Like every year, we are presenting the summarized budget on the very same day.
The Union Budget 2021 has been divided as below:
- Provisions applicable to Individual / HUF / Small Tax Payers
- Provisions related to Filing of Return / Tax Audit etc.
- Provisions related to Appeal / Assessment / Penalty / Survey etc.
- Provisions related to TDS / TCS
- Provisions related to Real Estate Sector (Relevant for Seller as well as for Buyer)
- Other Changes related to Income Tax.
- Changes in GST.
Provisions applicable to Individual / HUF
Exemption for LTC Cash Scheme Under the existing provisions of the Act, clause (5) of section 10 of the Act provides for exemption in respect of the value of travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding on leave to any place in India.
In view of the situation arising out of outbreak of COVID pandemic, it is proposed to provide tax exemption to cash allowance in lieu of LTC.
The conditions for this purpose shall be prescribed in the Income-tax Rules in due course and shall, inter alia, be as under:
(a) The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21;
(b) specified expenditure means expenditure incurred by an individual or a member of his family during the specified period on goods or services which are liable to tax at an aggregate rate of twelve per cent or above under various GST laws and goods are purchased or services procured from GST registered vendors/service providers;
(c) specified period‖ means the period commencing from 12th day of October, 2020 and ending on 31st day of March, 2021;
(d) the amount of exemption shall not exceed thirty-six thousand rupees per person or one-third of specified expenditure, whichever is less;
(e) the payment to GST registered vendor/service provider is made by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under Rule 6ABBA and tax invoice is obtained from such vendor/service provider;
(f) If the amount received by, or due to an individual as per the terms of his employment, from his employer in relation to himself and his family, for the LTC is more than what is allowable to such person under the above discussed provisions, the exemption under the proposed amendment would be available only to the extent of exemption admissible under above listed provisions.
However, it is to be noted that it is applicable for A Y 2021-22 only as it is brought in force due to Covid 19 pandemic only.
Extension of date of sanction of loan for affordable residential house property
The existing provision of the section 80EEA of the Act, inter alia, provides a deduction in respect of interest on loan taken for a residential house property from any financial institution up to one lakh fifty-thousand rupees subject to the condition that the loan has been sanctioned during the period beginning on 1st April, 2019 and ending on 31st March, 2021.
There are further conditions that the stamp duty value of residential house property does not exceed forty-five lakh rupees and the assessee does not own any residential house property on the date of sanction of loan.
This provision allows deduction to the first time home buyers, in respect of interest on home loan.
In order to help such first time home buyers further, it is proposed to amend the provision of section 80EEA of the Act to extend the outer date for sanction of loan from 31st March 2021 to 31st March 2022.
Advance tax instalment for dividend income
No Interest under section 234C shall be charged provided the assessee has paid full tax in subsequent advance tax instalments.
These exclusions are: –
(a) the amount of capital gains; or
(b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2; or
(c) income under the head “Profits and gains of business or profession” in cases where the income accrues or arises under the said head for the first time; or
(d) income of the nature referred to in sub-section (1) of section 115BBDA.
It is proposed to include dividend income in the above exclusion but not deemed dividend as per sub-clause (e) of clause (22) of section 2 of the Act
Payment by employer of employee contribution to a fund on or before due date
Employee‘s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Therefore, provisions of Section 43B are not applicable and thereby employer will not get deduction of the amount paid after the due date of deposit even if it is deposited within the due date of filing income tax return.
5. Constitution of Dispute Resolution Committee for small and medium taxpayers
Only those disputes where the returned income is fifty lakh rupee or less (if there is a return) and the aggregate amount of variation proposed in specified order is ten lakh rupees or less shall be eligible to be considered by the DRC.
Provisions related to Filing of Return / Tax Audit etc.
Relaxation for certain category of senior citizen from filing return of income-tax
Relaxation on fulfilment of below conditions.
- The senior citizen is resident in India and of the age of 75 or more during the previous year;
- (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;
- This bank is a specified bank. The Government will be notifying a few banks, which are banking company, to be the specified bank; and
- 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.
Rationalisation of provisions relating to tax audit in certain cases
Under section 44AB of the Act, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds one crore rupees in any previous year.
In case of a person carrying on profession he is required to get his accounts audited, if his gross receipt in profession exceeds, fifty lakh rupees in any previous year.
In order to reduce compliance burden on small and medium enterprises, through Finance Act 2020, the threshold limit for a person carrying on business was increased from one crore rupees to five crore rupees in cases where,-
- aggregate of all receipts in cash during the previous year does not exceed five per cent of such receipt; and
- aggregate of all payments in cash during the previous year does not exceed five per cent of such payment.
It is proposed to increase the threshold from five crore rupees to ten crore rupees in cases listed above.
Provisions related to Appeal / Assessment / Penalty / Survey etc.
Extending due date for filing return of income in some cases, reducing time to file belated return and to revise original return and also to remove difficulty in cases of defective returns
It is proposed that the due date for the filing of original return of income be extended to 31st October of the assessment year in case of spouse of a partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force, if the provisions of section 5A applies to them
Section 5A of the Act provides for taxation of spouses governed by Portuguese Civil Code. On account of this provision any income earned by a partner of a firm whose accounts are required to be audited shall be apportioned between the spouses and included in their total income, if the section 5A applies to them.
If Section 92E of the Act is applicable then 30th November
Reduction in time for filing revised / belated return of income:
It is proposed that the last date for filing of belated or revised returns of income, as the case may be, be reduced by three months. Thus the belated return or revised return could now be filed three months before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
2. Constitution of the Board for Advance Ruling
The Authority for Advance Rulings shall cease to operate with effect from such date, as may be notified by the Central Government in the Official Gazette
It is proposed that the Central Government shall constitute one or more Board for Advance Rulings for giving advance rulings under the said Chapter on and after the notified date.
Every such Board shall consist of two members, each being an officer not below the rank of Chief Commissioner.
Advance rulings of such Board shall not be binding on the applicant or the Department and if aggrieved, the applicant or the Department may appeal against the ruling or order passed by the Board before the High Court.
3. Income escaping assessment and search assessments
The Bill proposes a completely new procedure of assessment of such cases. It is expected that the new system would result in less litigation and would provide ease of doing business to taxpayers as there is a reduction in time limit by which a notice for assessment or reassessment or re-computation can be issued.
4. Allowing prescribed authority to issue notice under clause (i) of sub-section (1) of section 142
Section 142 of the Act provides for conduct of inquiry before assessment. Clause (i) of sub section (1) of the said section gives the Assessing Officer the authority to issue notice to an assessee, who has not submitted a return of income, asking for submission of return.
However, this power can be currently invoked only by the Assessing Officer. The Central Government is following a conscious policy of making all the processes under the Act, where physical interface with the assessee is required, fully faceless by eliminating person to person interface between the taxpayer and the Department.
5. Provision for Faceless Proceedings before the Income-tax Appellate Tribunal (ITAT) in a jurisdiction less manner
In order to impart greater efficiency, transparency and accountability to the assessment process, appeal process and penalty process under the Act a new faceless assessment scheme, faceless appeal scheme and faceless penalty scheme have already been introduced.
In order to ensure that the reforms initiated by the Department to reduce human interface from the system reaches the next level, it is imperative that a faceless scheme be launched for ITAT proceedings on the same line as faceless appeal scheme
6. Discontinuance of Income-tax Settlement Commission
It is proposed to discontinue Income-tax Settlement Commission (ITSC) and to constitute Interim Board of settlement for pending cases.
7. Reduction of time limit for completing assessment
Section 153 of the Act contains provisions in respect of time-limit for completion of assessment, reassessment and re-computation under the Act.
The time for completing of assessment is proposed to be nine months from the end of the assessment year in which the income was first assessable, for the assessment year 2021-22 and subsequent assessment years.
8. Provisional attachment in Fake Invoice cases
Section 271AAD of the Act was inserted vide the Finance Act, 2020 to impose penalty on a person or a person who causes such person to make a false entry or omit an entry from his books of accounts. It is an anti-abuse provision. Upon initiation of such penalty proceedings, it is highly likely that the taxpayer may also evade the payment of such penalty, if imposed. Hence, in order to protect the interest of revenue, 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 two crore rupees
9. Rationalisation of the provision relating to processing of returned income and issuance of notice under sub-seciton (2) of section 143 of the Act
Amend the provisions of section 143 to reduce the time limit for sending intimation under sub-section (1) of section 143 of the Act from one year to nine months from the end of the financial year in which the return was furnished.
It is also proposed to reduce the time limit for issue of notice under sub-section (2) of section 143 of the Act from six months to three months from the end of the financial year in which the return is furnished
Provisions related to TDS / TCS
Tax Deduction at Source (TDS) on purchase of goods
It is proposed to provide for TDS by person responsible for paying any sum to any resident for purchase of goods.
The rate of TDS is kept very low at 0.1%.
- The tax is only required to be deducted by those person (i.e ―buyer) whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.
- Tax is required to be deducted by such person, if the purchase of goods by him from the seller is of the value or aggregate of such value exceeding fifty lakh rupees in the previous year.
It is also proposed to provide that the provisions of this section shall not apply to,- (i) a transaction on which tax is deductible under any provision of the Act; and (ii) a transaction, on which tax is collectible under the provisions of section 206C other than transaction to which sub-section (1H) of section 206C applies
TDS/TCS on non filer at higher rates
It is proposed to insert a new section 206AB / 206CCA in the Act as a special provision providing for higher rate for TDS / TCS for the non-filers of income-tax return.
Proposed 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.
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 proposed TDS rate in this section is higher of the followings rates:-
- twice the rate specified in the relevant provision of the Act; or
- twice the rate or rates in force; or
- the rate of five per cent.
Similar rate for TCS.
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.
Further the time limit for filing tax return under sub-section (1) of section 139 of the Act has expired for both these assessment years.
There is another condition that aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years.
Specified person shall not include a non-resident who does not have a permanent establishment in India.
Provisions related to Real Estate Sector (Relevant for Seller as well as for Buyer)
Incentives for affordable rental housing
One of the conditions to claim benefit u/s 80-IBA is that the project is approved by the competent authority after the 1st day of June 2016 but on or before the 31st day of March 2021.
To help migrant labourers and to promote affordable rental, it is proposed to allow deduction under section 80-IBA of the Act also to such rental housing project which is notified by the Central Government in the Official Gazette and fulfils such conditions as specified in the said notification.
Further, it is also proposed that the outer time limit for 31st March 2021 in this section for getting the affordable housing project approved be extended to 31st March 2022 and same outer time limit be also provided for the proposed affordable rental housing project.
Increase in safe harbour limit of 10% for home buyers and real estate developers selling such residential units
In order to boost the demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a lower rate to home buyers, it is proposed to increase the safe harbour threshold from existing 10% to 20% under section 43CA of the Act, if the following conditions are satisfied:-
- The transfer of residential unit takes place during the period from 12th November, 2020 to 30th June, 2021
- The transfer is by way of first time allotment of the residential unit to any person
- The consideration received or accruing as a result of such transfer does not exceed two crore rupee
Further it is proposed to provide the consequential relief to buyers of these residential units by way of amendment in clause (x) of sub-section (2) of section 56 of the Act by increasing the safe harbour from 10% to 20%.
Accordingly, for these transactions, circle rate shall be deemed as sale/purchase consideration only if the variation between the agreement value and the circle rate is more than 20%.
Extension of date of incorporation for eligible start up for exemption and for investment in eligible start-up
In order to help such eligible start-up and help investment in them,-
- it is proposed to amend the provisions of section 80-IAC of the Act to extend the outer date of incorporation to before 1st April, 2022; and
- it is proposed to amend the provisions of section 54GB of the Act to extend the outer date of transfer of residential property from 31st March 2021 to 31st March 2022.
Rationalisation of the provision of Charitable Trust and Institutions to eliminate possibility of double deduction while calculating application or accumulation
To ensure that there is no double counting while calculating application or accumulation, it has been proposed that
- Voluntary contributions made with a specific direction that it shall form part of the corpus shall be invested or deposited in one or more of the forms or modes specified in sub-section (5) of section 11 maintained specifically for such corpus.
- Application out of corpus shall not be considered as application for charitable or religious purposes for the purposes of third proviso of clause (23C) and clauses (a) and (b) of section 11. However, when it is invested or deposited back, into one or more of the forms or modes specified in sub-section (5) of section 11 maintained specifically for such corpus from the income of the previous year, such amount shall be allowed as application in the previous year in which it is deposited back to corpus to the extent of such deposit or investment.
- Application from loans and borrowings shall not be considered as application for charitable or religious purposes for the purposes of third proviso of clause (23C) and clauses (a) and (b) of section 11. However, when loan or borrowing is repaid from the income of the previous year, such repayment shall be allowed as application in the previous year in which it is repaid to the extent of such repayment.
- Clarify in both clause (23C) of section 10 and section 11 that for the computation of income required to be applied or accumulated during the previous year, no set off or deduction or allowance of any excess application, of any of the year preceding the previous year, shall be allowed.
3. Rationalisation of the provision of slump sale
It is proposed to amend the scope of the definition of the term ―slump sal by amending the provision of clause (42C) of section 2 of the Act so that all types of ―transfer as defined in clause (47) of section 2 of the Act are included within its scope.
4. Taxation of proceeds of high premium unit linked insurance policy (ULIP)
Under the existing provisions of the Act, there is no cap on the amount of annual premium being paid by any person during the term of the policy.
Instances have come to the notice where high net worth individuals are claiming exemption under this clause by investing in ULIP with huge premium.
Allowing such exemption in policy/policies with huge premium defeats the legislative intent of this clause. The intention was to provide benefit to small and genuine cases of life insurance. Hence, it is proposed to provide for the followings:
(i) Insert Explanation 3 to the clause (10D) of section 10 of the Act to define ULIP as a life insurance policy which has components of both investment and insurance and is linked to a unit as defined
(ii) exemption under this clause shall not apply with respect to any ULIP issued on or after the 1st February, 2021, if the amount of premium payable for any of the previous year during the term of the policy exceeds two lakh and fifty thousand rupees.
(iii) if premium is payable by a person for more than one ULIPs, issued on or after the 1st February, 2021, exemption under this clause shall be available only with respect to such policies aggregate premium whereof does not exceed the amount of two lakh fifty thousand rupees, for any of the previous years during the term of any of the policy.
5. Depreciation on Goodwill
It has been decided to propose that goodwill of a business or profession will not be considered as a depreciable asset and there would not be any depreciation on goodwill of a business or profession in any situation.
In a case where goodwill is purchased by an assessee, the purchase price of the goodwill will continue to be considered as cost of acquisition for the purpose of computation of capital gains under section 48 of the Act subject to the condition that in case depreciation was obtained by the assessee in relation to such goodwill prior to the assessment year 2021-22, then the depreciation so obtained by the assessee shall be reduced from the amount of the purchase price of the goodwill.
Goods and Service Tax
Amendments carried out in the Finance Bill, 2021 will come into effect from the date when the same will be notified, as far as possible, concurrently with the corresponding amendments to the similar Acts passed by the States and Union territories with Legislature.
- AMENDMENTS IN THE CGST ACT, 2017:
|1.||A new clause (aa) in sub-section (1) of Section 7 of the CGST Act is being inserted, retrospectively with effect from the 1st July, 2017, so as to ensure levy of tax on activities or transactions involving supply of goods or services by any person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.
Remarks: Applicable for clubs / associations. Now a retrospective amendment has been proposed to ensure the levy of tax on the amounts collected from the members towards the supply of goods/services. This shall however be subject to the exemption (upto Rs. 7,500/month/member) in respect of housing societies.
|2.||A new clause (aa) to sub-section (2) of the section 16 of the CGST Act is being inserted to provide that input tax credit on invoice or debit note may be availed only when the details of such invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note.
Remarks: The conditions for determining the eligibility of input tax credit u/s 16(2) of the CGST Act, 2017 does not include the requirement of furnishing the details of the invoice by the vendors and the consequent communication to the recipient. Now it has been proposed to add a new clause providing for such requirement to determine the eligibility of input tax credits.
|3.||Sub-section (5) of section 35 of the CGST Act is being omitted so as to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional.
Section 44 of the CGST Act is being substituted so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional and to provide for filing of the annual return on selfcertification basis. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.
Remarks: GSTR 9C has been removed. However, GSTR 9 will be amended to meet such requirement. So the details will be same as earlier, just a certificate of professional is not required.
|4.||Section 50 of the CGST Act is being amended, retrospectively, to substitute the proviso to sub-section (1) so as to charge
Remarks: The liability to pay interest shall be computed on the net cash liability declared in the return with effect from the 1st July, 2017.
|5.||Section 74 of the CGST Act is being amended so as make seizure and confiscation of goods and conveyances in transit a separate proceeding from recovery of tax.
Remarks : Related to Seizure and confiscation of goods and conveyances in transit
|7.||An explanation to sub-section (12) of section 75 of the CGST Act is being inserted to clarify that “self-assessed tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39.
Remarks: It has been proposed to be clarified that the liability declared in GSTR 1 but not included in GSTR 3B will be considered as “self-assessed tax” so that recovery can be done by the department without following the complex procedure of adjudication etc.
|8.||Section 83 of the CGST Act is being amended so as to provide that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made thereunder.
Remarks: Related with provisional attachment.
|9.||A proviso to sub-section (6) of section 107 of the CGST Act is being inserted to provide that no appeal shall be filed against an order made under sub-section (3) of section 129, unless a sum equal to twenty-five per cent. of penalty has been paid by the appellant.
Remarks: Pre-deposit for appeal filing.
|10.||Section 129 of the CGST Act is being amended to delink the proceedings under that section relating to detention, seizure and release of goods and conveyances in transit, from the proceedings under section 130 relating to confiscation of goods or conveyances and levy of penalty.
Remarks: Seizure and confiscation of goods and conveyances in transit.
|11.||Section 151 of the CGST Act is being substituted to empower the jurisdictional commissioner to call for information from any person relating to any matter dealt with in connection with the Act.
Remarks: Power to collect information
- AMENDMENTS IN THE IGST ACT, 2017:
|1.||Section 16 of the IGST Act is being amended so as to:
(i) zero rate the supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit only when the said supply is for authorised operations;
(ii) restrict the zero-rated supply on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services; and
(iii) link the foreign exchange remittance in case of export of goods with refund.
Remarks: It has been proposed that only the supplies to Special Economic Zone developer or a Special Economic Zone unit which are for authorised operations (as per the SEZ Act and relevant rules and notifications read with the letter of allotment) shall enjoy the benefit of zero-rating.
It has been proposed that the option of making the supply on payment of integrated tax shall only be granted to a notified class of taxpayers or notified supplies of goods or services.