Tax compliance season for Income Tax Return filing of A.Y. 2021-22 is on the way and thus, it is pertinent to note key amendments made in the Finance Act, 2021 which are applicable with effect from Assessment Year 2021-22. We have discussed some key amendments introduced in the Finance Act, 2021 in this article; which will help professionals, Tax consultants and assessee’s to be ready for Income Tax compliances.

Amendments in the Finance Act, 2021

1. Due Date for Income Tax Return (ITR) Filing – U/s 139

Description Existing Due Date Amended Due Date
Due Date for filing of Belated or Revised ITR from Assessment Year 2021-22 onwards 31st March of that Assessment Year1 31st December of that Assessment Year1
Due Date for filing of ITR for spouse of a partner of a firm; where spouse of a partner is governed by Portuguese Civil Code i.e. Sec. 5A of the Act2

♦ Where Firm is liable for Tax Audit u/s 44AB

♦ Where Firm is liable for Transfer Pricing Audit u/s 92E

31st July of that Assessment Year

31st July of that Assessment Year

31st October of that Assessment Year

30th November of that Assessment Year

Due Date for filing of ITR, where Tax Audit or Transfer Pricing Audit is not required 31st July of that Assessment Year 31st July of that Assessment Year

[No Change]

Due Date for filing of ITR, where Tax Audit is required 31st October of that Assessment Year 31st October of that Assessment Year

[No Change]

Due Date for filing of ITR, where Transfer Pricing Audit is required 30th November of that Assessment Year 30th November of that Assessment Year [No Change]

1 Or before completion of assessment, whichever is earlier.

2 Assumed that no Tax Audit or Transfer Pricing Audit is applicable to the spouse or spouse is not a partner in a firm; where such firm is liable to Tax Audit u/s 44AB or Transfer Pricing Audit u/s 92E.

2. Fee for default in furnishing return of income – U/s 234F

Finance Act, 2021 has reduced the time limit to file belated [Sec 139(4)]or revised [Sec 139(5)] return of income from 31st March to 31st December of the relevant Assessment Year. As return of income can’t be filed beyond 31st December of the relevant Assessment Year, late filing fee after amendment shall be payable in the following manner:

Total Income (Rs.) Date of filing of ITR Late filing Fees (Rs.)
Assessee not liable to file ITR Any time during April to December Nil
Any amount of Income On or before the due date Nil
Up to Rs.5 Lakhs After the due date 1,000
Exceeding Rs.5 Lakhs After the due date 5,000

3. Fee for default in linking Aadhaar and PAN – U/s 234H

  • As per Section 139AA, it is mandatory for every person who has been allotted PAN as on 1st July 2017 and who is eligible to obtain Aadhaar number, shall link his Aadhaar number with PAN. As per latest notification, the due date for such linking has been extended to 30th June 2021.
  • If any person fails to link his Aadhaar number with PAN on or before the due date for linking (currently 30th June 2021), while linking Aadhar number with PAN after due date such person has to pay penalty fee not exceeding Rs.1,000 as introduced under new Section 234H by Finance Act, 2021.
  • Further, there are some other adverse impacts also for non-linking of Aadhaar number with PAN; which are as under:

a) Person will not be able to file the Income Tax Return (ITR); which will lead to consequences for non-filing of ITR like payment of fee for default in furnishing return of income u/s 234F, Interest u/s 234A for late filing of ITR, no carry forward of current year’s losses, non-availability of certain deduction which are linked with filing of ITR within due dates e.g. Section 80P, 80-IA, Section 11, etc; prosecution for failure to furnish return of income, penalty for concealment of income, etc.

b) Deduction of TDS at higher rate as per section 206AA or 206AB.

c) Deduction of TDS at higher rate as per section 206CC or 206CCA.

d) A penalty of Rs.10,000 shall be levied u/s 272B, if such person shall not be able to comply with the provisions of section 139A requiring him to quote his PAN in certain financial transactions, etc.

4. Increase in Tax Audit limit – Section 44AB – Applicable w.e.f. A.Y. 2021-22

  • As per section 44AB of the Act, any person carrying on business shall get his accounts audited, where his total sales or turnover or gross receipts in business exceeds Rs.1 crore in any financial year.
  • As per Finance Act, 2021, the limit of Rs.1 crore has been increased to Rs.10 crore [As per Finance Act, 2020 – Rs.5 crore]; if aggregate of all receipts including sales/ Turnover/ gross receipts during financials year in cash does not exceed 5% of the total receipts; and aggregate of all payments including expenses incurred during financials year in cash does not exceed 5% of the total payments.

5. Tax on dissolution or reconstitution of Firm/ AOP/ BOI [Other than Company or a Co-operative Society] – Section 48(iii), Section 45(4) and Section 9B – Applicable w.e.f. A.Y. 2021-22

  • Key Definitions inserted u/s 9B of the Act:

a) Specified entity means a firm or other association of persons or body of individuals (not being a company or a co-operative society)

b) Specified person means a person, who is a partner of a firm or member of other association of persons or body of individuals (not being a company or a co-operative society) in any previous year.

c) Reconstitution of the specified entity means, where —

1. one or more of its partners or members, as the case may be, of such specified entity ceases to be partners or members; or

2. one or more new partners or members, as the case may be, are admitted in such specified entity in such circumstances that one or more of the persons who were partners or members, as the case may be, of the specified entity, before the change, continue as partner or partners or member or members after the change; or

3. all the partners or members, as the case may be, of such specified entity continue with a change in their respective share or in the shares of some of them.

  • Tax on receipt of capital asset or stock in trade by partner or member from firm/ AOP/ BOI:

a. Section 9B provides that where a partner or member receives during the year any capital asset or stock-in-trade or both from a firm/ AOP/ BOI (specified entity) in connection with the dissolution or reconstitution of such specified entity, then the specified entity shall be deemed to have transferred such capital asset or stock-in-trade or both, as the case may be, to the partner or member in the year in which such capital asset or stock in trade or both are received by that partner or member.

b. Further, profits or gains arising from such deemed transfer of capital asset or stock-in-trade shall be taxable under the head “Capital Gain” or “Business or Profession” respectively.

c. Fair market value of Capital Asset or Stock in trade on the date of its receipt by the specified person shall be considered as full value of consideration as a result of such deemed transfer.

d. Section 45(4) provides for the computation of capital gain which arises to a partner or member on extinguishment or relinquishment of his right in the specified entity in connection with reconstitution of the specified entity. Though the income arises to partner or member but it is deemed as income of the specified entity. Thus, the specified entity would be assessed u/s 9B r.w.s. 48 for its own income and u/s 45(4) for income arising to partner thereof.

e. Capital Gain u/s 45(4) shall be calculated with the following formula:

A = B + C – D

Where, A = Income Chargeable to Income Tax u/s 45(4) as income of specified entity under the head “Capital Gain”

B = Value of any money received by the partner or member from the specified entity on the date of such receipt

C = the amount of FMV of the capital asset received by the partner or member from the specified entity on the date of such receipt

D = the amount of balance in the capital account (represented in any manner) of the partner or member in the books of account of the specified entity at the time of its reconstitution [the balance in the capital account of the partner or member in the books of account of the specified entity is to be calculated without taking into account the increase in the capital account of the partner or member due to revaluation of any asset or due to self-generated goodwill or any other self-generated asset.]

If the value of “A” in the above formula is negative; then its value shall be deemed to be zero.

“self-generated goodwill” and “self-generated asset” mean goodwill or asset, as the case may be, which has been acquired without incurring any cost for purchase or which has been generated during the course of the business or profession.

f. Further, while calculating Capital Gain u/s 48, capital gain calculated u/s 45(4) shall be deductible from the full value of consideration along with cost of acquisition, cost of improvement and expenditure incurred exclusively in connection with transfer.

Particulars Amount (Rs.)
Full value of consideration received or accrued (FMV of capital asset)

Less:

1. Expenditure incurred exclusively in connection with transfer

2.  Cost of acquisition / Indexed Cost of acquisition

3. Cost of improvement / Indexed Cost of improvement

4.  Capital Gain chargeable to tax u/s 45(4) of the Act

5. Exemption u/s 54 to 54GB

Xxxxxx

Xxxx

Xxxx

Xxxx

Xxxx

Xxxx

Income Taxable under the head capital gains u/s 48 Xxxx

g. Section 9B provides for taxability arising at the time of dissolution or reconstitution. Whereas Section 45(4) deals with the taxability at the time of reconstitution only. Thus, section 45(4) does not apply at the time of dissolution.

6. No Depreciation on Goodwill – Section 2(11), Section 32(1), Section 43(6)(c)(ii), Section 50(2), Section 55(2)(a) – Applicable w.e.f. A.Y. 2021-22

  • Definition of “block of asset” has been amended to exclude “goodwill of a business or profession”.
  • Amendment to Section 32(1) has been made to exclude “goodwill of a business or profession” from intangible assets for depreciation purpose.
  • Section 43(6)(c)(ii) has been amended to make adjustment in the “Written Down Value (WDV)” for goodwill of a business or profession. Amendment provides that opening WDV for A.Y. 2021-22 of block of asset under which “goodwill of a business or profession” is included shall be reduced by the WDV of goodwill of a business or profession.
  • Further, if depreciation was claimed on goodwill forming part of the block of the assets in the A.Y. 2020-21; then while computing opening WDV for A.Y. 2021-22, the amount of reduction calculated in above shall not exceed the WDV of such block of assets. Kindly refer illustration given below.
  • Section 50 which is a “Special provision for computation of capital gains in case of depreciable assets” has been amended with new proviso so that CBDT can prescribe a manner to determine the WDV of the block of asset and short-term capital gain if goodwill of a business or profession is forming part of the block of the asset as on A.Y. 2020-21 and depreciation has been claimed on it.
  • Section 55 has been amended to provide that cost of acquisition of purchased goodwill of a business or profession is to be calculated after reducing depreciation amount which was allowed for Assessment Years prior to A.Y. 2021-22.
  • Section 55 has been amended to provide that cost of acquisition of goodwill of a business or profession other than purchased shall be taken to be Nil.
  • Illustration: Assessee acquired following intangible assets as on 17th May 2018.

1. Goodwill: Cost of Acquisition – Rs.50 Crores.

2. Tenancy rights: Cost of Acquisition – Rs.25 Crores.

3. Licences: Cost of Acquisition – Rs.25 Crores.

Scenario 1: In June 2019, assessee sold License for Rs.20 Crores.

Scenario 2: In June 2019, assessee sold License for Rs.40 Crores.

Computation of WDV as on 31.03.2021 (in Crores):

Particulars Scenario 1 Scenario 2
F.Y.  2018-19
Opening WDV as on 01.04.2018 NIL NIL
Add: Cost of Assets acquired under the block of Intangibles 100 100
Less: Sale Proceeds of assets sold during the year NIL NIL
Total Value of Block of Intangibles for depreciation 100 100
Less Depreciation @ 25% (25) (25)
Closing WDV as on 31.03.2019 75 75
F.Y.  2019-20
Opening WDV as on 01.04.2019 75 75
Add: Cost of Assets acquired under the block of Intangibles NIL NIL
Less: Sale Proceeds of assets sold during the year (20) (40)
Total Value of Block of Intangibles for depreciation 55 35
Less Depreciation @ 25% (13.75) (8.75)
Closing WDV as on 31.03.2020 41.25 26.25
F.Y.  2020-21
Opening WDV as on 01.04.2020 41.25 26.25
Add: Cost of Assets acquired under the block of Intangibles NIL NIL
Less: Sale Proceeds of assets sold during the year NIL NIL
Less: WDV of Goodwill [Note 1] (28.125) (26.25)
Total Value of Block of Intangibles for depreciation 13.125 NIL
Less Depreciation @ 25% (3.281) NIL
Closing WDV as on 31.03.2021 9.844 NIL
Note 1
Cost of acquisition of Goodwill 50
Less: Depreciation allowed during F.Y. 2018-19 @ 25% (12.50)
Less: Depreciation allowed during F.Y. 2019-20 @ 25% [50-12.50] (9.375)
WDV as on 01.04.2020 28.125

7. Computation of Capital Gain in case of Slump Sale or Slump Exchange – Section 2(42C), Section 50B(2) – Applicable w.e.f. A.Y. 2021-22

  • As per Section 2(42C) [up to A.Y. 2020-21], “Slump Sale” means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.
  • Thus, slump sale is defined to mean sale of undertaking for lump sum consideration. Some high courts have taken a view that sale of undertaking by way of exchange shall not be considered as slump sale. To provide clarity on this issue and overrule decisions of such high courts, definition of slump sale under section 2(42C) has been amended via Finance Act 2021 to include all type of transfer defined under section 2(47).
  • As per Section 2(42C) w.e.f. A.Y. 2021-22, “Slump Sale” means the transfer of one or more undertakings, by any means for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.
  • Section 50B of the Act provides for computation of capital gain in case of slump sale. The existing Section 50B does not contain any provision for the computation of the full value of consideration in relation to the transfer of the undertaking under a slump sale.
  • The Finance Act, 2021 has amended Section 50B(2) to provide that the fair market value (FMV) of the capital assets (being an undertaking or division transferred by way of slump sale) as on the date of transfer shall be calculated in the prescribed manner. Such FMV shall be deemed to be full value of the consideration received or accruing as a result of transfer of such capital asset.
  • Further, a new clause in Explanation 2 has been inserted to provide that the value of capital asset being goodwill, which has not been acquired by the assessee by purchase from previous owner, shall be taken as Nil while computing net worth.

8. Taxability of Interest on Provident Fund (PF) Contribution by Employee – Section 10(11), Section 10(12) – Applicable w.e.f. A.Y. 2022-23

  • As per the existing provision, interest on the contribution made by the employees to the statutory provident fund, recognised provident fund and the public provident fund is exempt from tax.
  • As per the Finance Act, 2021 no exemption shall be available for the interest income accrued during the previous year in the recognised and statutory provident fund to the extent it relates to the contribution made by the employees over Rs. 2,50,000 [if contribution to such fund by the employer] / Rs. 5,00,000 [if no contribution to such fund by the employer] in the previous year.
  • The interest income shall be taxable under the head ‘Income from other sources’ at the slab rate applicable to the assessee.
  • Manner of calculating interest subject to tax shall be provided by the government.

9. Only resident individuals and partnership firms are allowed eligible for presumptive taxation scheme under section 44ADA – Applicable w.e.f. A.Y. 2021-22

  • Section 44ADA provides for computation of profit and gains of profession on a presumptive basis. It applies to an assessee engaged in the specified profession u/s 44AA(1) and resident in India. Under the presumptive taxation scheme, the assessee computes the taxable income on a presumptive basis if gross receipts of the profession do not exceed Rs. 50 lakhs during the year. The presumptive income shall be 50% of total receipts of the year from such a profession.
  • Upto A.Y. 2020-21, this presumptive taxation scheme was eligible to all assessee resident in India; however, from A.Y. 21-22 this presumptive taxation scheme shall be eligible only to resident individual and resident partnership firm in India. Thus, AOP, BOI, HUF, Company, LLP; etc resident in India shall be ineligible to claim presumptive taxation scheme u/s 44ADA.

10. Taxation of Unit Linked Insurance Plan (ULIP) – Section 10(10D), Section 2(14), Section 45, Section 112A – Applicable w.e.f. A.Y. 2022-23

  • ULIP is defined as the life insurance policy which includes risk cover for policyholder and investment.
  • Up to A.Y. 2021-22, amount received under the ULIP is exempt from tax, if the premium payable for any of the years during the term of the policy does not exceeds 10% of the actual sum assured [Policy issued on or after 1st April 2012; if policy is issued on or after 1st April 2003 but on or before 31st March 2012, then 20% shall be considered instead of 10%].
  • From A.Y. 2022-23, exemption u/s 10(10D) of the Act shall not be available to any ULIP issued on or after 1st February 2021 and amount of premium payable for any of the previous year during the term of such policy is more than Rs.2,50,000.
  • Further, if more than 1 ULIP is issued on or after 1st February 2021 and the aggregate amount of premium payable on those ULIPs for any of the previous year during the term of such policies does not exceeds Rs.2,50,000; then exemption shall be available for such policies u/s 10(10D) of the Act.
  • Exemption shall be available u/s 10(10D) to ULIPs even though such policies are issued on or after 1st February 2021 and if premium amount of exceeds Rs.2,50,000 for any of the previous year during the term of such policies but any amount under such policies have been received on the death of such person.
  • Amendment in section 2(14) have been made in the Finance Act, 2021 to consider ULIPs as capital asset; which are issued on or after 1st February 2021 and premium of such policies exceeds Rs.2,50,000 for any previous year during the term of such [with the exception for amount received on death]. Accordingly, capital gain shall be chargeable to tax u/s 45 of the Act on such ULIPs.
  • Capital gain on policies mentioned in the above para shall be calculated u/s 112A & long term capital gain @ 10% shall be chargeable on gain exceeding Rs.1 lakh. Definition of “equity oriented fund” u/s 112A has been amended to cover such ULIPs, if such fund invests minimum 90% (in case of investments in another fund units listed on a recognised stock exchange) or 65% (in any other case) in equity shares of a domestic company. Requirement of 90% or 65% is to be satisfied throughout the term of such policies.

11. The word “Liable to tax” has been defined – Section 2(29A) – Applicable w.e.f. A.Y. 2021-22

  • Existing section 2(29A) defining “long-term capital asset” has been renumbered as 2(29AA).
  • As per amendment in section 6 by Finance Act 2020, an Indian citizen who is not liable to tax in any other country or territory shall be deemed to be resident in India only in case where his total income “other than income from foreign sources” exceeds Rs. 15 Lakhs. In this case number of days stayed in India doesn’t matter.
  • New section 2(29A) has been inserted by Finance Act, 2021 which defines “Liable to tax”, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country.

12. Deduction of TDS (Tax deduction at source) on payment of purchase of goods – Section 194Q, Section 206AA – Applicable w.e.f. 1st July 2021

  • Who is responsible for TDS:

a. Under this section, Tax is deductible by buyer of the goods.

b. “Buyer” for this purpose, means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs. 10 crore during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

  • When Tax is to be deducted:

a. Any person being a buyer who is responsible for paying any sum to any resident seller for purchase of any goods of the value (or aggregate of such value) exceeding Rs. 50 lakh in any previous year, is required to deduct tax at source u/s 194Q w.e.f. July 1, 2021.

b. In simple word, if the following conditions are satisfied, then tax is deductible:

1. Payer is “buyer” of goods.

2. Total sales, gross receipts or turnover from the business carried on by buyer exceed Rs. 10 crore during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

3. Payment / credit is on or after July 1, 2021.

4. Payment/credit pertains to purchase of goods from seller.

5. Aggregate payment / credit during the financial year exceeds Rs. 50 lakh.

If all above conditions are satisfied, the buyer is required to deduct tax at source u/s194Q.

c. Tax should be deducted by the buyer, at the time of credit of such sum to the account of the seller in the books of accounts or at the time of payment thereof by any mode, whichever is earlier.

  • When Tax is not to be deducted:

Tax is not deductible under this section if:

1. If tax is deductible (TDS) under any other section of the Act.1 Or

2. If TCS provisions u/s 206C of the Act is applicable [except u/s 206C(1H)].2

1 If tax is deductible under any other section then tax shall be deducted under that section and not u/s 194Q, even though actually not deducted by the payer under any other section.

2 If any transaction is covered by the provisions of TCS u/s 206C [Other than section 206C(1H)], then tax shall be deductible by the seller u/s 206C and TDS u/s 194Q will not be applicable. If any transaction is covered by the provisions of TCS u/s 206C(1H) as well as by the provisions of TDS u/s 194Q; then TDS u/s 194Q shall be applicable & TCS u/s 206C(1H) shall not be applicble.

  • TDS Rate:

a. TDS rate is 0.1% of the amount paid or payable in excess of Rs. 50 lakhs.

b. If seller or the receipient does not provide valid PAN to the buyer then 5% TDS rate shall be applicable as per Section 206AA.

c. Further, if seller or the receipient provides valid PAN but has not filed Income tax returns for immediately past 2 years for which due date prescribed u/s 139(1) has expired, then also buyer need to deduct tax at source @5% u/s 206AB of the Act.

  • Examples for better understanding:
Buyer Turnover of Buyer for F.Y. 2020-21 Seller Turnover of seller for F.Y. 2020-21 Consideration for purchase of goods during the period TDS u/s 194Q by the Buyer for F.Y. 2021-22 TCS u/s 206(1H) by the Seller for F.Y. 2021-22
01.04.2021 to 30.06.2021 01.07.2021 to 31.03.2022
A 10 Crore or below U 10 Crore or below 40 lakhs 90 lakhs No TDS No TCS
B Above 10 cr V Below 10 cr 40 lakhs 90 lakhs TDS on 80 lakhs No TCS
C Above 10 cr X Above10 cr 80 lakhs 90 lakhs TDS on 90 lakhs No TCS
D Below 10 cr Y Above 10 cr 80 lakhs 90 lakhs No TDS TCS on 1.20 cr
E Below 10 cr Z Above10 cr 20 lakhs 90 lakhs No TDS TCS on 60 lakhs

13. Special provision for deduction of Tax at Source (TDS) for non-filers of Income Tax Return – Section 206AB – Applicable w.e.f. 1st July 2021

  • Section 206AA of the Act provides for higher rate of TDS for non-furnishing of PAN. It is seen that while this provision has served its purpose in ensuring obtaining and furnishing of PAN by various person, there is need to have similar provisions to ensure filing of return of income by those person who have suffered a reasonable amount of TDS/TCS. Hence, it is proposed to insert a new section 206AB in the Act as a special provision providing for higher rate for TDS for the non-filers of income-tax return.
  • Newly inserted section 206AB of the Act would apply on any sum or income or amount paid, or payable or credited, by a person (herein referred to as deductee) to a specified person.
  • For the purposes of this section “specified person” means a person who has not filed the returns of income for both of the 2 assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit of filing return of income u/s 139(1) has expired; and the aggregate of tax deducted at source (TDS) and tax collected at source (TCS) in his case is rupees fifty thousand or more in each of these two previous years.
  • The specified person shall not include a non-resident who does not have a permanent establishment in India. For the purposes of this sub-section, the expression “permanent establishment” includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.
  • This section shall not apply where the tax is required to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act. The TDS rate in this section is higher of the followings rates:

a. twice the rate specified in the relevant provision of the Act; or

b. twice the rate or rates in force; or

c. 5%

  • If the provision of section 206AA of the Act is applicable to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA of the Act.

14. Special provision for collection of Tax at Source (TCS) for non-filers of Income Tax Return – Section 206CCA – Applicable w.e.f. 1st July 2021

  • Simiilar to newly inserted section 206AB for TDS, government has introduced new section 206CCA wherein higher TCS rates are prescribed for non-filers of Income Tax return.
  • Newly inserted section 206CCA of the Act would apply on any sum or amount received by a person (herein referred to as collectee) from a specified person.
  • For the purposes of this section “specified person” means a person who has not filed the returns of income for both of the 2 assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing return of income u/s 139(1) has expired; and the aggregate of tax deducted at source (TDS) and tax collected at source (TCS) in his case is rupees fifty thousand or more in each of these two previous years.
  • The specified person shall not include a non-resident who does not have a permanent establishment in India. For the purposes of this sub-section, the expression “permanent establishment” includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.
  • The TCS rate in this section is higher of the followings rates:

a. twice the rate specified in the relevant provision of the Act; or

b. 5%

  • If the provision of section 206CC of the Act is applicable to a specified person, in addition to the provision of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC of the Act.

15. Deduction of Tax (TDS) in case of Specified Senior Citizen – Section 194P – Applicable w.e.f. A.Y. 2022-23

  • In case of a specified senior citizen, the specified Banks shall deduct tax at source based on applicable slab rates on total income of such specified senior citizen after giving effect to deduction allowable under chapter VI-A and rebate allowable u/s 87A of the Act.
  • In order to ease compliance burden on specified senior citizen pensioners who are of 75 years of age or above at any time during the previous year, it is proposed to exempt them from the requirement of filing of income tax, subject to fulfilment of certain conditions.
  • Conditions to be fulfilled for getting exempted from the requirement of filing of income tax return by the Senior citizen are:

a. Senior citizen should be a “Specified Senior Citizen” [refer definition provided below].

b. Specified Bank should have deducted tax at source (TDS) u/s 194P of the Act.

  • “specified bank” means a banking company as the Central Government may, by notification in Official Gazette, specify.
  • “specified senior citizen” means

a. An Individual resident in India. And

b. Who is of the age of 75 years or more at any time during the previous year. And

c. Who is having income in the nature of pension and interest income from any account maintained with same specified bank in which he is receiving pension income. And

d. Who does not have any income other than pension and interest income mentioned at sr. no. c above. And

e. Who has furnished a declaration to the specified bank. [Income Tax department shall prescribe such declaration in future]

16. Timely deposit of Employees’ contribution to Employees welfare funds by Due Date – Section 36, Section 43B – Applicable w.e.f. A.Y. 2021-22

  • Any amount received by the employer from his employees as contributions to any provident fund (PF) or superannuation fund or any fund set up under the provisions of the Employee’s State Insurance Act, 1948 (ESI) or any other fund for the welfare of such employees are considered as Income of the employer u/s 2(24)(x) of the Act.
  • Employer is eligible to claim deduction u/s 36(1)(va) of the Act while computing the income under the head “Profit and gains of business or profession”, if employees’ contribution is credited to the employees account on or before due date prescribed under the respective employee welfare fund laws.
  • Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer’s contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer’s contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income u/s 139(1) of the Act, assessee would be entitled to deduction u/s 43B and such deduction would be admissible for the accounting year.
  • There are various divergent judicial rulings on the deductibility u/s 43B in respect of employee’s contribution paid after due date under respective laws but before due date of filing of return of Income.
  • In order to provide certainty, provision of section 36(1)(va) has been modified to include explanation that provision of section 43B shall not apply for the purposes of determining the due date under this clause.
  • Further, provision of section 43B has been modified to include explanation that provision of section 43B shall not apply to a sum received by the assessee from his employees to which the provisions of Section 2(24)(x) applies.

Author Bio

Qualification: CA in Practice
Company: Sanjay Rane and Associates
Location: Mumbai, Maharashtra, India
Member Since: 05 Aug 2018 | Total Posts: 1
Practicing Chartered Accountant, specialization in Income Tax (International Taxation, Domestic Income Tax). Currently, associated as partner with the chartered accountants firm, M/s Sanjay Rane & Associates based in Mumbai. https://ssraneandco.com/ View Full Profile

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