New financial year comes with new changes or with modification in the existing provisions brought out through amendments. So instead of being out dated, let’s be updated with changes coming in GST and Income Tax regime with effect from 01.04.2021.
Changes in GST from 01.04.2021
1. HSN/ SAC Code
From 1st April 2021, it is going to be mandatory to report minimum 4 digit or 6 digits of HSN (Harmonized System of Nomenclature) Code in Table-12 of GSTR-1 and also in Tax Invoice. When to use HSN code 4 and 6-digit code?
| HSN Code Change | B2B Transactions | B2C Transactions |
| For Turnover upto Rs 5 Cr | 4 – Digit | – |
| For Turnover of more than Rs 5 Cr | 6 – Digit | 6 – Digit |
| For Exports | 8 – Digit | 8 – Digit |
2. Mandatory E-invoicing
As we know, companies having turnover above Rs 500 crore had to issue E-invoice from October 1, 2020 under GST. Whereas, issuing electronic invoices was made mandatory for businesses with turnover of Rs 100 crore and above from January 1, 2021. Now, to ease the process, Central Board of Indirect Taxes and Customs (CBIC) notified that E-invoicing will be made mandatory for business to business (B2B) transactions for taxpayers having aggregate turnover over Rs 50 crore from April 1, 2021.
Changes in Income Tax from 01.04.2021
3. Change in the Income Tax Slab Rates
No changes in income tax slabs or rates have been proposed. Budget 2020 introduced a new income tax regime with reduced tax rates for those willing to forego 70 tax-exemptions and deductions under it. Choice can be changed every year and any regime which is beneficial can be adopted by the individual.
However, Individuals who have income from business or profession cannot switch between the new and old tax regimes every year. Therefore, if any salaried person want to change their slab rate they should intimate this to employer in the beginning.
| Taxable income of Resident less than 60 years | Tax Rate (Existing Scheme) | Tax Rate (New Scheme) |
| Up to Rs. 2,50,000 | Nil | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% | 5% |
| Rs. 5,00,001 to Rs. 7,50,000 | 20% | 10% |
| Rs. 7,50,001 to Rs. 10,00,000 | 20% | 15% |
| Rs. 10,00,001 to Rs. 12,50,000 | 30% | 20% |
| Rs. 12,50,001 to Rs. 15,00,000 | 30% | 25% |
| Above Rs. 15,00,000 | 30% | 30% |
4. Exemption for LTC Cash Scheme
The Finance Bill 2021 has brought another provision, which will be applicable from beginning of the new financial year, the value in lieu of any travel concession or assistance received by, or due to, an individual shall also be exempt under this clause subject to fulfilment of conditions to be prescribed. No exemption shall be allowed under this clause in respect of the same prescribed expenditure to any other individual under the same proviso.
5. Provisions related to Sovereign Wealth Fund (SWF) and Pension Fund (PF)
At Present, Sovereign Wealth Fund (SWF) and Pension Fund (PF) can’t be invested through a holding company. It is proposed to allow the same, after complying with the various conditions. Following are the conditions-
- The holding company should be a domestic company; it should be set up and registered on or after 1st April 2021.
- Minimum 75% investments should be made in one or more infrastructure companies and exemption under this clause shall be calculated proportionately, in case if the aggregate investment of holding company in Infrastructure Company or companies is less than 100%.
5. New Procedure for Income escaping & search assessments
This provision states that if income is escaped during an assessment and the Assessing Officer has reason to believe that escaped income, should be chargeable to tax but has escaped assessment for any assessment year, he may assess or reassess or re-compute the total income for such year under section 147 of the Act by issuing a notice under section 148 of the Act.
However, these reopening of cases are subject to the time limit which is prescribed in section 149 of the Act.
6. Time limit for completion of assessment, reassessment and re computation
With respect to the orders of assessment relating to the assessment year commencing on or after the 1st April 2021, Nine months has been substituted for twenty-one months in the provision.
7. Changes in Income Tax on Interest on PF
Union Budget 2021 proposed to tax interest received on annual provident fund contributions above Rs 2.5 lakh. That would have a huge impact on high income earners due to EPF returns in the next financial year. If the EPF and voluntary provident fund (VPF) contributions cross Rs 2.5 lakh, the tax on interest will be the same as the individual’s income tax rate (including surcharge, if any).
Read Also: EPF Interest will be taxable above Rs 2.5 lakh
8. Pre-filled ITR Forms
A major change in ITR Form is expected as, as per Budget 2021 Prefilled ITR Forms will be introduced. The Prefilled ITR Forms will have information of Capital Gains from Listed Securities, Dividend Income, Interest from Banks/Post Office, etc. Earlier Prefiled ITR form was available for Salaried employees where Income was reflected on basis of Form 16.
But now the scope has become wide. ITR form will now have pre-filled information on dividend, interest and capital gains to ease compliance for individual taxpayers. Details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also come pre-filled.
9. New Labour Law
New Wage Code Bill 2021 will come in effect from April 2021. This code will bring a major change in the definition of Wages. This Change is going to bring a major hit on take-home salary. This will lead to the following changes –
1. Contribution in Provident Fund will increase
2. Change in Gratuity rule
3. Changes in salary structure
4. Relaxation with respect to Leave Travel Concession (LTC) rules
5. Employee Over Time Pay
Read More at New Wage Code: 5 changes in your salary structure from April 2021
10. No ITR Filing For Senior Citizens Above 75
Persons whose age is above 75 years and who has pension income and interest from fixed deposit comes in the same bank and who has only interest income, they need not file income tax return. Bank will deduct the income tax which he has to pay and deposit to the government. The condition is the person should have only pension income and interest from fixed deposit should accrue in the same bank.
The author of the above article is Sneha Bhalotia.
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