With the new financial year beginning on 1 April, a slew of changes in the income tax rules and auto payments on credit/debit cards will come into effect.
Here’s a look at the changes announced in the Union Budget by Finance Minister Nirmala Sitharaman in February, which will come into effect starting Thursday, 1 April.
1. Employee Provident Fund
Interest on employee contribution towards provident fund will be exempt up to a maximum of Rs 2.5 lakh. However, any interest income from a contribution above this limit will be taxable in the hands of the employee from 1 April 2021.
2. Tax Deducted at Source
In order to ensure that more people file their Income Tax returns, Sitharaman proposed higher TDS (tax deducted at source) or TCS (tax collected at source) rates in Budget 2021.
"The individuals who have not filed the income tax returns, however, have a TDS or TCS deduction of more than Rs 50,000 in the last two years, will have to pay TDS or TCS subject to a minimum of 5 percent. Here the deductor will now become responsible for collecting the ITR proof from individuals for compliance," Archit Gupta, Founder and CEO of Cleartax told LiveMint.
3. No I-T Return for Senior Citizens
The Union Budget 2021 has exempted individuals above 75 years from filing income tax returns (ITR). The exemption will be available to only those who have no other income but depend on pension and interest income from the bank hosting the pension account.
4. New Tax Regime vs Old Tax Regime
While the new regime was implemented in the last financial year, the option of choosing the regime will be available from 1 April 2021. Tax payers will have until 31 March to make tax saving deductions.
5. LTC Scheme
The Centre had proposed to provide tax exemption to cash allowance in lieu of Leave Travel Concession (LTC). The scheme was announced by the government last year for individuals who were unable to claim their tax benefit due to COVID-19 restrictions on travel. Money must be spent before 31 March to avail this benefit.
6. Auto-Payment From Debit/Credit Card
- Auto-payments from debit and credit cards, which require additional authentication from 1 April has now been pushed to 1 September.
- The limit for auto-debit from cards and wallets is set at Rs 5,000 and for transactions above the cut-off, an additional one-time password (OTP) will be needed.
- The new rule will be applicable for transactions that can be done via debit card, credit card, UPI, PPIs, and digital wallets.