What is in budget 2021 for taxpayers | Income tax slabs FY 2021-22

Income tax slabs for FY 2021-22

Individual Taxpayers are again disappointed

No Covid tax, surcharges on income tax

” This is indeed a bold growth-oriented budget in terms of Indian economy. Absence of the much-feared Covid Tax/Covid Cess and the surcharges on Income Tax is a great relief. Privatization of 2 nationalised banks and proposal of monetization of assets like land are clear positives. Raising FDI in insurance from 49% to 74% is a great step by the finance minister, which will fuel up Indian financial market. Market response to the budget reflects growth optimism and Indian Stock Market triumphed in happiness. 

What is Income Tax

First of all let us understand what is Income tax is. Indian Income tax system levies tax on individual taxpayers on the basis of a slab system. Slab system means different tax rates are there for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer. This type of taxation enables progressive and fair tax systems in the country. Such income tax slabs tend to change during every budget.These slab rates are different for different categories of taxpayers. Income tax has classified three categories of “individual “taxpayers such as:

  • Individuals (aged less than of 60 years) including residents and non-residents
  • Resident Senior citizens (60 to 80 years of age)
  • Resident Super senior citizens (aged more than 80 years).

Income tax slabs 2021-2022

Income tax slabs for FY 2021-22

Income tax slabs FY 2021-22.

Current Income Tax Slab FY 2021-22

(Income tax slabs Applicable for All Individuals & HUF)

Rs 0.0 –         Rs 2.5 Lakhs.                        NIL
Rs 2.5 lakhs- Rs 5.00 Lakhs                     5%
Rs. 5.00 lakhs- Rs 7.5 Lakhs                   10%
Rs 7.5 lakhs – Rs 10.00 Lakhs                 15%
Rs 10.00 lakhs – Rs. 12.50 Lakhs           20%
Rs. 12.5 lakhs- Rs. 15.00 Lakhs             25%
Income more than Rs. 15 Lakh               30%

The Finance Minister Nirmala Sitharaman has declared several proposals for the benefit of depositors, investors and taxpayers. Sitharaman said that the tax system should put a minimum burden on the taxpayers. The FM surprised taxpayers by not announcing any change in income tax slab rates. Taxpayers were expecting a big change in income tax slabs. Therefore Finance minister disappointed Individual Taxfillers expecting such changes.

There is a big relief in filing ITR for senior citizens above 75 and NRIs

The Finance Minister proposed that If a senior citizens (above 75) is earning only pension and interest income from deposits then there is no need to file Income Tax Return. The government has proposed to allow tax exemption on maturity of ULIP having annual premium up to Rs 2.5 lakh. However maturity of ULIPs was already  exempted under EEE (Exempted, Exempted, Exempted) for the ULIP policies falling in that category.  Income of EPF (Employees Provident Fund)interest income above Rs 2.5 lakh will be taxable.

EPF : Employees Provident Fund (EPF) is a scheme in which retirement benefits are accumulated. Under the scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer.

The finance minister also proposed to provide GST relief by reducing inverted GST structures. 

Nirmala Sitharaman had earlier indicated previously to present a “budget like no other”. It was hoped that this year it will be a Budget like no other for taxpayers as well. Everyone was epecting from The finance minister to provide relief to the pandemic-hit common man as well as focus more on driving economic recovery. Experts was already expecting that Budget 2021 could be the starting point for picking up the pieces after the economic destruction caused in year 2020 by COVID-19 pandemic.

The salaried individuals were hoping that the government would broaden some tax advantages through Budget. In the run-up to the Budget presentation, several experts and professional bodies like ICAI, and Expert Panel had recommended the government to increase the deduction limit under Section 80 C of the Income Tax Act,1961. Some even suggested the government to allow higher deduction under Section 80D and increase the deposit limit in PPF (Public Provident Fund) to Rs 3 lakh. 

PPF: Public Provident Fund scheme is one of the most popular long-term saving-cum-investment products, mainly due to its combination of safety, returns and tax savings. The PPF was first offered to the public in the year 1968 by the Finance Ministry’s National Savings Institute.

Dividend payment to REIT/InvIT are exempted from TDS

Dividend payment to REIT/InvIT are exempted from TDS, FM Sitharaman announced in Budget speech.

With effect from April 1, 2020 there will be a drastic change of Taxes for REITs and InvITs. In India these alternate investment vehicles has raised more than Rupees 250 billion of capital. Until now Indian Companies are need to DDT and shareholders (except non-corporate residents) were exempt. In case of business trusts, dividends used to be exempt at each level. However the government has did not announce any specific relief to such trusts in Buget proposals.

If the SPV has opted to be taxed at the concessional corporate tax rate of 22% (against the general rates of 25%/30%), the dividends declared by the SPV will be taxable in the hands of the unitholders and the business trust would be required to withhold tax at the rate of 10% when distributing income representing dividends received from SPVs.

Get more

Read this for more details of SPV Taxation

Budget 2021

Top 5 takeaways for taxpayers from Budget 2021

1. No tax burden on senior citizens above 75

2. Tax assessment can be re-opened only up to 3 years

3. Dispute Resolution Committee for small taxpayers

4. Additional deduction of Rs 1.5 lakh for purchasing affordable house.

5. Relief from double taxation for NRIs

Income Tax on Gifts/Presents 

Gifts or Presents for an amount up to Rs 50,000 are completely tax free. If upper limit of Rs 50000 of exemption is breached, the whole amount of gifts become taxable. However, gifts/presents/offering/Streedhan(hindi) which an individual receive from relatives are exempt from tax by virtue of Section 56 of the Income Tax Act. According to the IT Act 1961,

These undermentioned persons qualifies as relative.

  • Spouse
  • Brother or Sister
  • Brother/ Sister of the spouse
  • Brother or sister of either of the parents
  • Any lineal ascendant or descendent
  • Any lineal ascendant or descendent of the spouse.
  • Apouse of the persons referred above.

Friends do not come under ‘relative’ and any gifts which an individual receive from them are taxable. Further, gifts received at the time of marriage (Stridhan) are exempt from tax.

But, gifts on occasions like birthday, anniversary, etc. of an individual will be charged to tax as per above mentioned limits and will be clubbed in income as per tax slab.

Budget 2021: Buyers of affordable houses will get more time to avail additional tax benefits

According to Budget 2021; By buying an affordable house, a taxpayer may avail tax benefits up to Rs 3.5 lakh on interest paid on home loan taken to buy such a house.

Budget 2021-22: This is time to give a boost to the buyers of affordable houses. Therefore Finance Minister decided to extend the time period of taking loans to buy such houses by one year – i.e. from March 31, 2021 to March 31, 2022 – to avail additional tax benefits of Rs 1.5 lakh under section 80EEA of the Income Tax Act.

Section 80EEA on affordable housing loan

Section 80EEA of Income Tax,1961 provides tax benefits up to Rs 1.5 lakh on the interest paid on loans taken for Residential House Property for affordable housing. The benefit is over and above the tax benefit of Rs 2 lakh available under section 24(B) of the Income Tax Act on interest on Housing Loan on both self-occupied and rented properties.

So, by buying an affordable house, a taxpayer may avail tax benefits up to Rs 3.5 lakh on interest paid on home loan taken to buy such a house.

The Maximum deduction allowed under this section is Rs 1,50,000 or interest payable on the home loan, whichever is less and following condition should be satisfied to claim deduction under section 80EEA of Income Tax Act. Following are the conditions of such loan.

1. Loan availed for acquisition of Residential Property.

2. Loan has been sanction during the financial year 2019-20, 2020-21 or 2021-22.

3. The Value of house property does not exceed Rs 45 lacs.

4. The assessee does not own any residential house property on the date of sanction of loan.

Affordable Housing

Conditions mentioned in last year’s Finance Bill with respect to the carpet area of the house property in real estate projects approved on or after September 1, 2019 are as follows:

To be qualified as an affordable house, the carpet area of the house property should not exceed 60 square meter (645 sq ft) in metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad,Greater Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region).

In other cities and towns, the carpet area should not exceed 90 square meter (968 sq ft).

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