Direct Tax Proposals:-
- Certain direct tax proposals were introduced, providing relaxation to individual taxpayers and startups
to some extent. The individual and corporate tax rates for FY 2021-22 (AY 2022-23) were left
unchanged. In a major move, the limit for tax audits under section 44AB has been increased from Rs
5 crore to Rs 10 crore (only where 95% of payments are digitized i.e. through bank), providing relief
to many corporate houses. - The following are other proposed amendments:
IT relaxation for senior citizens of 75 years age and above: - It has been proposed to exempt the senior citizens from filing income tax returns if pension
income and interest income are their only annual income source. Section 194P has been
newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age
who have a pension and interest income from the bank.
Reduction in time for IT Proceedings:
Except in cases of serious tax evasion, assessment proceedings in the rest of the cases shall
be reopened only up to three years, against the earlier time limit of six years.
Constitution of ‘Dispute Resolution Committee’:
Those assessed with a taxable income of up to Rs.50 lakh (for small and medium taxpayers)
and any disputed income of Rs.10 lakh can approach this committee under section 245MA. It
will prevent new disputes and settle the issue at the initial stage.
National Faceless Income Tax Appellate Tribunal Centre:
Provision is made for faceless proceedings before the Income Tax Appellate Tribunal (ITAT) in
a jurisdiction less manner. It will reduce the cost of compliance for taxpayers, and increase
transparency in the disposal of appeals. Further, it will also help achieve even distribution of
work in different benches and ensure efficient administration.
Tax incentives to startups:
The tax holiday for startups has been extended by one more year up to 31st March 2022.
Relaxations to NRI:
When Non-Resident Indians return to India, they have issues with respect to their accrued
incomes in their foreign retirement accounts. This is usually due to a mismatch in taxation
periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions. It
has been proposed to notify rules for removing their hardship of double taxation.
Relief for Dividend : In the previous Budget, the Dividend Distribution Tax(DDT) was
abolished in order to incentivize investment. Dividend was made taxable in the hands of
shareholders. Now, in order to provide ease of compliance, It is proposed to make dividend
payment to REIT/ InvIT exempt from TDS. Further, as the amount of dividend income cannot
be estimated correctly by the shareholders for paying advance tax, It is proposed to provide
that advance tax liability on dividend income shall arise only after the declaration/payment of
dividend. Also, for Foreign Portfolio Investors, It is proposed to enable deduction of tax on
dividend income at lower treaty rate.
Relief to Small Trusts: Reduce compliance burden on small charitable trusts running
educational institutions and hospitals. So far, there is a blanket exemption to such entities,
whose annual receipt does not exceed `1 crore, now proposed to increase this amount to `5
crore
Pre-filing of returns to be forefront:
Pre-filling will be allowed for salary, tax payments, TDS, etc. Further, details of capital gains
from listed securities, dividend income, etc. will be prefilled.
Advance Tax on dividend income:
Advance tax will henceforth be applicable on dividend income only after its declaration. Tax
holidays are proposed for aircraft leasing and rental companies.
Disallowance of PF contribution:
In case the employee’s PF contribution was deducted but not deposited by the employer, it will
not be allowed as a deduction for the employer.
Section 43CA stands amended:
The stamp duty value can be up to 120% (earlier 110%) of the consideration if the transfer of
“residential unit”, which means an independent housing unit is made between 12th November
2020 and 30th June 2021.
Amendment to Section 44ADA:
Section 44ADA applied 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.
Section 80EEA deduction extended:
The affordable housing additional deduction was extended till 31st March 2022. The tax
exemption has been granted for affordable rental projects.
Relaxation of Condition for carry forward of loss for Disinvestment In order to promote strategic
disinvestment of PSU, it is proposed to relax the condition regarding carry forward of loss for
disinvested PSU in amalgamation
Rationalization of taxation of Unit Linked Insurance Plan (ULIP) : In order to rationalize
taxation of ULIP, it is proposed to allow tax exemption for maturity proceed of the ULIP having
annual premium up to ` 2.5 lakh. However, the amount received on death shall continue to
remain exempt without any limit on the annual premium. The cap of ` 2.5 lakh on the annual
premium of ULIP shall be applicable only for the policies taken on or after 01.02.2021. Further,
in order to provide parity, the nonexempt ULIP shall be provided same concessional capital
gains taxation regime as available to the mutual fund.
Rationalization of Tax free Income on Provident Funds: In order to rationalize tax
exemption for the income earned by high income employees, it is proposed to restrict tax
exemption for the interest income earned on the employees’ contribution to various provident
funds to the annual contribution of ` 2.5 lakh. This restriction shall be applicable only for the
contribution made on or after 01.04.2021.
Non-filing of Return by Deductee/Collectee : In order to discourage the practice of not filing
returns by the persons in whose case substantial amount of tax has been deducted/collected,
it is proposed to provide that a person in whose case TDS/TCS of `50,000 or more has been
made for the past two years and who has not filed return of income, the rate of TDS/TCS shall
be at the double of the specified rate or 5%, whichever is higher. This provision shall not be
applicable for the transactions where full amount of tax is required to be deducted e.g. salary
income, payment to non-resident, lottery, etc.
Levy of TDS on Purchase of Goods: In order to widen the scope of TDS, it is proposed to
levy a TDS of 0.1% on a purchase transaction exceeding ` 50 lakh in a year. In order to reduce
the compliance burden, it is also proposed to provide that the responsibility of deduction shall
lie only on the persons whose turnover exceeds ` 10 crore.
Other Clarifications:
I. In order to provide certainty, it is proposed to clarify that no depreciation on Goodwill
shall be allowed. However, the deduction for the amount paid for acquiring Goodwill
shall be allowed on sale of Goodwill.
II. In order to provide certainty, it is proposed to clarify that slump sale shall include all
types of transfer.
III. In order to protect the revenue, it is proposed to provide that the penalty proceedings
initiated for fake invoice/sham transactions of more than ` 2 crore shall also be eligible
for provisional attachment of assets
IV. In order to provide certainty, it is being expressly clarified that transaction taxable under
income-tax are not liable for equalization levy. Further, it is also proposed to clarify
regarding applicability of equalization levy on physical/offline supply of goods and
services.
Indirect Tax Proposals:-
Few of the items on which Customs Duty Rates are revised are as follows:
o Reduced duty on copper scrap from 5% to 2.5%
o Basic and Special additional excise duty on petrol and high-speed diesel oil (both
branded and unbranded) is reduced
o Increased duty on solar inverters from 5% to 20%
o Raised duty on solar lanterns from 5% to 15%
o The basic customs duty on gold and silver reduced.
o The department will rationalize duty on textile, chemicals and other products
o The revised rates will be applicable from 2nd February 2021 onwards.
New tariff items under 2404 11 00 and 2404 19 00 have been inserted in accordance with
upcoming HS 2022 nomenclature. Further, NCCD of 25% is prescribed on these tariff items
with effect from 1st January 2022.
Agriculture Infrastructure And Development Cess (AIDC) has been newly imposed on petrol
and diesel at Rs2.5 and Rs.4 per litre respectively.
Regarding agricultural products, the customs duty is increased on cotton, silks, alcohol, etc.
Exemption of Social Welfare Surcharge on the value of AIDC imposed on gold and silver.
Therefore, these items would attract surcharge at the normal rate, only on value plus basic
customs duty.
The exemption on import of leather will be withdrawn as they are domestically produced.
A new initiative called ‘Turant Customs’ will be introduced for faceless, paperless, and
contactless customs measures.
CGST Act was amended for several provisions as follows:
o Section 16 amended to allow taxpayers’ claim of the input tax credit based on GSTR-2A
and GSTR-2B.
o Section 50 of the CGST Act is being amended to provide for a retrospective charge of
interest on net cash liability with effect from the 1st July 2017.
o Section 35 and 44 amended: Mandatory requirement of furnishing the GST
reconciliation report signed by the specified professional is relaxed by allowing the filing
of annual return on a self-certification basis. The Commissioner can exempt a class of
taxpayers from the requirement of filing the annual return.