1) Senior Citizens who are 75 years of age and above: For senior citizens who only have pension and interest income, propose exemption from filing their income tax returns. The paying bank will deduct the necessary tax on their income at the rate in force.
· Specified senior citizen means an individual, being a resident in India.
· He should not have any income from Rental Income, Business & Profession, Capital gains, Dividend Income.
· You have interest income from the same bank in which he is receiving his pension income.
· This amendment will take effect from 1st April, 2021.
Detail Clarification related to Family Pension, Tax deduction, Declaration required, will follow
2) Exemption for cash allowance receive in lieu of Leave Travel Concession (LTC): Provide relief to employees, it is proposed to provide tax exemption to the amount given to an employee in lieu of LTC.
· The applicable LTC in the Block year 2018-2021.
· Specified expenditure in specified period ie from 12th Oct.2020 to 31st Mar2021.
· Good and service must be levied rate of 12% or above under various GST law with registered vendors.
· The amount of exemption shall not exceed 36,000/- per person or 1/3 of specified expenditure, (Purchase) whichever is less.
Note: Do keep in mind that the benefit of the LTC Cash Voucher scheme is available in the old tax regime.
3) Taxability of interest on Provident fund: Interest income earned on the Employees’ PF Contribution to various provident funds to the annual contribution of 2.5 lakh a year.
For the example
PF Contribution by employee of Rs. 3, 00,000 a year, interest on Rs 2.5 lakh is exempt from tax and interest on remaining 50,000 is taxable.
· The interest earned by the Provident Fund contributions above Rs 2.5 lakh a year will now be added to the taxable income and taxed at the normal rates.
· This restriction shall be applicable only for the contribution made on or after 01.04.2021.
(4) Relief from Advance Tax on Dividend: In order to provide relief to taxpayers, advance-tax liability on dividend income shall arise only after the declaration/payment of dividend.
(5) Taxation of Unit linked Insurance Policy (ULIP): For annual premium paid above 2.5 lakh for ULIPs, the maturity benefit will now be taxed as Capital Gains.
· Long-Term Capital Gains (LTCG) arising out of the sale of units of equity-oriented mutual fund schemes are taxed at 10 % if the LTCG exceed 1 lakh in a financial year (gains up to January 31, 2018 being grandfathered).
· The limits Rs. 2.5 lakh in for all ULIPs combined together.
· The cap of 2.5 lakh on the annual premium of ULIP shall be applicable only for the policies taken on or after 01.02.2021.
· Amount receive on death will be exempt from tax.