Tax Proposal under Union Budget 2021

Posted On: 01 FEB 2021 2:07PM by PIB Delhi

Tax Proposal under Union Budget 2021

Vision of a transparent, efficient tax system to promote investments and employment in the country with minimum burden on tax payers

Direct Taxes

Achievements:

• Corporate tax rate slashed to make it among the lowest in the world
• Burden of taxation on small taxpayers eased by increasing rebates
• Return filers almost doubled to 6.48 crore in 2020 from 3.31 crore in 2014
• Faceless Assessment and Faceless Appeal introduced

Relief to Senior Citizens:

• Exemption from filing tax returns for senior citizens over 75 years of age and having only pension and interest income; tax to be deducted by paying bank

Reducing Disputes, Simplifying Settlement:

• Time limit for re-opening cases reduced to 3 years from 6 years
• Serious tax evasion cases, with evidence of concealment of income of Rs. 50 lakh or more in a year, to be re-opened only up to 10 years, with approval of the Principal Chief Commissioner
• Dispute Resolution Committee to be set up for taxpayers with taxable income up to Rs. 50 lakh and disputed income up to Rs. 10 lakh

• National Faceless Income Tax Appellate Tribunal Centre to be established
• Over 1 lakh taxpayers opted to settle tax disputes of over Rs. 85,000 crore through Vivad Se Vishwas Scheme until 30^th January 2021

Relaxation to NRIs:

• Rules to be notified for removing hardships faced by NRIs regarding their foreign retirement accounts

Incentivising Digital Economy:

• Limit of turnover for tax audit increased to Rs. 10 crore from Rs. 5 crore for entities carrying out 95% transactions digitally

Relief for Dividend:

• Dividend payment to REIT/ InvIT exempt from TDS
• Advance tax liability on dividend income only after declaration/ payment of dividend
• Deduction of tax on dividend income at lower treaty rate for Foreign Portfolio Investors

Attracting Foreign Investment for Infrastructure:

• Infrastructure Debt Funds made eligible to raise funds by issuing Zero Coupon Bonds
• Relaxation of some conditions relating to prohibition on private funding, restriction on commercial activities, and direct investment

Supporting ‘Housing for All’:

• Additional deduction of interest, up to Rs. 1.5 lakh, for loan taken to buy an affordable house extended for loans taken till March 2022
• Tax holiday for Affordable Housing projects extended till March 2022
• Tax exemption allowed for notified Affordable Rental Housing Projects

Tax incentives to IFSC in GIFT City:

• Tax holiday for capital gains from incomes of aircraft leasing companies
• Tax exemptions for aircraft lease rentals paid to foreign lessors
• Tax incentive for relocating foreign funds in the IFSC
• Tax exemption to investment division of foreign banks located in IFSC

Ease of Filing Taxes:

• Details of capital gains from listed securities, dividend income, interest from banks, etc. to be pre-filled in returns

Relief to Small Trusts:

• Exemption limit of annual receipt revised from ₹1 crore to ₹5 crore for small  charitable trusts running schools and hospitals

Labour Welfare:

• Late deposit of employee’s contribution by the employer not to be allowed as deduction to the employer
• Eligibility for tax holiday claim for start-ups extended by one more year
• Capital gains exemption for investment in start-ups extended till 31^st March, 2022

Indirect Taxes

GST:

Measures taken till date:

• Nil return through SMS
• Quarterly return and monthly payment for small taxpayers
• Electronic invoice system
• Validated input tax statement
• Pre-filled editable GST return
• Staggering of returns filing
• Enhancement of capacity of GSTN system
• Use of deep analytics and AI to identify tax evaders

Custom Duty Rationalization:

• Twin objectives: Promoting domestic manufacturing and helping India get onto global value chain and export better
• 80 outdated exemptions already eliminated
• Revised, distortion-free customs duty structure to be put in place from 1^st October 2021 by reviewing more than 400 old exemptions
• New customs duty exemptions to have validity up to the 31^st March following two years from its issue date

Electronic and Mobile Phone Industry:

• Some exemptions on parts of chargers and sub-parts of mobiles withdrawn
• Duty on some parts of mobiles revised to 2.5% from ‘nil’ rate

Iron and Steel:

• Customs duty reduced uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels
• Duty on steel scrap exempted up to 31^st March, 2022
• Anti-Dumping Duty (ADD) and Counter-Veiling Duty (CVD) revoked on certain steel products
• Duty on copper scrap reduced from 5% to 2.5%

Textiles:

• Basic Customs Duty (BCD) on caprolactam, nylon chips and nylon fiber & yarn reduced to 5%

Chemicals:

• Calibrated customs duty rates on chemicals to encourage domestic value addition and to remove inversions
• Duty on Naptha reduced to 2.5%

Gold and Silver:

• Custom duty on gold and silver to be rationalized

Renewable Energy:

• Phased manufacturing plan for solar cells and solar panels to be notified
• Duty on solar invertors raised from 5% to 20%, and on solar lanterns from 5% to 15% to encourage domestic production

Capital Equipment:

• Tunnel boring machine to now attract a customs duty of 7.5%; and its parts a duty of 2.5%
• Duty on certain auto parts increased to general rate of 15%

MSME Products:

• Duty on steel screws and plastic builder wares increased to 15%
• Prawn feed to attract customs duty of 15% from earlier rate of 5%
• Exemption on import of duty-free items rationalized to incentivize exporters of garments, leather, and handicraft items
• Exemption on imports of certain kind of leathers withdrawn
• Customs duty on finished synthetic gem stones raised to encourage domestic processing

Agriculture Products:

• Customs duty on cotton increased from nil to 10% and on raw silk and silk yarn from 10% to 15%.
• Withdrawal of end-use based concession on denatured ethyl alcohol
• Agriculture Infrastructure and Development Cess (AIDC) on a small number of items

Rationalization of Procedures and Easing of Compliance:

• Turant Customs initiative, a Faceless, Paperless, and Contactless Customs measures
• New procedure for administration of Rules of Origin

Press Release