Every year the Central Government puts forth several propositions under the Union Budget detailing economic reforms. This year, the Finance Minister announced significant changes in several policies on February 1st 2021.
Some of the most notable reforms introduced included EPF gain taxation for high salary non-requirement of ITR filing for senior citizens, an extension of home loan interest rebate holiday, etc.
Mentioned below are the five crucial changes discussed in the income tax budget of 2021.
New updates in the Union Budget 2021
- Tax exemption restriction on EPF
To rationalise tax exemption for employees with high salary, the Central Government has put a restriction on tax exemption on interest earned via employee’s contribution to the provident fund. Any interest over the amount of Rs.2.5 lakh will be taxed on withdrawal in the year 2021. This provision will be implemented from April 1st. Taxpayers must consider this fact before proceeding to calculate income tax payment for a financial year.
- Home loan
The Finance Minister proposed to offer an additional deduction of Rs.1.5 lakh on interest payable against home loans availed to purchase affordable housing. This provision was made to facilitate the purchase of affordable housing for individuals. The timeline to avail this exemption on interest payment is extended upto March 31st, 2022.
Typically individuals can gain a tax rebate on housing loan EMI payment under Section 24(b) of the Income Tax Act, 1961. They can enjoy exemptions of up to Rs.2 lakh. This is in addition to the Rs.1.5 lakh deduction on the principal portion of EMI that can be claimed under Section 80C.
Thus, this new provision under income tax reforms in 2021 has allowed borrowers to maximise their benefits by way of tax exemptions.
Nonetheless, to enjoy higher savings, individuals should opt for HFCs offering substantial amount and better services. This also entails evaluating what are the tax savings and other advantages offered by home loan today.
Apart from enjoying tax benefits on home loans, individuals can also look for other advantages to optimise their borrowing experience.
In this regard, they can look for pre-approved offers that can expedite the loan application process. Such offers are available on a range of financial products like loans against property, home loans, etc. You can check your pre-approved loan offer simply by entering your name and contact number.
The recent Budget also proposed to remove tax exemption under Section 10(10D) of the IT Act. This is applicable on ULIPs or unit-linked insurance policies with a premium above Rs.2.5 lakh. This proposal states that a ULIP availed on or after February 1st with an annual premium exceeding Rs.2.5 lakhs will be taxable with equity mutual fund schemes.
- ITR filing for senior citizens
Another announcement made by Finance Minister linked with income tax is the non-requirement of tax filing for individuals above 75 years of age. This means that senior and super-senior citizens belonging to this category will not need to file their tax returns in the upcoming year.
TDS or Tax deduction at source in India is a way of collecting income tax, assets or dividends sale by deducting tax before paying the balance. According to Budget 2021, a new Section 206AB implements a higher TDS rate for non or late tax return filers.
These are some of the major updates proposed by the Finance Minister pertaining to Income Tax in the Union budget 2021.
Here the new and existing updates on home loan interest rebate indicate accelerated benefits for individuals planning to purchase a property. In this regard, researching the home loan tax exemptions and benefits every new and existing borrower should have on their fingertips would be extremely helpful in maximising savings.