Major changes in Income Tax rules for the FY 2021-22
The government generally makes changes to the tax rules during the budget presented in February. These changes come into effect from the following financial year which starts from April.
Take note of the changes and plan your taxes better.
Choosing your tax regime
Last year’s budget gave taxpayers an option of choosing between two tax regimes. This is the second year when you will have to make a choice. What’s the difference between the two? The old regime comes with a host of exemptions but with higher tax rate slabs, the new regime allows lower tax rate slabs but does not allow specified deductions & exemptions. Choose the right slab and get maximum benefits.
Lesser time to file revised tax returns or file belated returns
The tax returns are due by 31 July every year. You had a chance to file it till 31 Mar of the Assessment year with a small late fee or even revise your return. With this financial year, the window for revising returns or filing belated returns has got shorter by 3 months. You just have time till 31st Dec.
Dividend income gets featured on the ITR
Till FY 2019-20, dividend distribution tax was levied on companies and dividend income from domestic companies was exempt up to Rs. 10 lakh, but from FY 2020-21, the dividend is fully taxable as per the slab rate and no dividend distribution tax to be paid by the companies. So check for TDS against dividend income in your Form 26AS and reconcile it with credit of dividend amount in your account and pay up tax according to your slab.
Enjoy pre-filled ITR forms
To make the process of tax filing easier and more transparent, your ITR forms will come pre-filled with details of capital gains from listed securities, mutual funds, income from dividend, interest from banks and post office, salary income, etc.
Interest on voluntary contribution to EPF beyond a limit gets taxed
Interest earned on provident funds was fully exempt from income tax till F.Y.2020-21. During Budget 2021, the FM announced that the interest income on the voluntary contribution into EPF over Rs 2.5 lakh would be taxed. But later, this limit was increased to Rs 5lakhs, if your employer doesn’t contribute to EPF.
Thus, if your deposit in EPF/VPF exceeds the limit prescribed, interest income will be taxable now. This comes into effect in April this year. So plan your contributions and taxes accordingly.
Tax on ULIPs
The maturity proceeds of a ULIP policy were exempt from tax if the premium did not exceed 10% of the sum assured. But the last budget changed it all! This provision will apply only when the premium of all ULIPs that you have taken doesn’t exceed Rs 2.5 lakhs in a year. This rule applies for ULIPs bought after 01 Feb 2021.
Senior Citizens aged 75 are not required to file ITR in certain cases
If senior citizens have only income from pension and interest income from a bank, they are exempted from filing IT returns subject to fulfillment of certain conditions