The new financial year begins on 1 April. Union Finance Minister Nirmala Sitharaman presenting Union Budget 2021 had announced a slew of changes in the income tax rules. These changes are set to come into effect from tomorrow, 1 April 2021. So let’s take a look at the changes announced in the Union Budget in February for income tax which will come into effect from tomorrow. This post will guide you about all the GST and Income Tax Updates applicable from 1st April 2021
GST Updates from 1st April 2021
E-invoicing will be mandatory (for taxpayers having a turnover of over Rs 50 crore)
The Central Board of Indirect Taxes and Customs (CBIC) notified that e-invoicing will be mandatory for business-to-business (B2B) transactions for taxpayers having a turnover of over Rs 50 crore from April 1, 2021. At present, issuing electronic invoices is mandatory for businesses with a turnover of Rs 100 crore and more, which has been put into effect from January 1, 2021, while for companies having turnover of Rs 500 crore plus was made effective from October 1, 2020. E-invoicing replaces the physical invoice and will soon replace the existing e-way bill system, and taxpayers will not have to generate separate e-way bills. The government expects e-invoicing will also help in improving the payment cycle for the industry and giving a boost to invoice-based lending to MSMEs. The Entities which are exempted for e-invoices are Special Economic Zone (SEZ) Units, insurer or a banking company or a financial institution, including a non-banking financial company, goods transport agency supplying services in relation to transportation of goods by road in a goods carriage, Suppliers of passenger transportation service € Suppliers of services by way of admission to the exhibition of cinematograph films in multiplex screens.
HSN Code will mandatory (for taxpayers having turnover greater than 5 crores)
Harmonized System of Nomenclature (HSN) code is a system that was introduced for the systematic classification of goods all over the country or world. It is a 6-digit uniform code that categorizes and classifies more than 5,000 products. Notably, the codes are accepted worldwide. The codes are developed by the World Customs Organisation (WCO), and they came into effect in 1988. There are about 5,000 commodity groups that are identified by a six-digit code. The codes are arranged in a logical and legal structure which is supported by well-defined rules to achieve uniformity in classification. Taxpayers to mandatorily declare HSN codes in GST Tax Invoices from 1st April 2021 The Taxpayers whose aggregate Turnover is up to Rs. 5 crores in the preceding Financial Year HSN code of 4 digits is mandatory for all the B2B tax invoices and optional for B2C tax invoices on the supplies of Goods and Services. The Taxpayers whose aggregate Turnover is more than Rs. 5 crores in the preceding Financial Year HSN code of 6 digits is mandatory for both B2B and B2C tax invoices on the supplies of Goods and Services. Important system changes need to be integrated into your e waybills, Delivery challans, Tax invoices, GSTR 1 reporting, Shipping bills, GST refund applications, and further note that options available for non-reporting under Table 17 and Table 18 would be done away from FY 2021-22 positively.
Income Tax Updates from 1st April 2021
TDS
In order to make more people file income tax returns (ITR), the finance minister has proposed higher TDS (tax deducted at source) or TCS (tax collected at source) rates in budget 2021. The budget has proposed the insertion of new Sections 206AB and 206CCA in the Income Tax Act as a special provision for the deduction of higher rates of TDS and TCS, respectively for the non-filers of an income tax return. The individuals who have not filed the income tax returns, however, have a TDS or TCS deduction of more than ₹50,000 in the last 2 years, will have to pay TDS or TCS subject to a minimum of 5%. Here the deductor will now become responsible for collecting the ITR proof from the individuals for compliance.
Option to choose ‘New tax regime’ instead of Old tax regime
The government had implemented the new tax regime last year in Budget 2020. However, the exercise of choosing one of the tax regimes for FY 2020-21 will be required to be made starting from 1st of April 2021. Taxpayers still have time until 31st March 2021 to make tax-saving deductions, however, they will be able to opt for a beneficial regime at the time of filing their tax returns for FY 2020-21
Senior citizens above 75 years exempted from filing ITR
To ease the compliance burden on senior citizens, finance minister Nirmala Sitharaman, while presenting Budget 2021, had exempted individuals above 75 years from filing income tax returns (ITR). The exemption will be available to only those senior citizens who have no other income but depend on pension and interest income from the bank hosting the pension account.
PF tax rules
In the Budget for 2021-22, FM Nirmala Sitharaman capped the tax-free interest earned on provident fund contribution by employees and employers together to a maximum of ₹2.5 lakh in a year. She then raised the limit for tax exemption on interest earned on provident fund contribution by employees to ₹5 lakh per annum in specified cases as against the proposed ₹2.5 lakh. The up to ₹5 lakh contribution does not include the employer’s contribution.
Pre-filled ITR forms
Individual taxpayers will be given pre-filled Income Tax Returns (ITR). In order to ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. already come pre-filled in income tax returns. To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled. The move is aimed at easing the filing of returns.
LTC scheme
The central government in Budget 2021 has proposed to provide tax exemption to cash allowance in lieu of Leave Travel Concession (LTC). The scheme was announced by the government last year for individuals who were unable to claim their LTC tax benefit due to covid-related restrictions on traveling. This scheme is only available till 31st March 2021, i.e. money must be spent by this date to avail of the scheme.