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No fresh direct taxes in Budget 2021-22, IT slabs remain unchanged
Senior citizens above 75, with only pension and interest income, exempted from filing IT returns
New Delhi, February 1, 2021
Finance Minister Nirmala Sitharaman today did not propose any fresh direct taxation or changes in the income tax slabs in the Union Budget for 2021-22 and sought to take further steps to simplify the tax administration, ease compliance and reduce litigation.
Presenting the Budget in the Lok Sabha, she noted that India's corporate tax rate was among the lowest in the world and that the burden on small taxpayers was eased earlier by increasing rebates.
Sitharaman proposed that senior citizens, who are 75 years of age and above, with only pension and interest income, would be exempted from filing income tax returns.
"Many of them, despite having foregone several basic necessities of their own, have strived to build our nation. Now in the 75th year of Independence of our country, when we continue our endeavour with renewed vigour, we shall reduce compliance burden on our senior citizens who are 75 years of age and above," she said.
Sitharaman said the paying bank would deduct the necessary tax from their income.
The Finance Minister also proposed to reduce the time limit for reopenning a tax assessment from six years to three years.
At present, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years.
"As a result, taxpayers have to remain under uncertainty for a long time. I therefore propose to reduce this time-limit for re-opening of assessment to 3 years from the present 6 years. In serious tax evasion cases too, only where there is evidence of concealment of income of Rs 50 lakh or more in a year, can the assessment be re-opened up to 10 years. Even this reopening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department," she said.
Sitharaman proposed to constitute a Dispute Resolution Committee to further reduce litigation for small taxpayers.
"It has been the resolve of this Government to reduce litigation, which mars the present taxation system. The Government came out with the Direct Tax Vivad Se Vishwas Scheme to give taxpayers an opportunity to settle long pending disputes and be relieved of further strain on their time and resources. The response from the taxpayers has been the best ever as over 1 lakh ten thousand taxpayers have already opted to settle tax disputes of over Rs 85,000 crores under this scheme," she said.
The Minister said the Dispute Resolution Committee would be faceless to ensure efficiency, transparency and accountability. Anyone with a taxable income up to Rs 50 lakh and disputed income up to Rs 10 lakh shall be eligible to approach the committee, she said.
Sitharaman said that, for ease of compliance and to reduce discretion, the Government was committed to make the taxation processes faceless. It has already introduced faceless assessment and appeal this year.
"The next level of income tax appeal is the Income Tax Appellate Tribunal (ITAT). I now propose to make this Tribunal faceless. We shall establish a National Faceless Income Tax Appellate Tribunal Centre. All communication between the Tribunal and the appellant shall be electronic. Where personal hearing is needed, it shall be done through video-conferencing," she said.
The Minister said she proposed to notify rules for removing the hardship of double taxation faced by non-resident Indians (NRIs) who, when they return to India, have issues with respect to their accrued incomes in their foreign retirement accounts.
"This is usually due to a mismatch in taxation periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions," she said.
The Minister proposed to increase limit for tax audit for those who carry out 95% of their transactions digitally from Rs 5 crore to Rs 10 crore with a view to further incentivising digital transactions and reduce compliance.
Currently, if a company's turnover exceeds Rs 1 crore, it has to get its accounts audited. In the February 2020 Budget, Sitharaman had increased the limit for tax audit to Rs 5 crore for those who carry out 95% of their transactions digitally.
Sitharaman proposed to make dividend payment to REIT/InvIT exempt from tax deduction at source (TDS) in order to provide ease of compliance.
Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, she proposed to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for Foreign Portfolio Investors, she proposed to enable deduction of tax on dividend income at lower treaty rate.
In the previous Budget, Sitharaman had abolished the Dividend Distribution Tax (DDT) in order to incentivise investment. Dividend was made taxable in the hands of shareholders.
Sitharaman recalled that, in the last Budget, for attracting foreign investment in the infrastructure sector, she had granted 100% tax exemption, subject to certain conditions, to foreign Sovereign Wealth Funds and Pension Funds on their income from investment in Indian infrastructure.
"We have noticed that few of such Funds are facing difficulties in meeting some of these conditions. In order to ensure that a large number of Funds invest in India, I propose to relax some of these conditions relating to prohibition on private funding, restriction on commercial activities, and direct investment in infrastructure," she said.
In order to allow funding of infrastructure by issue of Zero Coupon Bonds, she proposed to make notified Infrastructure Debt Funds eligible to raise funds by issuing tax efficient Zero Coupon Bonds.
As part of the priority accorded to "Housing for All" and Affordable Housing and Rental Housing, the Government had, in the July 2019 Budget, provided an additional deduction of interest, amounting to Rs 1.5 lakh, for loan taken to purchase an affordable house.
Sitharaman has now proposed to extend the eligibility of this deduction by one more year, to 31st March 2022. The additional deduction of Rs 1.5 lakh shall, therefore, be available for loans taken up till 31st March 2022, for the purchase of an affordable house.
"Further, to keep up the supply of affordable houses, I propose that affordable housing projects can avail a tax holiday for one more year – till 1st March, 2022," she said.
To promote supply of Affordable Rental Housing for migrant workers, she proposed to allow tax exemption for notified Affordable Rental Housing Projects.
Sitharaman said that the Government is committed to make the International Financial Services Centre (IFSC) in GIFT City at Gandhinagar a global financial hub. In addition to the tax incentives already provided, she proposed to include, among others, tax holiday for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors; tax incentive for relocating foreign funds in the IFSC; and to allow tax exemption to the investment division of foreign banks located in IFSC.
Sitharaman said that, in order to ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. already come pre-filled in income tax returns. To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled.
The Finance Minister said the Government hoped to reduce the compliance burden on small charitable trusts running educational institutions and hospitals. So far, there is a blanketexemption to such entities, whose annual receipt does not exceed Rs 1 crore. The Budget propsoes to increase this amount to Rs 5 crore.
"We have noticed that some employers deduct the contribution of employees towards Provident funds, superannuation funds, and other social security funds but do not deposit these contributions within the specified time. For the employees, this means a loss of interest or income. In cases where an employer later becomes financially unviable, non-deposit results in a permanent loss for the employees.
"In order to ensure that employees’ contributions are deposited ontime, I reiterate that the late deposit of employee’s contribution by the employer will not be allowed as deduction to the employer," she said.
In order to incentivise start-ups in the country, Sitharaman proposed to extend the eligibility for claiming tax holiday for start-ups by one more year -- till 31st March, 2022. Further, in order to incentivise funding of the start-ups, she proposed to extend the capital gains exemption for investment in start-ups by one more year - till 31st March, 2022.