Key Highlights of Budget 2021: Impact on Direct and Indirect Tax

Key Highlights of Budget 2021: Impact on Direct and Indirect Tax

DIRECT TAX CHANGES

1. No change in tax rates

2. The time limit for assessment reduced to 9 months from 12 months from the end of the relevant Assessment Year.

3. Time limits for issuing intimation us 143(1) reduced to 9 months going forward from 12 months, and scrutiny initiation notices us 143(2) reduced to 3 months from earlier 6 months.

4. The time limit for initiating reassessment proceedings reduced from earlier 6 years to 3 years from the end of the relevant assessment year. However, in case of potential escaped income is more than 50 lakh then the limit is 10 years.

5. National Faceless Income Tax Appellate Tribunal Centre: Provision is made for faceless proceedings before the Income Tax Appellate Tribunal (ITAT) in a jurisdiction less manner. It will reduce the cost of compliance for taxpayers, and increase transparency in the disposal of appeals.

6. No deduction if the deposit of Employee’s PF contribution is delayed by employer – lenient view from certain court rulings overturned. Hence payment for PF needs to be made within the due date.

7. Introduction of Section 194Q: TDS on purchase of goods @ 0.1% (5% for non-PAN cases) to be deducted by large-sized payers i.e. whose sales in the previous year is more than INR 10 crores if the aggregate value of goods purchased from a supplier is more than INR 50 lakhs during the FY, and any other TDS / TCS does not already deduct.

8. Tax audit threshold for the person having cash receipt transactions not more than 5% increased from INR 5 crores to 10 crores.

9. Interest accrued on Provident Fund (only Statutory Provident Fund and Recognized Provident Fund) to the extent it relates to the contribution made by employees in excess of Rs.2,50,000.00 in the previous year shall be taxable.

10. Where an Immovable property transferred below its stamp duty value. Then, for the purpose of Capital Gain, Stamp duty value is considered the Sale Consideration u/s 43CA. Whereas this difference is treated as Income under other sources of Income for the Buyer. However, both provisions do not apply if the difference is not more than 10%.

This difference is now extended from 10% to 20% and transfer should by way of the first-time allotment.

11. Due date for filing revised and belated returns reduced by 3 months from 31st March of relevant AY to 31st Dec of relevant AY.

12. Pre-filing of returns to be forefront: Details of salary, rental income, capital gains from listed securities, dividend income, Interest income, tax payments, TDS etc. will be prefilled in ITR to ease filing of income tax return.

13. LLPs excluded specifically from presumptive taxation us 44ADA.

14. Expanding Assessing Officers rights on attachment of property, when penalty for making false entries in books of accounts likely to exceed INR 2 crore.

15. Introduction of Section 194P: Relaxation to senior citizens over the age of 75 years from filing income tax returns if their income comprises of only pension and bank interest from specified banks and TDS has been deducted thereon [Effective from FY 2021-22 onwards].

16. Tax exemption of additional 1.5 lakh for ‘affordable housing’ and ‘rental housing’ projects extended for projects taken upto 31st March 2022 from existing 31^st March 2021.

17. Maturity proceeds from Unit Linked Insurance Policies with annual premium of more than 2.5 lakhs will be taxable at par with equity oriented mutual fund scheme under the head Capital Gain (method of computation of capital gain to be prescribed) [Effective from 1st Feb 2021] .

INDIRET TAX CHANGES

1. Definition of supply is amended retrospectively with effect from 01st July 2017 now supply will include 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.

2. ITC Availability: A new clause (aa) to sub section (2) of section 16 is inserted to provide that ITC may be available only when the details of such invoice or debit note have been furnished by the supplier in GSTR1 and such details have been communicated to the recipient. Earlier it was just in the CGST rules and now got backing in Act and therefore it becomes extremely important to mitigate mismatch.

3. NO Requirement to get Account audited by specified professional and Annual Return in Form GSTR 9C and GSTR 9: Sub section (5) of section 35 is being omitted to remove the mandatory requirement of getting account audited and reconciliation statement submitted by Specified professional. Only Annual return to be filed on self assessment basis.

4. Interest on delayed Payment: Section 50 of the Act is amended retrospectively with effect from 01st July 2017 to charge interest on Net cash liability instead of gross tax liability. A much needed relief in-spite the same was confirmed by CBIC in their press relief but legal backing gave in budget.

5. Section 129(1)(a) amended to seek to increase the payment of penalty (previously penalty and tax) from 100% to 200% for releasing of detained or seized goods and conveyance. Previously, tax and penalty equal to 100% were to be paid for the release of detained or seized goods and conveyance.

6. Definition of Zero Rated Supply under Section 16(1)(b) amended to “Supply of goods or services or both for authorized operations to a Special Economic Zone developer or a Special Economic Zone unit.” So now onwards it becomes important to check whether registered suppliers supplying goods or services for any unauthorized operations like café, recreational areas, etc.