The current financial year is going to end soon and the next financial year will start from April 1. There are certain income tax provisions which have become applicable for the transactions carried out from the current financial year, which taxpayers should be aware of.

Let us discuss some major changes which will affect an individual taxpayer from FY 21-22.

Changed taxation rules for Unit Linked Insurance Policies (ULIP)

Money received under a life insurance policy, including ULIPs, is generally exempt subject to conditions of premium for the year not exceeding certain percentages of the sum assured depending on the year when the policy was bought. Since long-term capital gains on equity mutual funds have become taxable at 10% after initial exemption of Rs 1 lakh, ULIPs had advantage over equity mutual funds and people used to invest in ULIPs and enjoy tax-free income. In order to ensure level playing field, the Finance Act 2021 has made money received in respect of certain ULIPs issued after 1st February 2021 taxable in the hands of the policy holders. However, any money received on death of the policy holder will be tax free in the hands of the recipients.

The amended rule will apply in case the premium paid for any year during its tenure exceeds Rs 2.50 lakh. Insurance companies will deduct tax on the difference at the rate of 5% in case the amount payable exceeds Rs 1 lakh during the year. The ULIPs which have minimum of 65% investments in equity products during their tenure will be taxed like equity mutual funds whereas for other ULIPs the difference between the premiums paid and the money received will get taxed.

Tax on interest earned on contribution made towards provident fund in excess of specified amounts

Presently your balance in your provident fund earns you interest at around 8.50% annually. This is higher than any other safe debt product. Such higher returns and safety of investments made many high salary earners like promoters and key personnel in big companies to contribute huge sums of money to their provident fund beyond what they were mandatorily required to do. In order to discourage such misuse, the law was amended to provide that interest earned by you year after year on your provident fund contribution in a year, whether mandatory or voluntary, over Rs 2.50 lakh will no longer be exempt and will be taxed in your hands. In case the employer does not contribute towards your EPF, you enjoy a higher annual limit of Rs 5 lakh.

In order to give effect to this provision, the provident fund offices will maintain two separate provident fund accounts of the member where the interest is tax free and second where full interest is taxable for all the annual contributions over Rs 2.50 lakh or Rs 5 lakh as the case may be.

Extended period for availing the exclusive tax benefit on home loan for affordable housing

You are entitled to avail tax benefit in respect of interest upto Rs 1.50 lakh every year, paid on a home loan sanctioned between 1st April 2019 and 2021 for a house having stamp duty valuation not over Rs 45 lakh over and above deduction available under Section 24(b). The deadline for getting the home loan sanctioned has now been extended till 31st March 2022 from the earlier deadline of 31st March 2021.

No requirement to file ITR for senior citizens on satisfying certain conditions

In order to provide relief to senior citizens over the age of 70 years from the burden of having to file their Income Tax Returns (ITRs), the law has been amended to provide that the senior citizens who receive pension will not have to file their ITRs if they furnish a declaration to the bank from where the pension is disbursed about their interest earnings provided they do not have a bank account with any other bank except the bank disbursing the pension and do not have any other income. The bank will deduct appropriate tax on such income including the pension after giving benefits of deductions and rebate under section 87A which will absolve the eligible senior citizen from liability to file his ITR.

Higher TDS/TCS for non-filing of your ITR for two years

In case you do not file your income tax returns for two consecutive years immediately preceding the year of deduction, by the due date of filing the ITR and total tax deducted on your income is more than fifty thousands in these two years, the payer will have to deduct tax at higher rate than what is applicable in your case.

Source: https://www.financialexpress.com/money/income-tax/major-income-tax-provisions-applicable-from-current-financial-year-for-individual-taxpayers/2406395/