Budget Highlights – Tax Changes 2021-22

Income Tax Proposals

  • The ‘tax audit limit’ under Section 44AB has been increased from Rs.5 crores to Rs.10 crores where 95% of business transactions are done in digital mode.
  • Delay in remittance of employee share of PF contribution by the employer beyond the due date specified in the respective Act, will not be allowed.
  • Additional Deduction of interest up to Rs.1.5 Lakhs (80EEA) for the loan taken to buy affordable house between1st April 2019 to 31st march 2021 is now extended till 31st March 2022.
  • Income tax exemption limit for hospital and educational institutions registered as trust, has been increased from 1 crore to 5 crore.
  • TDS on Purchase of Goods

A new section 194Q has been inserted to provide for 0.1% TDS on purchase in excess of Rs 50 lakhs by an assesse whose gross turnover /receipt exceed Rs 10 crore during the financial year immediately preceding the financial year in  which the purchase of the goods is carried out. In case of no PAN, TDS rate will be applied at 5%.

  • Time limit for filing belated and revised return is reduced by 3 months. Thus the belated return or revised return could now be filed three months before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
  • Amendment to Section 44ADA:
    Section 44ADA applies to all the assessees being residents in India. Now onwards, it applies only to the resident individual, Hindu Undivided Family (HUF) or a partnership firm, other than LLP.
  • Higher rate of TDS or TCS to be applicable for those who have not filed income tax return for preceding two consecutive years (Sec 206AB & 206CCA)
  • Interest income from provident fund will now be taxable on encashment if the contribution made by the person exceeds two lakh and fifty thousand rupees in a previous year in that fund on or after 1 st April, 2021.
  • Advance tax liability on dividends will arise only after declaration of dividend.
  • Exemption for cash allowance received in lieu of LTC  Due to the COVID-19 pandemic and the nationwide lockdown, employees have not been able to avail of Leave Travel Concession (LTC) in the current block of 2018-21. Thus, to provide relief to such employees, the said section has been proposed to be amended to provide an exemption in respect of cash allowance received in lieu of leave travel concession (LTC). However, the exemption shall be allowed subject to certain conditions.
  • No depreciation shall be allowed on goodwill. It has been proposed to amend section 2(11) to specifically provide that “block of assets shall not include goodwill” be it acquired or self-generated.
  • Transfer of capital asset to partner/member on the dissolution of the firm/AOP/BOI taxable as capital gains It has been proposed that where a partner/member receives any money or other asset at the time of dissolution or reconstitution of the firm/AOP/BOI which is more than the balance appearing in the capital account (without considering revaluation), the profits or gains arising from such receipt shall be chargeable under the head ‘capital gains’ as income of such firm, AOP or BOI of the previous year in which such money or other asset was received by the specified person.
  • Taxation of unit linked insurance policy (ULIP) :  The Finance Bill 2021 has proposed that the exemption under section 10(10D) shall not be available with respect to any ULIP issued on or after the 01-02-2021, if the amount of premium payable during the term of the policy exceeds Rs. 2,50,000 per annum.Further, it has also been proposed that a ULIP (not eligible for exemption under section 10(10D)] shall be treated as capital asset.
  • Extension in the time limit for transfer of residential house property for Section 54GB exemption Section 54GB provides for exemption from the capital gain arising from the transfer of a residential property on or before 31-03-2021 if the assessee utilizes the net consideration for investment in the equity shares of an eligible start-up. The Finance Bill 2021 has proposed to extend the said outer date of transfer of residential property to 31-03-2022.
  • Set-off of deficit not to be allowed to Charitable Institutions. It has been proposed that the charitable trusts shall not be permitted to claim any carry forward of losses.
  • Section 80-IBA deduction to rental housing projects Section 80-IBA provides for deduction of an amount equal to 100% of the profits and gains derived by an assessee from the business of developing and building affordable housing project approved on or before 31-03-2021. This date has been proposed to be further extended to 31-03-2022. Further, to help migrant laborers and to promote affordable rental housing, the scope of Section 80-IBA is proposed to be expanded to allow a deduction in respect of notified rental housing projects as well.
  • Extension in the due date for the incorporation of start-up co. for Section 80-IAC A start-up is eligible for deduction under section 80-IAC if it satisfies certain conditions. One of the conditions provides that it should be incorporated between 01-04-2016 and 31-03-2021. The Finance Bill 2021 proposes to extend the outer date of incorporation to 31-03-2022. Deductions Highlights of the Finance Bill, 2021 February, 2021.

GST Amendments

  1. Scraping of GST Audit: Sub section (5) of Section 35 of the CGST Act is being omitted so as to remove the mandatory requirement of getting Annual Accounts audited and reconciliation statement submitted by CA/CMA.

However taxpayer is required to furnish annual return which may include a self-certified reconciliation statement reconciling value of supplies declared in the annual return with audited financial statements.

  • Interest to be charged on Net Cash Liability for late payment of GST i.e. on that portion of tax that has been paid by debiting Electronic Cash Ledger.
  • Pre-deposit of 25% of Penalty imposed is required to be made to file an appeal against an order made by Jurisdictional Officer in case of detention or seizure of goods in transit including
  • Deposit of Refunds received: In case of zero rated supplies without payment of tax, refund claimed on account of unutilised input tax credit shall be deposited along with applicable interest if sales proceeds are not realised as per time limit specified under FEMA, 1999.

COMPANIES ACT, 2013

Small Companies definition has been changed

  • Paid up Share Capital is increased from Rs.50 Lakhs to Rs.2 Crores
  • Turnover Limit is increased from Rs.2 Crores to Rs.20 Crores.

More relaxations for One Person Company (OPC)

  • No restrictions on paid up share capital and turnover.
  • Can convert into any other type of company at any time.
  • Reduction in residency limit for an Indian Citizen to set up OPC from 182 days to 120 Days.

NRIs allowed to incorporate OPC in India.

                            CUSTOMS ACT, 1962 PROPOSALS

  • Rationalisation of customs duty structure by eliminating out-dated exemptions.
  • Support to MSMEs hit by recent sharp rise in iron and steel prices and relief to metal recyclers.
  • Rationalisation of duties on raw material inputs to man-made textiles.
  • Rationalisation of custom duty on gold and silver
  • Increase in duty on solar inverters and lanterns to promote domestic production.
  • Agriculture Infrastructure and Development Cess on small number of items.

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