7 New Income Tax Rules: ULIP/EPF Investments are Taxable
The new financial year has started from April 1. With the change in the financial year, there has been a change in several rules related to income tax. Under these changes, tax will be levied on the interest earned on contributing more than Rs 2.5 lakh a year in EPF. Moreover, if ITR is not filed, double the TDS has to be given.
Here are the 7 income tax changes in FY’2021-22
1. Tax on interest from EPF
In the Budget 2021-22, tax on interest from Employee Provident Fund (EPF) was announced. Now, investment in EPF up to 2.5 lakh in a financial year will be tax free. If additional amount is invested, the interest earned on this amount will be taxable. That means if you have deposited Rs. 4 lakhs annually, the interest earned on 1,00,000 will be taxed at the rate of your tax slab.
2. ULIP to be taxed
Now units with premium of more than Rs 2.5 lakh will not be eligible for Linked Insurance Plan (ULIP) tax exemption. In other words, if the annual premium for two or more ULIPS in a year is more than Rs 2.5 lakh, their maturity amount will be covered under the tax. The new rule will apply to ULIP issued on or after 1st February, 2021.
3. Pre-Filled ITR Form
Individual taxpayers will now be provided pre-field ITR forms for the convenience of employees and to facilitate the process of filing income tax returns. This will make it easier to file ITR.
4. Super Senior Citizens Exempted from Filing ITR
Citizens above the age of 75 years will not have to file ITR. This exemption has been given to senior citizens who are dependent on interest on pension or fixed deposits.
5. Double TDS if ITR is not filed
The government has tightened rules for those who do not file income tax returns. For this, the government has added section 206AB to the Income Tax Act. Under this, such individuals will now have to pay double TDS, if ITR are not filed.
According to the new rules, those who have not filed income tax returns will also be charged more tax collection at source (TCS). As per the new rules, from 1st July, 2021, the TDS and TCL rates will be 10-20% which was earlier 5-10%.
6. Now only 1 chance to file late income tax return
Now you will get only one chance to file a delayed ITR. Rs. 5,000 late filing fee was applied for filing ITR by 31st December and Rs. 10,000 was imposed on doing so from 1st January to 31st March.
But now the ITR has to be filed only by December 31. This means that taxpayers will no longer get a chance to file income tax returns for the last financial year till the end of March in the current assessment year. Taxpayers will now be able to file returns with a late fee of Rs 5,000 only by December. However, those earning up to Rs 5 lakh will continue to get the option to file returns with a late fee of Rs 1,000.
7. Only three-year-old tax returns will be able to open
The deadline for opening old returns in tax evasion cases of less than Rs. 50 lakh has been reduced from 6 years to 3 years. With this, 10 year old returns can be opened only after evidence of more than 50 lakh tax evasion is revealed. This will also require the permission of the Principal Commissioner of Income Tax.
I am Nikesh Mehta, owner and writer of this site.
I’m an analytics and digital marketing professional and also love writing on finance and technology industry during my spare time. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected] or LinkedIn profile.