International Tax Panorama

Finance Minister Nirmala Sitharaman presented Union Budget 2021-22 today. Below are some of the key highlights of the budget, which are as follows:

• No general increase in tax rates or tax incidence

Going against the expectations of salaried class, Finance Minister Nirmala Sitharaman did not announce any major alteration in personal taxation in Budget 2021 . There were no changes in income tax slabs, PPF limit, Section 80C exemption

• ‘Faceless Dispute resolution scheme to reduce small taxpayers’ compliance’

Anyone with a taxable income up to Rs 50 Lakhs and disputed income up to Rs 10 Lakhs will be eligible to approach the committee.

• Tax treatment of Provident Fund and unit linked insurance plan (ULIP)

The Union Budget 2021 has restricted the tax-free return on investment in unit linked insurance plan (ULIP) and provident fund at Rs 2.50 lakh each. 

• Relaxation for Non-resident Indians (NRI)

Relaxation to NRI for Income of Retirement Benefit Account

NRIs can now set One Person Companies (OPC)

Tax audit limit for NRI has been increased from 5 crore to 10 crore 

• Relief to homebuyers

Affordable house buyers get more time to avail additional tax benefits. In a boost for homebuyers, FM announced extending the additional relief of Rs 1.5 lakh for home loans for affordable housing.

Now, the additional Rs 1.5 lakh relief on home loans for affordable housing has been extended for loans taken till March 31, 2022.

• No tax burden on senior citizens above 75

The Finance Minister gave some relief to senior citizens. Senior citizens of 75 years and above who only have pension and interest income will not be required to file returns.

In order to provide relief to senior citizens who are of the age of 75 years or above and to reduce compliance for them, it is proposed to insert a new section to provide a relaxation from filing the return of income,” she said. This relief is subject to the following conditions being met:

1. The senior citizen is resident in India and of the age of 75 or more during the previous year

2. He/she has pension income and no other income. However, in addition to such pension income he may have also have interest income from the same bank in which he is receiving his pension income;

3. This bank is a specified bank. The Government will be notifying a few banks, which are banking company, to be the specified bank; and

4. He/she shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed.

• No Covid tax, surcharges on income tax

On the plus side no cess was announced for higher income tax payers in the COVID era.

• Taxation for startups:

Eligibility for claiming tax holiday, capital gains exemption extended till Mar 2022

• GST: Inverted duty structures to be reduced

• Income tax return (ITR) filing made easy:

Interest income, Capital gains from securities to be pre-filled

• Reduction of time in income tax proceedings proposed

Income tax assessment could earlier be reopened up to 6 years. This time limit has now been reduced to 3 years. In serious tax evasion cases as well, only where Rs 50 lakh or more has been concealed, the assessment can be reopened up to 10 years and that too after the consent of Principal Chief Commissioner.

• No Tax deductible at source on Dividend Payment to REIT, InvIT 

In order to provide ease of compliance, the budget 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 was proposed that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for Foreign Portfolio Investors, the budget has proposed deduction of tax on dividend income at lower treaty rate.”

• Debt financing of InvITs and REITs

Debt financing of InvITs and REITs by FPIs will be allowed by making relevant changes in law and monetising operating public infrastructure assets will be key in the coming financial year.

a new bill to develop a new development financial institution (DFI) with an aim to create a lending portfolio for domestic financial institutions within three years.

• Treatment of Public Sector Banks

Finance Minister Nirmala Sitharaman announced capital infusion of ₹20,000 crore into public sector banks in order to meet the regulatory norms.

• Investor Charter

Investor Charter proposed for all types of investment products

• More Foreign direct investment in insurance.

The Finance Minister proposed increasing Foreign Direct Investment (FDI) limit in the insurance sector increase to 74% from 49%. The government has allowed foreign ownership in insurance with safeguards

• Depositors insurance limit to be increased to Rs 5 lakh

The Finance Minister said that the provision will be streamlined so that troubled bank depositors can get access to their deposits to the extent of their deposits.

• Increased spending on Health Sector

FM proposed an allocation of Rs 2.23 lakh crore for healthcare expenditure including a new central scheme ‘PM Swasth Bharat Yojana‘ with an outlay of Rs Rs 64,180 crore. FM Sitharaman said an amount of Rs 35,000 crore will be spent on Covid-19 vaccines as part of the government’s healthcare spending.    

• Agriculture Infrastructure and Development Cess (AIDC)

FM Sitharaman proposed an Agriculture Infrastructure and Development Cess (AIDC) of Rs 2.5 per litre on petrol and Rs 4 per litre on diesel. However, the FM said that due diligence was done not to burden consumers with extra costs. 

• Defence budget stands at Rs 4.78 lakh crore, sees 19% hike

• Import duty on gold, silver cut from 12.5% to 7.5%

• Social security benefits extension

Social security benefits will be extended to gig and platform workers. Minimum wages will apply to all categories of workers.

• Rs 1,10,055 crores allocated to Indian Railways

• Reduced deadline for Income tax return filling

The Union Budget 2021-22 has proposed to reduce the deadline for filing belated, revised income tax return (ITR) by three months from March 31 to December 31 of the Assessment year.