Union Budget 2021 - Key Highlights on Direct Tax and Indirect Tax Proposals

Union Budget 20211/2/2021 Source:Union Budget

Direct Tax Proposals

(1) Relief to Senior Citizens:- The budget proposes exemption from filing their income tax returns for senior citizens who only have a pension and interest income and who are 75 years of age and above.

(2) Reduction in Time for Income Tax Proceedings:- The budget proposes to reduce the time-limit for re-opening of assessment to 3 years from the present 6 years. In serious tax evasion cases too, only where there is evidence of concealment of income of 50 lakh or more in a year, can the assessment be re-opened up to 10 years. Even this reopening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department.

(3) Setting up the Dispute Resolution Committee:- The budget proposes to constitute a Dispute Resolution Committee for small taxpayers, which will be faceless to ensure efficiency, transparency and accountability. Anyone with a taxable income up to 50 lakh and disputed income up to `10 lakh shall be eligible to approach the Committee.

(4) Faceless ITAT:- National Faceless Income Tax Appellate Tribunal Centre shall establish where all communication between the Tribunal and the appellant shall be electronically through Video Conferences.

(5) Relaxation to NRI:- The budget proposes to notify rules for removing hardship for double taxation.

(6) Exemption from Audit:- Tax Audit Limit to be increased to Rs.10 crore from Rs.5 crore for those who carry out 95% of their transactions digitally.

(7) Relief for Dividend:- The budget proposes to make dividend payment to REIT/ InvIT exempt from TDS and advance tax liability on dividend income shall arise only after the declaration/payment of dividend

(8) Affordable Housing/Rental Housing:- The additional interest deduction of Rs.1.5 lakh to be extended for loans taken up till 31st March 2022, for the purchase of an affordable house.

(9) Pre-filling of Returns:- To further ease filing of Income Tax returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled in Income tax returns.

(10) Relief to Small Trusts:- Charitable trusts running educational institutions and hospitals whose annual receipt does not exceed Rs.5 crore is now qualified for non-applicability of various compliances like approval etc.

(11) Labour Welfare:- Late deposit of employee's contribution by the employer will not be allowed as deduction to the employer.

(12) Incentives for Start-ups:- Tax holiday for startups extend till 31st March, 2022. Further,capital gains exemption for investment in startups also extend till 31st March, 2022.

Indirect Tax Proposals

GST Act:-

To facilitating taxpayers, the budget proposes to remove the mandatory requirement of getting annual accounts audited and reconciliation statement, filing of the annual return on self-certification basis and charging interest on net cash liability with effect from the 1st July, 2017.

Social Welfare Surcharge (SWS):-

(1) Notification No. 12/2018-Customs dated 2.2.2018 is being rescinded to keep only one SWS rate of 10% for all goods.

(2) The SWS on Agriculture Infrastructure and Development Cess is being exempted for Gold and Silver.

Imposition of Agriculture Infrastructure and Development Cess on specified goods [w.e.f. 2.2.2021]:-

An Agriculture Infrastructure and Development Cess has been proposed on specified goods, as below:-

(A) On customs side:-

(B) Excise side:-

An agriculture Infrastructure and Development Cess (AIDC) of Rs. 2.5 per litre has been imposed on petrol and Rs. 4 per litre on diesel.