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Like every year, this year also, there have been significant amendments that have come up in provisions of Income Tax Act, especially with the enactment of the Finance Act 2021. As we have already entered into the financial year 2021-22, let’s have a brief overview of crucial changes that took place in the income tax provisions that are applicable for the current year.
Table of Contents
Here are some of the fundamental income tax changes that will be applicable from FY 2021 onwards:
The taxpayer is required to deduct TDS/collect TCS, at original rates that means without consideration of the concession rate of 25%.
With the newly inserted section-206AB of the Income Tax Act, 1961[1], TDS at the rate of higher of the following rates will be deducted on any sum or an income or amount paid, or payable or credited, by a taxpayer to a specified person:
Specified buyers of goods, responsible for paying a sum to any resident, should deduct tax at the rate of 0.1% of purchase amount exceeding 50 lakh rupees due to the newly inserted section 194Q of the IT Act 1961.
TDS should be deducted at the time of credit of sum to the account of the seller or at the instance of payment thereof by any mode, whichever is earlier.
Interest accruing on employee’s contribution to the specified PF during the year, on contribution more than 5 lakh rupees per annum shall now be taxable in case of no contribution to such fund by the employer. If the employer also contributes to such fund, then the interest income accrued on it during the previous year to an extent it relates to the contribution made by employees more than 250000 rupees per annum shall be taxable.
Goodwill is not an asset to claim depreciation.
Consequently:
Original/revised ITR for a financial year under section 139 can only be filed maximum up to December 31st of the relevant AY with late fee, if applicable. However, owing to the Covid-19, the last date for filing revised/belated return has been extended from December 31st 2021, to January 31st, 2022.
Those senior citizens aged 75 years or more, earning only pension income, shall be exempt from filing Income Tax Return. The exemption shall be granted on furnishing of declaration to the bank by the senior citizen. This is one of the income tax changes announced in the budget.
For opting the new tax regime for individuals and HUFs according to section 115BAC of the Income Tax Act, the taxpayer will have to file form 10-IE on or prior to the due date of filing of ITR under section 139(1) of the said Act.
Now tax audit under section 44AB of the IT Act 1961 will no more be required if turnover/gross receipts don’t go beyond 10 crore rupees provided that the cash receipts and payments don’t exceed 5% of the total receipts and payments, respectively.
The finance act 2021 has removed LLPs and HUF from the scope of presumptive taxation regime available for professionals.
Notice under section 143(2) for selection of the ITR for scrutiny assessment shall be issued within 3 months from the end of financial year wherein the return is furnished.
ULIP issued after Feb 1, 2021, with high premium will be eligible for concessional tax rate of 10% on long term capital gains under section 112A only if the minimum equity component is maintained throughout the term of the insurance policy.
Non-resident e-commerce operator will not be required to charge 2% EL on the value of sale of goods owned by or services provided by residents or non-residents with permanent establishment in India.
Assessment under section 143(3)/144 for AY 2021-22 and subsequent years will be completed within 9 months from the end of the AY in which income is first assessable.
All businesses should take heed to the income tax changes that take effect from Financial Year 2021. The Finance Minister had notified about a slew of changes in the Union Budget 2021. Therefore keep track of the latest income tax updates to avoid non-compliance.
Read our article: Income Tax Rules Changes from April 1 2021: Here’s all you need to know
Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.
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