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What does Union Budget 2021 offer the common man?

While the expectations of the common man of tax relief are not met, the budget outlines measures to rationalise the tax structure and bring out changes in the tax processes

Divya Baweja | February 2, 2021 | Updated 16:51 IST
What does Union Budget 2021 offer the common man?
Finance Minister Nirmala Sitharaman with MoS Finance Anurag Thakur. FM Sitharaman presented the Union Budget-2021 in Parliament on Monday. (PTI Photo)

As in the past, the common man had expectations from the budget that it would provide tax relief in terms of reduction in tax rates or in widening of tax slabs. However, Finance Minister Nirmala Sitharaman has not tinkered with either of these while presenting the Budget proposals.

While no sops have been provided to the common man, it has been proposed that senior citizens of 75 years age and above, with only pension and interest income (from the bank in which pension income is received) are not required to file tax returns.

In order to avail this benefit, the bank is required to be a "specified bank", which shall be notified by the government.

Further, eligible senior citizens are required to furnish a declaration to the specified bank, enabling them to deduct taxes on the total income.

Also Read: Budget 2021: DFI, FPI investment in REITs; Infrastructure push a welcome step to spur economy

The deduction towards interest on loan taken for purchasing affordable housing has been proposed to be extended by a year, that is, till March 31, 2022. Such deduction is available for interest up to Rs 150,000 on loan taken to purchase any house with stamp value not exceeding Rs 45 lakh and is available only to first-time home buyers.

Last year, the government had abolished Dividend Distribution Tax (DDT) and hence, dividend was made taxable in the hands of shareholders/unit holders from the financial year (FY) 2020-21. However, with a view to easing the advance tax payment requirement on dividend income, it is proposed that the liability to pay advance tax on such dividend income will arise only after the dividend has been declared/paid. This is in line with the advance tax requirement on capital gains.

Similarly, last year, the government covered employer's contributions to retirals such as provident fund (PF), superannuation fund, National Pension Scheme, and interest accrued on the same under the tax net.

Such contributions in total, exceeding Rs 750,000 were included in the taxable income in the year of contribution themselves. As a step forward, in the Budget 2021, it has been proposed that interest accrued on employee's contribution to PF exceeding Rs 250,000 will be taxable in the hands of the employees in the year of accrual.

Also Read: Budget 2021: How no new taxes, COVID cess will ensure stability in system

This will act as a deterrent for individuals, especially high net worth individuals, who have been contributing higher amounts as their share of contribution to PF, primarily with the purpose of earning higher interest. The computation mechanism in this respect is to be notified by the revenue authorities.

With the objective to ease/streamline the processes and bring about more transparency, the FM Sitharaman has proposed various measures such as faceless proceedings at the Income Tax Appellate Tribunal and reduction in timelines for assessment/re-opening of assessment.

As expected, the Budget 2021 proposals are heavily focused on the benefits to be provided to various sectors severely affected by COVID-19 pandemic. While the expectations of the common man of tax relief are not met, the budget outlines measures to rationalise the tax structure and bring out changes in the tax processes.

Also Read: Budget 2021: No restriction on 1-person co's paid up capital, turnover

(The author is Partner, Deloitte India. With inputs from Preeti Gupta, Senior Manager with Deloitte Haskins & Sells LLP.)

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