BUDGET 2021 - INCOME TAX FOR FY-2021-22 AND FILING RETURNS FOR FY 2020-21

I-TAX 2021 & 2022

BUDGET 2021 - INCOME TAX FOR FY-2021-22 AND FILING RETURNS FOR FY 2020-21

  There is no change either in Income tax slabs or the Tax Rate to what has been for the previous year ie FY - 2020-21. As such, it is necessary to refresh the slabs and the rates of the previous year and the Regimes,  Old Vs the New Regime. We are pleased to include the same in this post.

  There is only one change in the Budget 2021 that Assesses above 75 Years of age who have no other income than their Pension and Bank Interests have been exempted to file their income tax returns subject to few conditions. In their case the bank will work out the tax liability based on the pension and the Interest from FDs etc and deduct the tax as per slabs and submit the same to the IT Dept. The details of various terms and conditions  for Senior Citizen above 75 yrs of age to enjoy the exemption in filing ITRs are given at the end of this post.

  In addition to the above the dividents received on equity shares will be taxed as normal income. Few other changes in Resident new status and subscription to EPF do not effect us as such not being elaborated in this post.

  

  The senior assesses of 75 years and above  will have to file a declaration to the specified bank.  One who does not meet the conditions, will be required to file the return as hither to fore. It is estimated that a large number of pensioners will be benefitted who just have only one bank account in the specified bank.

   We hope that family pensioners will also be covered under this scheme. The doubt has arisen since Family Pension is considered under the IT Act as Income from other sources. 

   In view of the above we are of the opinion that we as Veterans (Officers) will need to file our returns either under the old regime or the new regime as per the most beneficial option to be arrived at as stated in the Worked Out Example in the succeeding paragraphs.

Readers are advised to read more details given in our previous post on the subject by clicking on the following link.

  https://signals-parivaar.blogspot.com/2019/07/i-tax-2020.html

BUDGET - 2020   -  SINCE VALID FOR FY 2021-22 AS WELL

New Income Tax Regime – Structural Shift in Taxation of Income - wef  FY 2020-21 (2021)

Budget 2020 became  unique in many ways with special reference to Income Tax slabs.  Honourable Finance Minister (FM) Nirmala Sitaraman in her budget 2020 had added a new taxation regime below non-public taxation. Instead of giving remedy to all of the Individual & HUF by means of increasing the tax slabs directly, Budget 2020  proposed to introduce new segment 115BAC within the Income Tax Act 1961 in which Individuals or HUF were given an option to give up numerous exemptions and get gain of lower tax prices. Following is the evaluation of the existing tax changes and the new tax slabs.

The new tax regime is however optional for the assesses. Individuals or HUF can pick to preserve to pay tax underneath the antique taxation device or the New regime. However new taxation regime comes with few caveats that are as under:

• Assessee shall must forgo plethora of deductions and exemptions granted underneath Income Tax Act 1961.

 * Salaried Assessees shall no longer be entitled to the following exemptions/ deductions as under:   

• Leave Travel Concession as contained in clause (5) of phase10;
• House hire allowance as contained in clause (13A) of phase 10;
• Some of the allowance as contained in clause (14) of section 10;
• Allowances to MPs/MLAs as contained in clause (17) of phase 10;
• Standard deduction, deduction for entertainment allowance and employment/expert tax as contained in segment 16;
• free food and beverage thru vouchers provided to the worker as notified in section 10(14).

* Deduction of Rs 15000 for Family pensioners.

    As far as we the veterans are concerned we generally claim deductions under 80-C i.e contribution to PPF upto Rs 1.5 Lakh and the like, Standard deduction of Rs 50000/- Deduction of Rs 50000/- on the interest earned from FDs (Not applicable to persons below 60 yrs of age) etc and Rs 10000/- from saving bank interest (Not applicable to Sr Ctz). This generally makes to a deduction of Rs 2.5 Lakh. 

Let us examine our options of Old or the New regime for n Income of 18 Lakh.

1. New regime - Here no deductions except NPS receipts, LTC, Education loan payment, Gratuity Leave encashment and other terminal benefits are permitted, in addition the benefit of higher slabs for Sr Ctz and VSC are also not permitted under this regime. Hence Rs 18 L is your Taxable income for all categories.

The tax works out as under for non-sr ctz:-

    a. 2.5 to 5 Lakh  =  12500/-    5% 

    b. 05 to 7.5 L     =  25000/-   10%
    c. 7.5 to 10 L     =  37500/-   15%

    d. 10 to 12.5 L   =  50000/-   20%

    e. 12.5 to 15 L   =  62500/-   25%

     f. 15 L to 18 L   =  90000/-   30%

                  TOTAL =    277500/-

    

     Note - Under the New Regime the Sr ctz concession of higher bracket of 3 Lakh & 5Lakh is not be available.

2.  Old Regime :- Deduction of Rs 250000 allowed and taken as such Taxable Income will be 18 Lakh minus 2.5 L = 15.5L as hither to fore..

The tax works out as under:-

   a.  2.5 to 5 L     =  12500/-  5%  (SrCTZ >60 it is Rs 10000/-)

   b.  5  to 10 L     = 100000/- 20%

   c.  10 to 15.5 L  = 165000/- 30%

                  TOTAL  =  277500 

        NOTE ;- The above figure of 277500 is for assessees under 60 Yrs of Age on 01 Apr, it will be Rs 2500 less  i.e. 275000/- for Sr Ctz above 60 and below 80 Yrs)

       Hence there is no difference in New or Old regime for assessees below 60 yrs of age in case your deductions are Rs 2.5 lakhs - one can take new or the old regime, However in case of Sr ctz it will be around 2.4 lakhs as explained in the article linked to this post.

       HOWEVER IN CASE DEDUCTIONS ALLOWED ARE MORE THAN 250000/- THEN OLD REGIME WILL BE MORE BENEFICIAL 

    You Can work out the taxes with 3 L deductions to see it for yourselves. Hence this be taken as a thumb Rule in opting for your choice of old or the New regime. Do verify by using the tool being provided to you in this post whish calculates your basic tax under both Regimes and recommends you the choice to be taken

       

    IF DEDUCTIONS ARE LESS THAN 2.5 LAKH THEN NEW REGIME IS BETTER.

  NOTE :: READY RECKONER , TAX CALCULATOR  CUM OPTION SELECTION TOOL:- 

     To help our readers to exercise their choice we ARE VERY HAPPY TO PROVIDE a Tax Calculator cum Option Selector TOOL below to calculate and compare the BASIC TAX under the old and new regimes and show the more beneficial option. 

    The tool has been extensively tested by us and made available to our readers working right here on the web page as under:-

            NOTE  ---    IN THIS TOOL YOU NEED TO FILL UP ONLY IN TWO CELLS I.E. TOTAL INCOME FROM ALL SOURCES AND AUTHORISED DEDUCTIONS UNDER THE OLD REGIME, ALL OTHER DETAILS WILL COME UP AUTOMATICALLY

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 Even though there are few deductions are also allowed under the New Regime but for Veterans this figure will generally be zero. After entering the figures simply press enter the results will flash out for all the three category  of assessees with recommended Option.

   In case there has been a mistake in the entry of figures and you are not able to correct it restart the web page by clicking the URL address on top of this page.

   NOTE - We will welcome any suggestions or corrections should you face any in this tool.

     There are also few changes in the Income Tax which one will pay next year on the PF contribution and Capital Gains, which do not affect the majority of the Veterans as such not included in this post.

      Col Ashok Malhotra has contributed a detailed write up on various provisions as applicable for Fin Yrs 2020-21 for which we all shall be filing the ITRs in Jul /Aug 2021. This is a very comprehensive document uploaded in this site and is available here to our readers to read or download, Please click on the link below:-

                           

**LINK- DOWNLOAD / OPEN THE ARTICLE** 

      

Exemptions / Deductions not allowed when reduced tax structure under New Tax Regime is opted.

1. Standard Deduction of Rs. 50,000 available in respect of Salaried Employees and Pensioners under Section 17(2) of Income Tax Act.

2. Deductions under Chapter VIA such as Section 80C (GPF, NPS contribution by Employee, life insurance Premium, Home Loan Principal etc), 80CCD(1B) (exemption for additional contribution to NPS by employee), Section 80 D (Health insurance Premium) 80DD (exemption for expenditure towards differently abled dependent), 80DDB (Exemption for medial expenditure), 80E (Interest on Higher Education Loan), 80G (Donation) etc.

3. House Rent Allowance under Section 10 (13A)

4. HBA (Housing Loan) Interest under Section 24b

5. Leave Travel Concession (LTC) under Section 10 (5)

6. Allowances under Section 10(14)

7. Professional Tax under Section 16.

8.  Deduction of rs 15K allowed to Family Pensioners.

Following exemptions are allowed even if reduced income tax structure under new tax regime is opted.

1. Rebate of Tax up to Rs. 12,500/- under Section 87A in the case of taxable income is less than Rs. 5 Lakh, it means No tax for taxable income below 5 Lakh.

2. Contribution to NPS by the Employer under Section 80CCD(2)

3. Education loan repayment.

4. LTC

5. Terminal benefits on retirement like gratuity, leave encashment, commutation of pension etc

When a Salaried Employee / Pensioner can be benefited while opting for New Tax Regime?

Though new tax regime under Section 115 BAC disallows many income tax exemptions / deductions it may still be beneficial to salaried employees who need to pay tax in higher tax bracket (viz., 30%) for considerable quantum of their taxable income and do not claim major income tax exemptions / deductions such as Section 24 (Housing loan interest), Chapter VIA deductions, HRA exemption under Section 10 etc. This has been explained as above.

In addition to the above there few more points which should be known by the Veterans on "Tax on Rental Income  & Applicable Deductions" --- 

1.Under what head is rental income taxed? ---The rental income from a property is taxed  in the hands of the owner, under the  Sec  24 head ‘income from house property’. However, the rent earned by letting out vacant land is not taxed under this category, but is taxed under “income from other sources”

2.What types of properties attract tax on rental income? --Tax is applicable on rental income earned from residential houses, commercial properties, factory buildings and even the land appurtenant to the building.

3.What is the annual value of a property?-The annual value of a property is deemed to be the higher of: (a) The actual rent received for the property or (b) The reasonable amount that property can fetch, if it is let out.

4.What are the tax deductions available on rental income?--From the rental income, a property owner is allowed to deduct municipal taxes on the property, rent that is not realised, a 30% standard deduction ,  irrespective of whether you have actually incurred any expenditure for repairs or renovation for the property, during the year under review on the annual value of the property. In case you have borrowed any money for the purpose of purchase, construction, repair/renovation of the property, you are also allowed to claim deduction for the interest payable on money so borrowed. The money can be borrowed from any person and not necessarily as a home loan. Presently, there is no restriction on the amount of interest, which you can claim against your rental income.   However there is a ceiling of Rs two lakhs, for loss under the head ‘Income from house property’, which can be set off against your other income, likes salary, business income or capital gains. Any loss under this head, beyond Rs two lakhs, is allowed to be carried forward for set off, during eight subsequent years. This provision adversely affects people who borrow money to buy a property and let it out, as rental values are generally around three to four per cent of the capital value, whereas the rate of interest on such loans is around nine per cent. As home loans are usually taken for longer periods, the situation of loss under this head, will normally continue for longer periods and the excess interest beyond Rs two lakhs will, effectively, be lost forever.

What are the tax exemptions available on capital gains earned from joint property?

In the case of long-term capital gains on sale of the jointly owned property, whether commercial or residential, each one of the co-owner shall be entitled to claim an exemption under Section 54EC, by investing the indexed capital gains up to Rs 50 lakhs.

NOTE:- EXERCISING OPTIONS ON OLD AND NEW REGIMES.

      Taxpayers who are willing to opt for New Tax Regime are required to intimate Pay/Pension  Drawing Authority prior to the close of the Financial year, say by Jan latest. This option can be exercised by salaried persons incl pensioners to opt for a particular option prior to filing their returns. However for business assessees the option can only be exercised once in life time. 

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OLD REGIME - INCOME TAX SLABS

 

SENIOR CITIZENS ABOVE 75 YRS OF AGE - ITR FILING

    Budget 2021 proposes to exempt senior citizens who are 75 years or above and have only pension and interest income in a financial year, from filing income tax returns. As per the Budget 2021 proposals, they will not be required to file income tax returns (ITR) anymore. The bank paying income to them will deduct the necessary tax from their bank account.

As per the explanatory memorandum, such benefit will be available only if the following conditions are satisfied:-

(i) The senior citizen is resident in India and of the age of 75 or more during the previous year; (Not open for NRIs)

(ii) He 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;

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

(iv) He 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.

Once the declaration is furnished, the specified bank would be required to compute the income of such senior citizen after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A of the Act, for the relevant assessment year and deduct income tax on the basis of rates in force. Once this is done, there will not be any requirement of furnishing return of income by such senior citizen for this assessment year. This amendment will take effect from 1st April 2021.

Following has come after Budget 2018 

During Budget presentations in 2018 the Finance Minister had announced several tax law changes to provide more tax benefits to senior citizens. These include tax benefits such as introduction of a new section 80TTB in the Income Tax Act, 1961, deduction for medical expenditure in case of no health insurance coverage etc.

Shalini Jain, Tax Partner – People Advisory Services, EY India says, "In view to ease the compliance burden for our elderly, the government has done away with the requirement of filing tax returns for senior citizens of age 75 years or above subject to satisfaction of conditions."

Under section 80TTB, seniors can claim up to Rs 50,000 interest income received from banks and post offices as a deduction from their income thereby making this type of interest income for senior citizens effectively tax exempt up to Rs 50,000.

Earlier, senior citizens were entitled to similar tax-exemption for interest income from bank and post office savings accounts but only up to Rs 10,000 under section 80TTA. The Rs 50,000 deduction was the biggest tax relief announced in Budget 2018 for most senior citizens as they earn most of their income through interest from bank FDs and post office schemes. TDS limit for bank fixed deposit interest was also hiked simultaneously for senior citizens.

Along with that, Budget 2018 increased the limit on health insurance premiums paid that can be claimed as a deduction from income from Rs 30,000 to Rs 50,000 for senior citizens. Additionally, if a senior citizen does not have a medical insurance policy and has incurred medical expenditure during the financial year, then also he/she can claim deduction of up to Rs 50,000 for such expenses under section 80D of the Income Tax Act.

Earlier, a deduction for medical expenditure up to Rs 30,000 was allowed for super senior citizens aged 80 years and above if they were not covered by any medical insurance policy.

For senior citizens suffering from certain critical illnesses, as specified in Rule 11DD of the income tax rules, that are covered under section 80DDB of the Act, deduction limit was raised to Rs 1 lakh for all senior citizens, from the earlier Rs 60,000 (in case of senior citizens) and Rs 80,000 (in case of very senior citizens).

The government has also extended the deadline by which seniors can invest in Pradhan Mantri Vaya Vandana Yojana (PMVVY) to March 31, 2023. The maximum amount that can now be invested in the scheme is Rs 15 lakh from the previous limit of Rs 7.5 lakh as announced in Budget 2018.

            PMVVY --     

NOTE  -  FOR MORE DETAILS MUST READ OUR PREVIOUS POSTS ON INCOME TAX.

    https://signals-parivaar.blogspot.com/2019/07/i-tax-2020.html

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