On the ending of the financial year 2020-21, the government has planned several major changes for the coming fiscal year 2021-22 which will be affected from April 1, 2021.
This announcement was made by Union Finance Minister Nirmala Sitharaman during the announcement of Budget 2021. Here is the list of changes which will come into force from 1st April. Here we will discuss majorly about new Salary structure, EPF contribution, Income Tax, LTC scheme, Gratuity, etc.
1. Changes in Basic Salary:
As per the new rules made, Government Employee’s minimum basic salary would be at least 50% and more of their net CTC, implying that their other monthly allowance such as Travel Allowance (TA), Dearness Allowance (DA), House Rent Allowance (HRA), overtime and others will not exceed 50% of their net CTC. For example if your CTC (Cost to Company) is Rs 50,000, your total allowances would not exceed Rs 25,000
Pay scales in the private sector will also be affected from April due to changes in salary structure. As per details most employees from private-sector are expected to see a decrease in their take-home pay.
2. EPF Contribution:
EPF is a social benefit scheme, for which both employees and employers contribute 12% of their basic salary and dearness allowance according to existing rules. The allocation to the PF will rise if the new salary structure goes into effect on April 1st. For example, if you receive a monthly CTC of Rs 40,000, the basic salary is Rs 20,000 and the PF account is Rs 2400. It should be remembered that an EPF contribution is measured using basic salary plus Dearness Allowance (DA).
The New wage rule will lead to an increase in PF contribution which is good for retirement corpus. The announcement also states that contributions of more than Rs 2.5 lakh in a year by any employee to the recognized provident fund will be taxed from April 1, 2021. The purpose of taxation on EPF is to tax high-value depositors. Finance Minister Nirmala Sitharaman said that the entire goal of the EPF is for the welfare of the workers and also confirmed that anyone with an income of less than Rs 2 lakh per month will not be affected by this proposal.
3. LTC Scheme:
During the presentation of Budget 2021, Union Finance Minister Nirmala Sitharaman made some necessary announcements, some of which include changes in ITR for senior citizens, LTC vouchers, changes in salary structure, and many more. In budget 2021, the central government proposed to provide tax exemption in the Leave Travel Concession (LTC) scheme due to the outbreak of COVID-19. Now the center has declared relaxation in the LTC scheme.
This exemption allowed central government employees to claim income tax benefits on expenses between October 12, 2020, to March 31, 2021, on purchase of items that attract a GST rate of 12 % or more instead of travel expenses for individuals who were unable to claim their LTC tax benefit due to covid-related restrictions on travelling. The scheme was first announced for government employees later it was extended to cover non-government employees as well.
4. Allowances Capped at 50%:
As per the new rules, all your PF, gratuity, dearness allowance, travel allowance, and house rent allowance figures will be changed. The new -wage law provides that all allowances, including inflation, travel, and fare allowances, should not exceed 50 percent of the total.
5. Change in Gratuity Rule:
Some new rules of gratuity have been made in the new labor laws. Right now, employees are entitled to gratuity after working in the same company for 5 consecutive years, but according to the new law, even if the employee has been appointed only for one year he will be entitled to gratuity benefits.
6. Pre-filled ITR Forms:
As per the new rules, the pre-filled Income Tax Return (ITR) forms are going to be available to taxpayers from April 1, 2021 with the purpose of making the procedure of filing tax forms much easier. By linking the Aadhaar card, PAN card, and bank accounts, the tax department is permitted to pre-fill the forms for individuals. Earlier it was given to taxpayers. Now again this facility has been extended. The pre-filled ITR will have an automatic upload on the taxpayer’s income and other data.
7. TDS at a Higher Rate:
These new sections 206AB and 206CCA have been inserted in the Income Tax Act, 1961 by the Finance Bill, 2021 in the Income Tax Act as a special provision providing a higher rate for TDS or TCS for non-filers of the Income Tax Act.
8. No Tax Filing For Senior Citizens Above 75:
Senior citizens above 75 years of age are not exempt from paying tax. However, they are exempted from filing ITR if certain conditions are met. Income tax returns are not required for people over 75 years of age and who only have pension income and interest from fixed deposits in the same bank and who have only interest income. According to the budget, the bank will have to cut income tax and must pay and deposit it to the government. But the condition is that the person should have only pension income and interest from fixed deposits should be deposited in the same bank. This was announced by Finance Secretary Ajay Bhushan Pandey at a post-budget press conference.
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