The global and Indian economies faced a turbulent year due to the COVID-19 pandemic. With vaccination campaigns progressing, economic activity is gradually returning to normal. Against this backdrop, the BJP-led government announced the Union Budget for 2021–22. A key question for many taxpayers was: what changed for taxes this year?
Finance Minister Dr. Nirmala Sitharaman introduced several important changes affecting income tax return filing and related procedures. Although the basic income tax slabs remained unchanged, the Budget included measures aimed at easing compliance, protecting vulnerable groups such as senior citizens, and encouraging formal financial flows.
Key changes introduced by the Union Budget include:
- No income tax return filing for persons above 75 years
Senior citizens above 75 years will not be required to file an Income Tax Return if they meet specific conditions:
- Their income source is exclusively pension and interest;
- The interest is received from the same bank where the pension is deposited;
- The bank is one of those notified by the government for this exemption;
- The assessee furnishes a declaration allowing the bank to carry out the necessary processes on their behalf.
This provision does not entirely eliminate the obligation to file returns for these senior citizens. Instead, the bank will complete filing formalities on their behalf and ensure they receive benefits under Chapter VI-A and Section 87A of the Income Tax Act, 1961.
- Pre-filled information in Income Tax return forms
To simplify tax filing, the government will provide pre-filled data in return forms for items such as dividends from listed securities, salary income, and TDS. Prefilled returns will make filing easier for taxpayers who are not finance professionals and should improve overall compliance.
- Reduced time window to file delayed Income Tax Returns
The time limit to file belated or revised returns has been shortened by three months. For the coming financial year, belated and revised returns must be filed by 31 December instead of 31 March, requiring taxpayers to act earlier when correcting or submitting past-year returns.
- Taxation on excess interest in Employee Provident Fund (EPF)
From the next financial year, interest attributable to an employee’s EPF share exceeding Rs 2.5 lakh will be taxable. This measure aims to discourage large voluntary contributions to the EPF and to channel more funds into the broader economy.
- Changes to the tax audit threshold
The threshold for tax audit applicability for businesses has been adjusted to further promote digital transactions. Previously, the turnover limit was increased from Rs 1 crore to Rs 5 crore provided that cash receipts and payments did not exceed 5% of total receipts and payments. This limit has now been raised to Rs 10 crore for eligible businesses where cash transactions remain within prescribed limits. The intent is to incentivize digital payments and ease audit burdens on small and medium enterprises.
- Exemption of certain trust dividends from TDS
Dividends paid by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are exempt from TDS. This simplifies advance tax procedures for investors and aims to encourage investment in these instruments.
- Tax exemption for certain Leave Travel Concession (LTC) cash schemes
For the next financial year, amounts received under specified Leave Travel Concession cash schemes will be exempt from taxation. The measure is intended to support and revive domestic tourism.
- Higher TDS and TCS for income tax filing defaulters
The Budget introduced Section 206AB in the Income Tax Act, 1961, which mandates higher TDS for taxpayers who have defaulted in filing returns. A corresponding provision increases TCS rates in similar circumstances. These steps are designed to strengthen compliance incentives.
Parting thoughts
The post-COVID Union Budget aimed to revive the economy through targeted reforms that simplify tax compliance, promote digital transactions, and stimulate investment and consumption. The success of these measures will depend largely on taxpayer awareness and compliance.
Several provisions create opportunities for individuals to optimize their tax filings and potentially receive more refunds or reduce liabilities lawfully. Taxpayers should review the changes carefully and consider how they affect filing choices and planning for the year ahead.
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