Big Changes Enforced in Indian Statutory System in The Year 2021

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  1. Old Case Won’t Open :Under the Finance Act 2021, the deadline for opening old cases of income tax assessment has been reduced except in some serious cases of tax evasion. Earlier, officers could also open assessments that were six years old, but now before opening cases older than 3 years, the approval of the principal commissioner will have to be taken. That too, when the scope of tax evasion exceeds Rs 50 lakh. In such large cases, 10 years old assessment can also be opened. The motive was that by linking today’s mistake with old lapses, the game of harassing taxpayers would be reduced.
  2. Expensive for not filing returns: Under a new provision implemented from July 21, those who do not file income tax returns regularly, their TDS will be deducted more. Suppose you have not filed income tax returns for two years and have to receive such payment from somewhere on which TDS is deducted, then TDS will be deducted twice as normal. If the TDS for the last two years is more than Rs 50,000, then the TDS burden is bound to increase. For this, a new section 206CCA has been added in the Income Tax Act.
  3. faceless penalty system: The year started with this new initiative of Income Tax. You had already heard the name of faceless assessment. Faceless penalty gave the convenience to the taxpayers that they can pay their penalty without going to the government office or meeting any tax officer. You can register your objection and resolve the disputes related to it. That means everything will be online. No human intervention. Taxpayer and Assessing Officer may not know each other. It was said that this would reduce exploitation or corruption.
  4. PF interest also taxable: Provident Fund (PF) interest in excess of a limit was also brought under the purview of income tax. However, this liability will come on only those accounts, which contribute more than Rs 2.5 lakh annually. In PF accounts in which contributions are made only by the employee and not by the employers, the interest will be taxable only after the annual contribution exceeds Rs 5 lakh. There is no maximum limit for putting money in PF account. In such a situation, many people put a large part of their savings in it for higher interest and investment security.
  5. Retrospective tax abolished: A major change in income tax this year was the abolition of retrospective tax. Think of retrospective as such that a tax law is made today, but it should be implemented with a retrospective date. Due to this, the government had removed demand notices of thousands of crores against big companies like Vodafone and Cairn Energy about a decade ago. Later these companies went to courts and international tribunals. There the government had to face it. The government also had to return the money to these companies.
  6. Audit exemption limit increased: Earlier, an account audit (tax audit u/s 44AB) was required to be done on income or receipts above Rs 5 crore annually. But this year this limit was increased to 10 crores. However, there is also a condition that not more than 5% of the total receipt has come in cash. That is, 95% of the amount has come in cashless or digital mode. Otherwise the limit of audit exemption will not be applicable to him.
  7. AIS: An Annual Information Statement (AIS) has been launched on the portal. It helps in automated return filing or pre-filing in a way. This statement will collect and provide information related to interest, dividend, securities, mutual funds and remittances abroad from all sources of investment with the help of your PAN.
  8. Increased tax on clothes, shoes: In the same meeting of the Council, it was decided to increase the rate of GST on cloth fabrics and footwear from 5% to 12%. Its purpose was to do away with the inverted duty structure (ISD). Many of these products attract 12% GST on raw materials. Due to this, traders had to claim huge refunds. To strike a balance, the government made the tax on sales equal to the tax on their cost. But now there is a lot of opposition from the fabric traders. The prices of clothes are also set to increase.
  9. Aadhaar basis for refund: The exercise of linking PAN with Aadhaar has been going on for a long time. Now its screws are going to be tightened directly on tax refund and input credit. The GST Council had decided that the registration number would be required to be linked with Aadhaar for refund claims. Also, if a person or firm wants to cancel his registration, then first he will have to link it with Aadhaar. The government has taken this step in view of large-scale fake refund claims. This provision will also be applicable from January 1.
  10. E-billing expanded: Along with sales, paperless real time electronic billing ie e-invoicing is a major feature of GST. However, even after four years of implementation of GST, it is not being fully complied with. Till recently, it was applicable only to those with an annual turnover of Rs 100 crore. But from this year those with turnover above Rs 50 crore have also been brought under its purview. The advantage of e-invoicing is that as the entry is made in the system, it gets updated directly in the taxpayer’s profile on the GST portal.
  11. input tax credit will be stuck: If the salesman does not fill the details of the invoice i.e. bill in his GST return (GSTR-1), then the trader who buys the goods from him will not get input tax credit. This is believed to be one of the most stringent GST provisions of this year, whose effect will be visible in the new year. Understand in simple language that it is not enough for a trader to honestly pay GST. It is necessary that the person from whom he is buying the goods should also comply fully. The objective is to weed out those who take credit and refunds on the basis of fake bills.
  12. Exemption from GST Audit: The requirement of GST audit has been abolished for traders or firms with a turnover of more than Rs 5 crore. Earlier, annual returns were to be filed for all GST registered individuals or companies after a turnover of more than 2 crores. Those with a turnover of more than 5 crores were required to file a Reconciliation Statement or Account of Purchases for the Year (GSTR-9C). This statement had to be audited by a certified CA. This year, the government allowed a self-certified statement to be replaced instead.
  13. Raid on data mismatching: Under another GST amendment, arrangements have been made that officers will be able to put red in the premises of taxpayers on the possibility of tax evasion. Provision has been made that if a mismatch is found between the sales figures and tax liabilities of a businessman, the department can send it to the recovery officers at his residence or premises. Sales figures are filed in the GST return form GSTR-1. As soon as the buyer files his return, the data of both should be matched online.
  14. Portal new, problems old: The new portal of Income Tax was launched on 7th June. Along with making it more capable than before, it has been equipped with many additional features. But from the very first day, complaints of old problems started coming in it. There have been frequent complaints from tax professionals that there is delay in filing. On 23 August, Finance Minister Nirmala Sitharaman summoned Infosys CEO Salil Parekh on this issue. At present, the government claims that most of the problems of the new portal have been resolved.
  15. Exemption from returns to the elderly: In the last budget, exemption was announced for people above 75 years of age from filing income tax returns. But some conditions have also been kept with this. One, that person should not have any other income other than pension and interest. Pension and interest should be in the same bank. For this, a form 12BBA has to be filled and submitted to the bank. Information about pension and interest will have to be given. This form will be treated as return. On the basis of this deduction of section-80C will also be available.

Dhanraj Sharma

Dhanraj Sharma is CEO of Tax Concept. He is on a Mission to Educate and Empower 10,000+ Professionals across the Country.

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