New PF tax rules: Finance Minister Nirmala Sitharaman announced in Budget 2021 that interest on employee contributions of over Rs 2.5 lakh per annum to the provident fund would be taxed, starting from 1 April. Annual contributions up to Rs 2.5 lakh have been kept as the deposit limit for which interest is tax-exempt.

Note that every month, at least 12% of an employee’s basic salary and performance wages are compulsorily deducted as provident fund, while the employer contributes another 12%. With this taxation, the government wants to curb high-income earners from self contributing more to their PF accounts.

Let’s take a look at 5 income tax changes that will come into effect from 1 April:

1) PF tax rules: Interest on annual employee contributions to provident fund over ₹2.5 lakh would be taxed from 1 April 2021. The govt said that the move is aimed at taxing high-value depositors in the Employee Provident Fund (EPF). Finance Minister Nirmala Sitharaman said the EPF is aimed at the welfare of workers and any person earning less than ₹2 lakh per month will not be affected by the proposal.

2) TDS: Budget 2021 has laid out stringent norms for those not filing tax returns. So, if you have not been filing your income tax returns, you have to pay a higher tax deducted at source (TDS). Even the Tax collected at Source (TCS) will increase for those who do not file their income tax returns.The widened scope of TDS and TCS comes under the freshly created income-tax act sections – 206AB and 206CCA.

As per the proposal, TDS will be deducted at twice the applicable rate as per the Income Tax Act or 5%, whichever is higher in case the person hasn’t filed ITR for the past two years (and the time limit for filing the ITR is also over) and a TDS of more than Rs 50,000 was deducted in each of the past two years from that person. So, the deductor will have to ensure that both these conditions are fulfilled.

3) ITR for senior citizens: Giving relief to senior citizens having only pension and interest income, Finance Minister Nirmala Sitharaman said senior citizens above 75 years having only pension, interest income are not required to file income tax return (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.

4) 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.

5) Leave Travel Concession 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 travelling.