A Common Man's Personal Finance

Union Finance Minister Nirmala Sitharaman presented the “once in a century” budget on February 1st, 2021 on the backdrop of a global contagion. There were widespread expectations for the announcement of measures to catalyse the growth of the economy, and the providing of relief to individuals and businesses impacted by the pandemic.

Although the budget doesn’t make any drastic alterations in tax slabs or provide fresh exemptions, it does include several initiatives which will have significant impact on the common man’s personal finances.

Tax Sops To Affordable Home Buyers

With ‘Housing for All’ and, thus, affordable housing remaining the priority for the government, the finance minister extended tax benefits under Section 80EEA by another year till March 2022 to investors of affordable housing. Under Section 80EEA, homebuyers investing up to Rs 45 lakh in residential property get additional tax benefit of Rs 1.5 lakh on the interest paid on their home loans. This exemption is in addition to the Rs 2 lakh available under Section 24 (b). This means investors of affordable housing will continue to get a total tax exemption of up to Rs 3.5 lakh for another year.

IT Filing Relief To Senior Citizens

To reduce compliance burden on senior citizens, the government exempted those 75 years old and/or above from filing annual income tax returns. However, the condition for this exemption is that pension and interest must be their only source of income, and the paying bank will need to deduct the necessary tax on it.

Lesser Burden Of Disputes On Taxpayers

For removing long periods of uncertainty over tax re-assessments, especially for small tax payers, the finance minister cut down the time limit for re-opening of assessments to half – from the present 6 years to 3 years.

Faceless Tax Dispute Resolution And IT

The burden of litigation on small taxpayers has been reduced by the proposal of setting up a faceless Dispute Resolution Committee. Anyone with a taxable income up to Rs 50 lakh and disputed income up to Rs 10 lakh will be eligible to approach the Committee. The government has also proposed to make the Income Tax Appellate Tribunal (ITAT) faceless.  All communication with the faceless tribunal can now be done electronically and any personal hearings for tax payers can conducted through video-conferencing.

Pre-Filled IT Return Forms

In order to ease the process of filing of returns for tax payers, the IT return forms will henceforth come with pre-filled information about capital gains from listed securities, and dividend income. Interest from banks, post offices and the like will also be pre-filled.

ULIPs, Provident Funds Under Tax Net

The tax exemption allowed so far on Unit Linked Insurance Plan (ULIP) products has now been capped at Rs 2.5 lakh of annual premium, which means tax exemption under Section 10(10D) is no longer available for maturity proceeds of the ULIPs having annual premium of more than Rs 2.5 lakh. The budget has also brought contribution in provident funds beyond Rs 2.5 lakh a year under the tax net.

Relief To Employers/Workers

 In order to ensure that employees’ contributions towards employee provident funds are deposited on time, late deposits by the employer will no longer be allowed.

Further, social security benefits have been extended to gig and platform workers. E-commerce workers have now been brought under Employees’ State Insurance Scheme (ESI), Employees’ Provident Fund (EPF) and the minimum wage rule. Women will be allowed to work in all categories in night shifts.

Protection For Depositors Of Stressed Banks

The Finance Minister has proposed to amend the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961 to ensure that depositors under stress get access to their funds to the extent of the deposit insurance cover. 

The author is CEO of Reliance Home Finance