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Effective Changes in Income Tax Rules FY 2021-22

Are you a wise owl, saving snail or a squirrel saver?

Regardless of the type of saver you are, there is always one place through which you can improve your savings.

These are none other than taxes.

So where on earth do you start and what all could you potentially miss? Let’s see what is in store for you with the new financial year coming in!

With the new tax regime coming in, if you have chosen which tax regime to opt in for, half the battle is already won.

Incase you are still to decide on which tax regime to opt in for, you can use our Income Tax Calculator to compare and analyse between both the regimes.

Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
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Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
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With the beginning of the new financial year a number of financial rules have already been changed. Now, if you are concerned about the money in your pocket, it is important for you to know these changes. If you fall under any of the six categories given below or know anyone who does, then this is a must read for you! Here are some changes in the Income Tax Rules FY 2021-22.

Welcoming Pre-Filled ITR Forms

To ensure ease of compliance contributing to timely filing of income tax, the Income Tax Department has started giving out pre filled ITR Forms. Fields like salary income, tax payments and TDS are set to be pre-filled. Further details like capital gains, dividend income, bank interests, interests from post office etc. will be prefilled too.

Have a Dividend Income? Changes in Income Tax Rules FY 2021-22 Impacting it.

Up until FY 2020-21 you did not have to pay any tax for any dividend income received from domestic companies as well as domestic asset management firms. These taxes were deducted at source and paid by the company of the mutual funds. However, with the exemption on dividend income being removed from the budget of 2020, the same is now taxable in your hands.

In case the amount of dividend received surpasses INR 5000, it is certain that the company houses would have deducted TDS before crediting the dividend to you. In such a scenario you must ensure that TDS that appears on your Form 26AS under the head income from other sources. You must then add it to your dividend income for full and final disclosure of your taxable dividend income.

Do you have an EPF Account?

Earlier the interest received in your EPF in respect of your own contribution even if it was beyond the mandatory 12% of your salary, was fully exempt. In the budget of 2021 it was proposed that this deduction will not be available for annual contribution made beyond INR 2.5 lakhs.

The only exception here is if your employer does not contribute to your provident fund account, the budget proposes a higher contribution threshold of INR 5 lakhs. Any interest above this amount on such contributions will be taxed year after year.

No ITR Filing for Senior Citizens?

If you are a senior citizen or have one in your family, above the age of 75 years then an exemption from filing of ITR can be availed.

As per the Income Tax Rules FY 2021-22, the following conditions need to be fulfilled for the senior citizen to be applicable for the scheme:

Leave Travel Concession Exemption

Although the scheme was only valid until March 31, 2021, you can avail this solely on money spent up until that date. The government had provided a significant advantage to all applicants who were unable to receive LTC tax benefits. Earlier the provision was to exclude the cash allowance on the leave travel concession from taxation.

Filing Belated or Revised ITR?

Earlier, the deadline for filing belated or revised ITR was 31st March along with late fee. So in case you failed to file your ITR by the due date, or noticed any omission or mistake you could correct it by 31st March. However, as per the Income Tax Rules FY 2021-22 the updated ITR must be filed latest by 31st December 2021 with a maximum penalty of INR 10,000.

These were the changes that Income Tax Department recently made. As of now, these are the changes you need to keep in mind before you compile and file your taxes for the year.

For any other queries on the topic, hit us up on TaxQ&A and we’ll be more than happy to help you out with them!

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