1. Capping of PF contribution limit to 2.50 lacs

Instances have come to the notice where some employees are contributing huge amounts to these funds and entire interest accrued/received on such contributions is exempt from tax under clause (11) and clause (12) of section 10 of the Act. This exemption without any threshold benefits only those who can contribute a large amount to these funds as their share.

Accordingly, it is proposed to insert proviso to clause(11) and clause (12) of section 10 of the Act, providing that the provisions of these clauses shall not apply to the interest income accrued during the previous year in the account of the person to the extent it relates to the amount or the aggregate of amounts of contribution made by the person exceeding Rs 250000/- in a previous year in that fund, on or after 1st April, 2021, computed in such manner as may be prescribed.

2. 206C(1H) tcs deduction

– 0.1% TDS on purchase of goods; 5% if PAN not provided

If on a transaction a TDS or tax collection at source (TCS) is required to be carried out under any other provision, then it would not be subjected to TDS under this section. There is one exception to this general rule. If on a transaction TCS is required under sub-section (1H) of section 206C as well as TDS under this section, then on that transaction only TDS under this section shall be carried out.

3. Imposing Penalty under Sec 271AAD

it is proposed to amend the provision of section 281B of the Act to enable the Assessing Officer to exercise the powers under this section during the pendency of proceedings for imposition of penalty under section 271AAD of the Act, if the amount or aggregate of amounts of penalty imposable is likely to exceed Rs two crore.

4. To amend the proviso of section 191 of the Finance Act, 2016, so as to provide that the excess amount of tax, surcharge or penalty paid in pursuance of a declaration made under the Scheme shall be refundable to the specified class of persons without payment of any interest.

5. Income Tax Settlement Commission shall cease to operate on or after 1st February, 2021

No application under section 245C of the Act for settlement of cases shall be made on or after 1st February, 2021;

All applications that were filed under section 245C of the Act and not declared invalid under sub-section (2C) of section 245D of the Act and in respect of which no order under section 245D(4) of the Act was issued on or before the 31st January, 2021 shall be treated as pending applications

6. The proposed Section 206CCA would apply onto any amount received by a collectee from a specified person. The proposed TCS rate in this section is higher of the following rates –

(1) twice the rate specified in the relevant provision of the Act; or

(2) at the rate of 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. The specified person is a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years which are immediately before the previous year in which tax is required to be deducted or collected, as the case may be.

7. The Budget proposes to notify rules for removing the hardship of Non-Resident Indians returning to India, on the issue of their accrued incomes in their foreign retirement account. It proposes to make dividend payment to REIT/InvIT exempt from TDS.  For Foreign Portfolio Investors, the Budget proposes deduction of tax on dividend income at lower treaty rate.  The Budget provides that advanced tax liability on dividend income shall arise only after the declaration or payment of dividend.

8. Senior citizens above 75 years having only pension and interest income, will be exempted from filing their income tax return.  The paying Bank will deduct the necessary tax on their income.

9. Extension of the Capital Gains exemption for investment in start ups by one more year till 31 st March, 2022.

10. The Budget proposes to make notified infrastructure debt funds eligible to raise funds by issuing tax efficient zero coupon bonds.

11. The Budget proposes more tax incentives which include tax holiday for Capital gains from incomes of aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors, tax incentives for relocating foreign funds in the IFSC and to allow tax exemption to the investment division of foreign banks located in IFSC.

12. The Budget proposes to increase the limit on annual receipts for small charitable trusts running educational institutions and hospitals from present Rs.1 Crore to Rs. 5 Crore for non-applicability of various compliances

13. In search, survey or requisition cases initiated or made or conducted, on or after April 01, 2021, it shall be deemed that the Assessing officer has information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated

14. New Section 148A of the Act proposes that before issuance of notice the Assessing Officer shall conduct enquiries, if required, and provide an opportunity of being heard to the assessee. After considering his reply, the Assessing Office shall decide, by passing an order, whether it is a fit case for issue of notice under section 148 and serve a copy of such order along with such notice on the assessee

15. Sec 43CA safe harbour rules cap to 20% for first allotment, maximum 2 crores. The transfer takes place from 12th November 2020 to 30th June 2021

16. MAT adjustments to exclude previous year income and dividends

17. Filing of belated or revised ITr time reduced. Period of filing Belated / Revised returns reduced from 12 to 9 months or before the completion of assessment, whichever is earlier.

18. Sec 43B clarifications on employers contributions only.

Employee contribution shall not be allowed as deduction unless it is allowed under respective Act only and treated as income under 2(24)(x) and is applicable retrospectively.

19. Goodwill not to be a depreciable asset. Acquisition or purchase of goodwill used to be the cost of the asset but depreciation is not eligible.

20. Sec 10(10)(D) – Amount paid for ulip exceeds 2.50 lacs in any previous year, then the maturity amount will not be exempt.

If there are two ULIPs, then cumulative amount to be seen. ULIPs to be considered as capital asset now and maturity amount to be capital gain minus the cost of acquisition.

Proviso 5,6,7,8

Sec 45(1B) inserted to consider as capital asset.

This is applicable for all the policies issued from 01-04-2021

It will be taxable at 10% under section 112A as equity oriented funds

21. 44ADA specifically excluded LLP now. LLP are supposed to maintain books of accounts.

22. Affordable housing interest on housing loan deduction of 1.50 lacs extended by one year to 31st march 2022

23. Substituted 45(4) 45(4A) – no more capital excess withdrawal

24. No change in tax slabs, no change in Chap VI-A

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February 2021