BUDGETFinance Bill 2021 | Key Direct & Indirect Tax Proposal

Highlights of Key Direct Tax Proposals inBudget 2021:

I. Ease of Compliance

II. Assessment and litigation

Citizens of age 75 years and above who have only Pension and Interest income – need not file Income Tax Returns provided pension and interest is received in specified Banks and subject to submission of requisite declaration

Pre-Filling of Returns – details of Capital Gains, Dividend Income and Interest income will be pre-filled in the returns apart from Salary income which is currently pre-filled.

No tax audit to be done in cases of turnover of upto INR 10 Crores (increased from present limit of INR 5 Crores) with 95% or more receipts and payments through digital mode.

Further, due date in case of partners of firms, to whom transfer pricing is applicable extended to November 30

Due date for belated and revised return shortened to 3 months before the end of the relevant assessment year or completion of assessment whichever is earlier viz. effectively December 31 of calendar year instead of currently March 31 of next calendar year

Vivad Se Viswas Scheme (VSVS): last date of filing extended to 28th February 2021.

It is clarified that settlement cases (ITSC) are not eligible for settlement under VSVS

Time window for re-opening of assessment reduced to 3 years from 6 years. Reopening of assessment beyond 3 years and upto 10 years can be done only if:

Time limit for:

Relief for small taxpayers – Constitution of Faceless Dispute Resolution Committee (DRC) for people with Total Income upto Rs.50 Lakhs and disputed income of Rs. 10 Lakhs

Income Tax Appellate Tribunal (ITAT) to become Faceless – Only electronic communication will be done

(i) Issuance of notice for opening of assessment reduced to 3 months (from existing 6 months)from the end of the relevant assessment year and

(ii) For completion of assessment reduced to 9 months from the end of relevant assessmentyear in respect of Assessment Year 2021-22 onwards

(i) Evidence of concealment of Income of Rs. 50 lakhs or more available

(ii) with prior approval of Pr. CCIT

BUDGET

III. Real Estate

Authority for Advance Rulings (ARR) to be discontinued from a notified date citing lack of availability of eligible members (retired SC, HC judges) and instead a Board of Advance Rulings consisting of two members, each being an officer not below the rank of Chief Commissioner. Rulings not to be binding and either party can prefer an appeal.

Discontinuance of Income-tax Settlement Commission (ITSC) – shall cease to operate from 1st February 2021 and an Interim Board for Settlement consisting of 3 members, each being an officer of the rank of Chief Commissioner to be set up for disposal of pending applications.

Statutory force given to the earlier announced proposal – increased safe harbour limit / tolerance limit of 20% compared to prevailing stamp duty ready reckoner rate for new residential units pur-chased / first time allotment during 12th November 2020 till 30th June 2021 for property price of upto INR 2 Crores

Affordable Housing – Additional Interest deduction (Sec 80EEA) of Rs.1.5 lakhs proposed be extended for loans taken till 31st March 2022.

Sunset Date for approval of Affordable Housing Project extended to March 31, 2022.

Development of Affordable Rental Housing Project also covered for 100% deduction u/s. 80-IBA apart from development of affordable housing project.

IV. Start-ups

Sunset Date for incorporation of start-up extended to March 31, 2022 for eligibility of Tax Holidays viz. 100% profit deduction.

Capital Gains exemption on investment in start-ups also extended to 31st March 2022.

V. M&A / Restructuring

Clarificatory amendment made in relation to slump sale to clarify that all types of “transfer” as defined in section 2(47) covered by provisions of Section 50B – ‘Slump exchange is taxable’ as against some contradictory ruling on the issue

Retirement of partner/member from partnership firm, AOP or BOI – amount paid in excess of cap-ital balance standing to the credit of the retiring partner / member (excluding the amount credited due to revaluation or self-generated assets) made taxable in the hands of the partnership firm, AOP, BOI

Goodwill specifically excluded from the definition of ‘block of assets’ and depreciation calculation stating that, generally, goodwill is an asset which does not depreciate and in case of acquired goodwill, it would be available as cost of acquisition in the event of sale of underlying business

Relaxations to public sector undertaking from stringent compliance for treating a transaction as qualifying demerger and certain related changes for carry forward of losses in case of amalgama-tions – to facilitate strategic disinvestment.

VI. TDS Compliance

No TDS to be deducted on dividend payable by a SPV to the Business Trust (InvIT and REIT) –all other dividend payments are still subject to TDS

Specified banks to deduct TDS, if applicable, in respect of income of specified senior citizens, who are exempted from Return filing.

TDS at 0.1% introduced on purchase of goods – on same lines as TCS introduced in the previous budget

Special provisions for higher TDS deduction / TCS collection in case of any payments to non-filers of income tax returns – increased compliance burden

VII. Other key changes

No change in tax rates for any category of assessee – however option of new tax regime for indi-viduals and HUF as already announced will become operative from FY 2021-22

Statutory force given to the earlier announced deemed LTC (Leave Travel Concession) scheme for incurring specified GST leviable expenditure

Advance tax payment liability on dividend income to begin from the quarter in which such divi-dend is received.

Employee contribution for social security schemes (PF, ESIC etc) not paid by employer within due date applicable for deposit of such sums, will not be allowed as a deduction – clarificatory deem-ing provision in nature – would apply to past years as well

Relief to Trusts – Charitable trusts running Hospitals and Educational Institutions relief increased from Rs.1 crore to Rs.5 crore

Corpus Donations received by Charitable Trusts to be exempt provided such money is deposited in specified forms as provided in Section 11(5) and related amendments. Further, amounts applied for the objects of the Trusts from loans and borrowings will not be treated as application of income and related amendments.

High premium Unit Linked Insurance Policies (ULIP) issued after 1st February 2021 with annual premium of more than INR 2.5 Lakhs made taxable as capital gains, though at concessional rate of 10% u/s. 112A

Relief in calculation of book profits in case of foreign companies by excluding dividend income and to companies in relation to effects on book profits due to advance pricing agreement (Sec 92CC) and secondary adjustments (Sec 92CE).

GST updates from Union Budget 2021

Section 7, CGST Act: Scope of supply (w.e.f. July 2017)Supply of activities or transactions inter se between a person & its members or constituents shall be deemed to take place from one such person to another - hence shall be treated as a supply. The amend-ment is clarificatory

Section 35, CGST Act: Accounts and recordsThe provision for audit under Section 35(5) has been omitted with consequential amendment in Section 44.

Section 44, CGST Act: Annual returnThe annual return may be accompanied by a self-certified reconciliation statement (instead of audit report), reconciling the value of supplies declared in the return furnished with the audited annual financial statement.

Section 74, CGST Act: Detention, seizure and confiscation of goods to be aseparate proceedingDetention, seizure and confiscation of goods or conveyances shall have separate proceedings for recovery of tax and penalty.

Section 75, CGST Act: Recovery of interest on self-assessed taxExplanation has been inserted to clarify that 'self-assessed tax' shall include only the amount of tax payable in respect of details of outward supplies furnished in GSTR-1, but not included in GSTR3B.

Section 50, CGST Act: Interest on delayed paymentAmendment in Section 50 so as to charge interest only on net tax liability i.e. on portion of the tax paid in cash has been made applicable retrospectively from July, 2017 as committed by GST Council.

Section 16, CGST Act: Claim of Input Tax CreditInput Tax Credit in respect of invoices and debit notes shall be available only to the extent they are furnished in GSTR-1 by the vendors and thus appearing in GSTR-2A of the recipient

Section 83, CGST Act: Provisional attachmentPowers of provisional attachment has been extended to proceeding under Chapter XII, XIV or XV for attachment of property including bank account belonging to taxable person or person who has retained benefits of offences under 122(1A).

Section 107, CGST Act: Appeals to appellate authority

An appeal against an order of detention or seizure of goods or conveyance can be filed only after 25 per cent of the amount of penalty.

GST updates from Union Budget 2021

Disclaimer:The contents of this document are for educational purposes only and do not amount to professional advice. This is for broad understanding purposes and no reliance should be placed or it should not be treated as providing any technical, professional, legal advice or recommendation.

Section 129 & 130, CGST Act: Detention, seizure and confiscation of goods

Section 129 and 130 have been amended to delink the proceedings for detention/seizure and confis-cation of goods and conveyances.

Section 151, CGST Act: Power to collect statistics

The power of the Commissioner has been extended to call for any information relating to any matter dealt with in connection with the GST Acts and the Rules.

Section 152, CGST Act: Bar on disclosure of informationSection 152 has been amended so as to prevent use of any information obtained under Section 150 and 151 for the purpose of proceedings under the Act without giving the concerned person an oppor-tunity of being heard.

Section 168, CGST Act: Power to issue instructions or directionsSection 168 has been amended to remove references to the omitted sub-section in Section 44 and151.

Schedule II, CGST Act: Paragraph 7 specifying supply (of goods) by any unincorporated association or body of persons to a member as supply of goods has been omitted retrospectively due to inclusion of the same in Section 7.

Section 16, IGST Act: Zero-rated suppliesThe goods and services supplied only for the authorized operations of SEZ unit / developer shall be eligible for the benefit as zero-rated supply

Zero-rated supplies with payment of tax may be restricted to notified class ofpersonsor class of goods or services.In case of non-realization of sale proceeds for zero-rated supplies under LUT, refund of unutilizedITC along with interest shall become due within 30 days of expiry of time prescribed under theForeign

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