While presenting the Union Budget 2021 on February 1, Union Finance Minister Nirmala Sitharaman had announced certain income tax rule change which came into effect from April 1.
Here’s a look at these new income tax rules:
Decreased tenure for filing belated ITR or revised ITR: You can file ITR by March 31 with late fee if you failed to file your ITR by the due date of July 31 previously.
By March 31, you could also revise your ITR of the same year. The finance bill for 2021-2022 has a proposal to reduce this time limit by three months and therefore you will have time to file your belated ITR or revise your ITR till December 31 of the same financial year. It effectively reduces the time available for you to file the belated ITR or revised ITR by three months.
ULIP investment: To roll back tax exemption to ULIPs if their annual premiums exceed Rs 2.5 lakh.
Previously, the Unit Linked Insurance Plan (ULIP) an EEE (exempt, exempt, exempt) category tax saving instrument. This means, it was exempt under income tax at all three stages of investment (i.e., 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).
Choice of two tax regimes: A new tax regime was introduced in the Budget 2020-21 under which an individual tax payer can opt, of lower tax rates coupled with a very few deductions available and fewer exempt allowances available instead of the regular tax regime where you have to pay tax at higher rates but have the right to claim various exemptions and deductions. 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.
EPF taxation: Interest on employee’s share of contribution to EPF from April 1, 2021, will be taxable at the stage of withdrawal if it exceeds 2.5 lakh in any year. This will lead to additional tax liability, especially for HNIs, who make higher contributions, and will also discourage voluntary provident fund (VPF) contributions. If the employer of a taxpayer does not contribute to the provident fund of the employee then the tax-free limit will be Rs 5 lakh.
Inclusion of dividend income in ITR: The dividend received from Indian companies as well as mutual fund schemes were tax-free in your hands as the tax was on the dividend or income distributed was paid by the company or the mutual fund till March 31, 2020.
However, Budget 2020 had removed the exemption on dividend income and has made the same taxable in your hands.
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. In case any TDS is reflecting in your form No. 26AS, you need to gross up your dividend income by adding the amount of tax deducted to the amount of dividend credited in your account for proper and correct disclosure of your taxable dividend income.