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Budget 2021 – All You Need To Know

While the economy is recovering from the recession, the finance minister i.e., Nirmala Sitharaman has presented the Union Budget 2021. Discussing all the sectors on an individual basis, let’s start with changes in tax laws. 

INCOME TAX

  1. The tax slab remains unchanged although there are some changes in ITR filing provisions and tax audit limit.
  2. Under section 44AB of Income Tax Act 1961, the turnover limit for Tax Audit has been increased from Rs. 5 crores to Rs. 10 crores in the proportion of non-cash transactions is at least 95% of the total transactions made during the year.
  3. No requirement to file ITR for the senior citizens whose total income comprises only of pension and interest on investment.
  4. Several changes have been seen in the provisions regarding the opening of assessment.
    • In cases of normal tax evasion, the time regarding the reopening of assessment has been reduced from 6 years to 3 years.
    • In cases of serious tax evasion, the time for which assessment of such cases can be reopened till 10 years with a condition that the concealment of income should be more than Rs. 50 lakhs.
  5. Advance tax liability on dividend income shall be considered while calculating the amount of advance tax at the earliest of the following two events:
    • Declaration of dividend
    • Payment of dividend
  6. Deduction under section 80EEA is to be extended up to 31st March 2022 in respect of interest paid on home loans for affordable housing.
  7. Affordable housing projects are allowed to avail tax holidays up to 31st March 2022.
  8. Deduction under section 80-IAC is to be extended up to 31st March 2021 in respect of profits and gains earned from eligible business by an eligible start-up for 3 consecutive AYs out of 10 years at the option of assessee.
  9. If amount of provident fund was deducted but not yet deposited by the employer, it will not be allowed as a deduction to the employer.
  10. Tax incentives for IFSC and tax holidays for aircraft leasing and rental companies will be provided.
  11. A committee i.e., a Faceless dispute resolution committee, and a mechanism are set up to reduce the litigations for small taxpayers i.e., taxpayers with taxable income up to Rs. 50 lakh and disputed income of Rs.10 lakh.
  12. It has been announced that a faceless Income Tax Appellate Tribunal (ITAT) should be set up to provide for online resolution.

INDIRECT TAXATION

Custom Duty

  1. A review of 400 exemptions has been taken place through extensive consultations to revise the custom duty structure.
  2. Rationalization of customs duty has been made on copper, textile, gold, and silver.
  3. The rate of customs duty has been raised from 5% to 20% in the case of solar inverters and from 5% to 15% in the case of solar lanterns.
  4. It has been announced that there no exemption on leather to promote the competitiveness of domestic companies.
  5. “Turant customs” has been proposed to take an initiative for faceless, paperless, and contactless customs measures.

Goods and Services Tax (GST)

GST Audit scrapped as Finance Budget 2021 omits section 35(5) from GST Act. It has the following effects:

  1. No need to file GSTR-9C
  2. No need of GST Audit by CA/CMA for the business having aggregate turnover above Rs. 5 crores.

COMPANY LAW

  1. Decriminalization of Companies act, 2013 is complete and decriminalization of LLP act, 2008 will be in force.
  2. The definition of small companies has been changed. As per the new definition, small companies are those companies whose:
    • paid-up capital does not exceed Rs. 2 crores and
    • turnover does not exceed Rs. 20 crores.
  3. OPC can be incorporated without any limit on turnover or paid-up capital for start-ups and innovators. Now, Non -resident Indians are also allowed to incorporate OPC in India.
  4. Introduction of additional modules for e-scrutiny and e-adjudication for Ministry o corporate affairs.
  5. A special framework for MSMEs has been framed.
  6. New Asset Reconstruction Company is to be set up to provide resolution to the stressed assets in PSUs.
  7. Amendment of Insurance Act to introduce additional Foreign Direct investment to insurance companies from 49% to 74%.
  8. Amendment in DICGC Act,1961 so that depositors of the bank can get easy access to deposits in case of a stressed bank through insurance.
  9. SEBI will be notified for regulation of setting up and arrangement of commodity market system.

Get to know more about Budget 2021 on TaxonTrack

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