On February 1st, 2021, our Finance Minister Smt. Nirmala Sitharaman came up with the Union Budget for the financial year 2021-22. There were many financial provisions in the Union Budget 2021, which we discussed yesterday. All these provisions came into effect from 1st April 2021.
In the Union Budget 2021, there were a number of tax provisions that also came into effect from 1st April 2021. The Union Finance Minister Nirmala Sitharaman had announced a certain income tax rule change.
Let us have a look at these Income tax changes and related provisions.
Choice Of Two Tax Regimes, The Old One And The New One!!
In the Union Budget 2020, FM had announced a new tax regime under which an individual taxpayer can opt, of lower tax rates coupled with very few deductions available and fewer exempt allowances available. However, the old tax regime still exists and was not removed. As per the old or regular tax regime, an individual has to pay tax at higher rates but has the right to claim various exemptions and deductions.
In the new financial year, FM has given individuals the choice to go with any tax regime as per their choice and comfortability. This is the first year when you have to exercise the option of whether to remain in the old tax regime or migrate to the new tax regime.
ULIP’s Now Hold No Tax-Free Status!!
Previous to this financial year, ULIP’s that Unit Linked Insurance Plan, which acted as both an investment and insurance product, hold the tax-free status. It was exempt under income tax at all three stages of investment, that is, income tax deduction at the time of investment, exempt passive income, and income tax exemption at the time of receipt of the amount under the plan.
However, with the beginning of the financial year 2021, its status has changed. As per the tax provision for ULIP’s, now investors of ULIP will be applicable to pay tax if their annual premiums exceed Rs 2.5 lacs.
Tax Trend Changed For EPF!
With the new financial year 2021, interest on employee’s share of contribution to EPF will be taxable, at the time of withdrawal if, their annual contribution would have exceeded Rs 2.5 lacs in any financial year. However, for those employees whose employer does not contribute to their EPF the limit will be up to Rs 5 lakh in a year.
This change in tax trends for EPF will add additional tax liability to the employer and will also discourage those who take interest in voluntary provident fund (VPF) contributions, to shoot up their EPF corpus.
Inclusion Of Dividend Income In ITR
We all know that after Union Budget 2020 was announced the dividends received in the hands of investors become taxable. Well, after the financial year 2021, a new provision has been added for the dividend received in the hands of investors.
In case the amount of dividend paid to you exceeded Rs 5,000, the company or the fund houses would have deducted tax while crediting the dividend to bank your account. So basically, in case if your form 26AS includes any kind of TDS, then you need to calculate your dividend income, and then disclose it correctly in your taxable dividend income. You can calculate your dividend income by adding the amount of tax deducted to the amount of dividend credited to your account
Senior Citizens Above 75 Years Exempted From Filing ITR!
With eth new financial year 2021, the senior citizens of the country that is people above the age of 75 years have been given tax relaxation. Yes, in the union budget 2021, FM announced that individuals above 75 years will be exempted from filing income tax returns (ITR). The exemption will be available to only those senior citizens who have no other income than pension and interest income from the bank hosting the pension account.
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