7 Important Tax Changes Of 2021 That Every Young Investor Should Know
1. New rules on EPF taxation:
A slight relaxation is given if no contribution is made by the employer in the fund for the entire year. For such cases, interest on the amount of contribution made more than INR 5 lacs will be taxable.
It may be noted that the limit of INR 5 lacs is not of much use to private sector employees. The reason is that they are covered in EPFO Act, and the provisions mandate an employer to compulsorily contribute to the account.
2. New rules for ULIP taxation:
This means that the income from ULIP will continue to be exempt as long as the amount of premium invested every year is not more than INR 2.5 lacs. In case the annual premium exceeds this amount, then the income from the ULIP will be taxable. The tax calculation will depend on the holding period & the equity component in the underlying funds.
Also, note that:
- The limit of INR 2.5 lacs applies to the combined annual premium of all ULIP policies taken together.
- The new provision will only apply to ULIPs purchased after February 1, 2021.
- The amount received on death is still completely tax-free irrespective of the premium amount.
3. Need to file Form 10-IE to opt for the new tax regime:
If you had opted for the new regime for Financial Year 2020-21, you need to also file a new Form 10-IE on the Income Tax portal when filing the tax return. This will help Income Tax Department to process your return as per the new regime.
If you don’t do this step, the department can assume that you wish to stick to the old regime and process it as per the old regime’s provisions. So, don’t miss filling this form!
4. Relaxation on calculating advance Tax on Dividend Income:
A relief has been given as per a new provision whereby penal interest under Section 234C will not be applicable on failure to assess the advance tax liability for dividend income.
5. Exemption to senior citizens from filing ITR:
- He/she qualifies as a “resident” as per Income Tax Act and age is above 75 years.
- His/her annual income consists only of pension and interest.
- He/she furnishes a declaration to the bank that he/she is not required to file an income tax return.
- The bank deducts applicable TDS from the income paid to the senior citizen basis the declaration made by the senior citizen.
- The bank is a “specified bank” as notified by Central Government.
6. Tighter deadlines for belated and revised returns:
- The window for filing belated and revised returns has been reduced by 3 months. This means you could earlier file a belated or revised return for FY 2020-21 up to March 31, 2022. Now, you can only do it latest by December 31, 2021.
- Also, the late filing fee for belated return has been changed to INR 5.000. However, this fee cannot exceed INR 1,000 for cases where the total income is up to INR 5 lacs.
7. Other important provisions:
- If you have not filed your tax return and have a TDS/TCS deduction of more than INR 50,000 in the last 2 years, you will be subject to double the rate of TDS/TCS or 5%, whichever is higher.
- A new facility of pre-filled ITR will be available from April 1, 2021, containing details of capital gains, dividend income, etc.
- In a tax-friendly move, the time limit for reopening tax assessment has been reduced from 6 years to 3 years.
- You will have to pay a fee (up to INR 1,000) if you fail to link your Aadhaar with PAN by June 30, 2021, then.
- Deduction under Section 80EEA, which was available until March 31, 2021 has not been extended until March 31, 2022. You can benefit from this extension and avail of an overall deduction of INR 3.5 lacs in your tax return if you satisfy the conditions.