Changes and amendments in tax laws happen regularly. The purpose of these changes is to bring increased efficiency, reduce red tape, and ease the taxpaying and collecting process for everyone involved. Budget 2020 had introduced a new tax regime as well as new income tax slab rates. In Budget 2021 too, several tax amendments were introduced. The amendments made in 2021 aim to simplify tax governance and enforcement and prevent the occurrence of lawsuits. Most amendments were welcomed, as they seemed to meet the expectations that had been set. If you are a taxpayer in 2022, then an awareness of these amendments made in 2021 is important. Let’s take a look at the same.
- Changes in tax filing laws for taxpayers above 75 years of age
Budget 2021 announced that senior citizens who are above the age of 75 years whose sources of income include their pension and interest amount only can be excluded from filing their ITR or Income Tax Return. However, this exclusion allows them to receive an exemption from filing ITR if the bank in which the pension is invested is the same as the one in which the interest income is received. This exemption has been introduced to make things easier for senior citizens who do not have multiple sources of income.
If you are interested in knowing the difference your age can have on your tax liability, the income tax calculator can provide a good estimate.
- Changes in interest on employee’s PF contribution
The interest that an employee earns on their contribution to the Employees’ Provident Fund done on or after 1st April 2021 will be taxed during the time of the withdrawal if it reaches Rs. 2.5 lakhs within a year. This will particularly affect High Net Worth Individuals who would make relatively larger contributions in the hope of earning more interest.
- Addition of ULIPs to the tax bracket
While Budget 2020 introduced new income tax slab rates, Budget 2021 introduced the addition of ULIPs into the tax bracket. As per the new laws, policyholders with ULIPs issued on or after February 2021 will have to pay tax on the maturity amount if the annual premiums paid by them exceed Rs. 2.5 lakhs. Similarly, ULIPs with premiums of or more than Rs. 2.5 lakhs as annual premiums shall also be liable to LTCG or long-term capital gains tax, at the same rate as those of other equity-oriented funds. However, this is applicable only if the ULIP gains exceed Rs. 1 lakh.
- Assistance for banks and tax-exempted senior account holders
Tax-exempted senior citizens will have to provide their bank with a statement. Following that, the bank will get an understanding of the profits the senior account holder is eligible for, depending on the deductions permitted under Chapter VI-A and the rebates allowed under Section 87 of the Income Tax Act. Thus, the senior citizens will be exempted from making a return on taxes for the year.
- Pre-filled ITR forms available with more details
The newly updated ITR forms shall now have more data pre-filled on aspects such as dividends, capital gains, and interest. Data from traded shares, dividend profits, interest from banks and post offices, wage revenue, TDS, and so on may also be available. This data will be available on the ITR form applicable for you out of the many types of ITR available.
Some tips to ease the tax paying process for you
Use an income tax calculator
This useful tool is provided by several organizations to help you get an estimate of the tax you will have to pay this year. Understanding the tax estimate gives you a headstartso that you can approach the entire process with confidence.
Consult a tax expert or a financial consultant
With constant amendments, two tax regimes, and so on, seeking assistance from an expert in these matters may be the best option.
Research the correct ITR form for you
There are around seven types of ITR forms available. Ensure to research the one right for you; submitting the wrong form may lead to the rejection of your returns.
We hope this information has been helpful to you.
