Budget 2021: No change in personal income tax slabs

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The Union government did not make any changes to the income tax system in place. Speaking at the Budget session, Finance Minister Nirmala Sitharaman said that income tax return filers increased to 6.48 cr in 2020 from 3.31 cr in 2014.

"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 offices, etc. will also be pre-filled," the Finance Minister said.

She announced exemption from filing income tax returns for senior citizens above the age of 75 who only have pension and interest. “Now in the 75th year of Independence of our country, when we continue our endeavour with renewed vigour, we shall reduce compliance burden on our senior citizens who are 75 years of age and above. For senior citizens who only have pension and interest income, I propose exemption from filing their income tax returns. The paying bank will deduct the necessary tax on their income,” said the FM.

The Finance Minister also announced reduction in the time-limit for reopening of tax assessment to three years from six years presently. Nirmala Sitharaman said, “Presently, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years. As a result, taxpayers have to remain under uncertainty for a long time. I therefore propose to reduce this time-limit for re-opening of assessment to 3 years from the present 6 years.” 

She added, “In serious tax evasion cases too, only where there is evidence of concealment of income of `50 lakh or more in a year, can the assessment be re-opened up to 10 years. Even this reopening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department.” 

The government also proposed to make the income tax appellate tribunals faceless and set up a national income tax appellate tribunal centre. "We shall establish a National Faceless Income Tax Appellate Tribunal Centre. All communication between the Tribunal and the appellant shall be electronic. Where personal hearing is needed, it shall be done through video-conferencing," Nirmala said, in the third Budget presented by her.

The Budget comes at a time when India has been battling with the COVID-19 pandemic and the economy is reeling under the aftereffects of the lockdown.

Last year, the government introduced reduced tax slabs with a clause that those opting for this will not be able to claim deductions. As per the tax regime, those earning upto Rs 5 lakh did not have to pay any income tax. Those earning between Rs 5 lakh and Rs 7.5 lakh were taxed at 10%, between Rs 7.5 lakh and Rs 10 lakh per year at 15%, between Rs 10 lakh and Rs 12.5 lakh at 20%, between Rs 12.5 lakh and Rs 15 lakh at 25%, and above that at 30%.

However, if individuals wanted to claim deductions, they could continue to do so under the old regime. The old regime dictated that there would be no tax upto Rs 2.5 lakh, 5% between Rs 2.5 lakh and Rs 5 lakh, 20% between Rs 5 lakh and Rs 10 lakh, and 30% for those earning above Rs 10 lakh. Under the proposal, which system would be beneficial to people, was determined on their earnings and the investments they made.