Income Tax: Highlights of Finance Bill 2021-22
Finance Bill 2021-22: The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman presented the Union Budget 2021-22 in Parliament on 1st February 2021. Just within an hour of the commencement of budget stock market shown positive result. It seems there must be something good for a common man. Tax Highlights of Finance Bill 2021-22 are as follows-
Income Tax Rates
- Income tax rates has not changed for AY 2022-23.
- TDS/TCS relief of 25% provided in FY 2020-21 due to COVID has been withdrawn with effect from 1/4/2021. Thus, now TDS/TCS would be charged at their original rates without any relief of 25%.
- Section 194Q on TDS on purchase of goods, which is applicable from 1/7/2021, requires deduction of tax @ 0.1% if purchase transaction exceeds Rs. 50 lacs in a year but with a condition that the responsibility of deduction shall apply on buyer whose turnover exceeds Rs. 10 Cr. In case TCS applies to such transactions u/s 206C, then TDS under 194Q would be deducted instead of TCS.
- TDS/TCS shall be deducted at higher rates in case of non filing of IT return for last 2 years and amount of TDS/TCS is more than or equal to Rs. 50000 in each of such financial year. Such higher rate would be Twice of specified rate or 5% w.e. higher. Also this section don’t covers Salary income, payment to NR, Income from Lottery.
Income Tax Audit
With new changes in tax audit laws, now Entity would get exempt from Tax audit if cash payment and receipt does not exceed 5% of total cash payment and receipt during the previous year and turnover is upto Rs. 5 Cr. Whereas original threshold limit of Rs. 1 Cr would be applicable if cash payment and receipt exceed 5% of total cash payment and receipt.
The threshold limit of Rs. 5 cr has increased to Rs. 10 Cr from A.Y. 2021-22. To take a special note on definition of Cash payments and receipts, it is hereby clarified that any settlement through non-account payee cheque or non-account payee draft shall be deemed to be Cash receipt/ cash payment.
Read Also: Income Tax Important changes you must know
- Employee Contribution to ESI/PF would get disallowed with effect from 1/4/2021 if it is not deposited by Due date and shall be treated as Income of Employer. However, this disallowance applies only to Employee’s contribution and not to Employer’s contribution.
- Interest income on PF contribution would now be taxable from AY 2022-23 if amount of interest exceeds Rs. 2.5 lacs in previous year unlike earlier when it was exempt. However, this limit would be Rs. 5 lacs where there is no contribution from Employer and only Employee is making the contribution.
- In order to claim exemption under section 54GB, the time limit has been extended from 31/3/2021 to 31/3/2022. The capital gain ( Net Consideration to be specific) on transfer of residential house property, if utilized by assessee for investment in equity shares of eligible start up, would be eligible for exemption if such investment is made till 31/3/2022.
- As per Finance Act,2021 the term “Liable to Tax” has been amended to include a case where subsequent to imposition of such tax liability, an exemption has been provided unlike earlier where it included only a liability of tax under law of any other country. It would be applicable from 1/4/2021.
- Last date for filing of Belated or Revised Return has been reduced by 3 months which would now be 31st December of relevant assessment year or before completion of assessment w.e. is earlier.
- Late fee for filing of ITR u/s 139(1) shall be Rs. 5000 and where total income of a person is upto Rs. 5 lacs, the fee would be Rs. 1000 instead of Rs. 5000.
- Time limit for completion of Scrutiny assessment and Best Judgement Assessment shall be 9 months from end of A.Y. in which it was first assessable.
- Time limit for reopening of income tax assessment proceedings has been reduced to 3 years from 6 years.
- With increase in use of technologies, Government has come up with faceless assessment and appeal this year.
- Last date to link PAN with Aadhar has been extended to 30/06/2021. Penalty for non linking would be Rs. 1000 and Pan would also become inoperative whereas penalty for furnishing of inoperative PAN or non furnishing of PAN would be Rs. 10000.
- Assessee would be liable for provisional attachment of assets in case of fake transactions of more than Rs. 2 Cr.
- Now, Scrutiny notice u/s 143(2) can be issued within 3 months from end of financial year in which return is furnished as compared to 6 months earlier.
- Finance Act, 2021 has made liability of advance tax on Dividend income after receipt of same because that would help taxpayers in saving interest on late payment of advance tax due to estimation issues. However, it does not include deemed dividend u/s 2(22)(e).
- Dispute Resolution Committee shall be set up for Small Taxpayers. Small Taxpayers shall mean any person with taxable income upto Rs. 50 lacs and disputed income upto Rs. 10 lacs would be eligible.
- From AY 2021-22, as amended from Finance act, 2021, now no depreciation would be allowed on Goodwill unlike earlier.
- For purpose of Capital Gain on Slump sale transactions, fair market value of capital assets shall be considered as full value of consideration received by Seller. If such assets include Goodwill then it’s value shall be taken as NIL in case acquisition is through Purchase.
The author of the above article is CA Rahul Gaur.
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