As we head into a new tax year in 2021, all businesses across India need to pay attention to what’s going on and what legal and financial changes are being made to the system, especially when it comes to tax. We’re living in an unprecedented time, what with COVID-19 and the ever-changing global landscape, and the last thing you want is to get caught out for not standing up-to-date with the times.
With this in mind, today, we’re going to explore any changes happening to the Indian taxation system in 2021, detailing everything you need to know to stay on the ball.
Changes to the 2021 Budget Tax System
While some changes were made back in February 2021, it’s safe to say there weren’t the significant, innovative changes that everybody expected Finance Minister Nirmala Sitharaman to make. Her changes came across more like tweaks to the Union Budget System.
However, I think we can all agree that this year is a struggle and strange time for every country in the world, and so perhaps major financial structure changes are best left until the current situation is a little calmer.
Before we get into the changes, it’s important to note that any financial processes you’re going through, such as figuring out how much tax you need to pay, can be worked out using free online tools like a GST calculator. This can make your life easier and is typically updated to reflect the most up-to-date rules and regulations.
That being said, let’s dive into the tweaks that were made and everything you need to know about when it comes to taxing your business in 2021.
Senior Citizen Changes
To begin with, the Budget aims to lessen the necessary contributions that people over the age of 75 have to make. This includes the process of exempting senior citizens and pensioners from having to file income tax returns if they have already made payments from their paying bank account. However, it’s worth noting that this is only applicable to senior residents of India who have interest income apart from their pension income.
Not really a business-related tax change, but an important one to note nonetheless.
The ITAT (or the Income Tax Appellate Tribunal) is a system that deals with people who haven’t paid their income tax, have avoided paying, or are having problems paying their fees. It’s basically the justice system for making sure everyone is paying their taxes.
However, due to the COVID-19 situation, this system has become “faceless and jurisdiction-less,” as described by the Finance Minister herself. All tribunals for this year are to be held through video conferencing platforms, and all processes have been changed to be processed electronically.
Interest Income is Taxable
As of Budget 2021, Interest Income is now taxable. This means that the standard EPF contribution is no longer exempt or holds the EEE status unless you are classed as a high-income employee. Suppose you have been investing in projects and funds like the Employee’s Provident Fund (EPF) or the Voluntary Provident Fund (VPF). In that case, you need to find out how this is affecting you because you’ll need to organize your finances around these changes since your payments are no longer tax-exempt.
Changes to ULIP
As of the Union Budget 2021, you are now allowed a tax exemption of ULIP proceeds that have an annual premium of Rs 2.5 lakh. This means that any interest earned on employee contributions that exceed the Rs 2.5 lakhs limit is no longer tax-exempt, and you will be changed. This change has been in effect since April 1st, 2021.
As you can see, some fundamental changes have been made to the Union Budget, and it’s important you keep up-to-date with them as an individual and a business, so you’re not caught out not paying the tax you should be paying (and potentially being fined), and you know exactly where your money is going. Don’t get caught out.