure timely deposit of employee's contribution to these funds by the employers, she announced that late deposit of employee's contribution shall never be allowed as a deduction to the employer.
Reduction in time for reopening income tax proceedings
In order to reduce the compliance burden, the Budget provides a reduction in the time-limit for reopening of income tax proceedings to three years from the present six years. In serious tax evasion cases, where there is evidence of concealment of income of Rs. 50 lakh or more in a year, the assessment can be reopened up to 10 years but only after the approval of the principal chief commissioner.
Tax audit limit hiked for digital transactions
To incentivize digital transactions and to reduce the compliance burden of the person who is carrying almost all of their transactions digitally, the Budget proposes to increase the limit for tax audit for persons who are undertaking 95 per cent of their transaction digitally from Rs. 5 crores to Rs. 10 crores.
Incentives for foreign investments
To attract foreign investment into the infrastructure sector, the Budget proposes to relax certain conditions relating to prohibition on private funding, restriction on commercial activities, and direct investment in infrastructure. In order to allow funding of infrastructure by the issue of zero-coupon bonds, the Budget proposes to make notified infrastructure debt funds eligible to raise funds by issuing tax-efficient zero-coupon bonds.
Tax incentive to IFSC
In order to promote international financial services centre (IFSC) in gift city, the Budget proposes more tax incentives which include tax holiday for capital gains from incomes of aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors, tax incentives for relocating foreign funds in the IFSC, and to allow tax exemption to the investment division of foreign banks located in IFSC.
Relief to small trusts
In order to reduce the compliance burden on small charitable trusts running educational institutions and hospitals, the Budget proposes to increase the limit on annual receipts for these trusts from the present Rs. 1 crores to Rs. 5 crores for non-applicability of various compliances.
Ms. Sitharaman further proposed to make income tax appellate tribunal "faceless". She proposed a national faceless income appellate tribunal centre where all communication between the tribunal and the appellant shall be electronic.
Pre-filling of returns
In order to ease the filing of returns, the Budget proposes that details of capital gains from listed securities, dividend income, and interest from banks, post office etc. will also be pre-filled in returns. Details of salary income, tax payment, and TDS already come pre-filled in returns.