How Budget 2021 will Impact Annual Tax Slab?

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The 2021 budget has not provided any tax revenue to taxpayers. There are no changes to the lower tax rates or raised rates. And no further tax exemptions or deductions were introduced. The deduction rates for the salaried and pensioners also remains the same as before.

Union budget announcement overview

Finance Minister Nirmala Sitharaman, on February 1, announced a number of proposals for the benefit of investors, investors, and taxpayers. Sitharaman said the tax system should put less burden on taxpayers. She surprised taxpayers by not announcing any change in income tax rates.

She also did not announce a proposal to introduce the most popular Covid cess. Assistance in implementing the ITR has been provided to older citizens who are 75 years of age or older. The Union budget also has some good news for retired NRIs. FM Sitharman has proposed making the payment of benefits on REIT / InvIT released on TDS.

The finance minister has proposed to provide GST assistance by reducing the number of converted GST properties. The Minister of Finance has suggested that older citizens (over 75) who receive a pension and interest from a deposit will not be required to submit a Tax Return.

The government has proposed to allow tax exemptions on the maturity of the ULIP with an annual fee of up to Rs 2.5 lakh. EPF interest income in excess of Rs 2.5 lakh will be taxable. Interest income from PF donations in excess of Rs 2.5 lakh/year will now be taxable, according to the recommendations of Sitharaman's union budget.

Sitharaman had earlier promised to introduce a "Union budget like no other". The Minister of Finance was expected to provide assistance to the person affected by the disease and focus on economic recovery. Experts believe that the 2021 Union Budget could be the first place to collect fragments after the economic devastation caused by the COVID-19 and the lockdown that followed it.

Union budget 2021 income tax expectations

In last year's union budget, Finance Minister Nirmala Sitharaman introduced a new tax regime consisting of seven tax slabs - Nil, 5 percent, 10 percent, 15 percent, 20 percent, Percent 25, and 30 percent - compared to four tax buildings under the old tax regime.

Both of these tax systems will continue and will be taxed, according to Sitharaman's speech during the budget announcement.

Although the new tax administration has lower tax rates of between Rs 5 lakh to Rs 15 lakh, no tax exemptions and rebates will be available to the state, unlike the popular union budget tax expectations.

As a result, the taxpayer who is paid will lose the current benefits of more than Rs 5 lakh through exemptions and deductions available at various stages in the old tax regime when they switch to the new tax regime.

Union Budget at a Glance 2021-22 (Rs crore)

Notes: Budgeted estimates (BE) refer to the budget allocations announced at the beginning of each financial year. Revised Estimates (RE) estimates projected amounts of receipts and expenditure until the end of a financial year. Actual amounts refer to audited accounts of expenditure and receipts in a year. The Change column represents the compounded annual growth rate (CAGR) for the period.

Sources: Union Budget at a Glance, Union Budget Documents 2021-22; PRS. (link)

Highlights of the union budget 2021

Prime Minister Narendra Modi praised the FM Union budget presented by Nirmala Sitharaman and called it a budget that reflects India's confidence.

Here are the highlights of this year's union budget:

Health and Sanitation

• A new program, called by Prime Minister Atma Nirbhar Swasthya Bharat Yojana, will be launched to improve primary, secondary, and tertiary health care.
• Mission POSHAN 2.0 to promote healthy eating outcomes in all 112 aspiring regions.
• Operation of 17 new community health units
• Upgrading of existing health units at 32 airports, 15 ports, and world ports.
• Jal Jeevan Mission Urban aims to provide a better water supply across the country.
• Efforts to strengthen the Urban Swachh Bharat Mission actions.

Education

• Setting up of 100 new Sainik schools.
• 750 Eklavya schools to be built in tribal areas.
• Central University to come from Ladakh.

Infrastructure

• Vehicle evacuation policy to remove old and defective vehicles - all vehicles are tested every 20 years (human vehicles) and 15 years (commercial vehicles).
• Highways have been announced in Kerala, Tamil Nadu, West Bengal, and Assam.
• National Revenue Pipeline introduced to monitor the monetization process.
• The National Rail System is designed to deliver a comprehensive rail system by 2030.
• The 100% electrification of the railway will be completed by 2023.
• Metro services have been announced in 27 cities, with additional allocations for Kochi Metro, Chennai Metro Phase 2, Bengaluru Metro Phase 2A and B, Nashik and Nagpur Metros.
• The National Hydrogen Mission will be launched to produce hydrogen from green energy sources.
• The re-use of port power to double in 2024.
• A gas pipeline project will be established in Jammu and Kashmir.
• The Pradhan Mantri Ujjwala Yojana (LPG) program will be expanded to accommodate additional one crore beneficiaries.

Taxes

• There is no ITR file for people over 75 who receive a pension and earn interest on deposits.
• The reopening of the IT test cases has been reduced from six to three years. However, in the event of serious tax evasion cases (Rs. 50 lakh or more), it can be up to 10 years.
• Affordable housing projects to get a one-year tax holiday.
• The compliance burden of sub-trustees whose annual receipts do not exceed Rs. 5 pounds will be lost.
• The occupational copper activity was reduced by 2.5%.
• Work in naphtha has been reduced to 2.5%.
• Activity on solar inverters increased from 5% to 20% and solar lights from 5% to 15%.
• All nylon products are made 5% taxable.
• Tunnel piercing machines to attract 7% customary tax.
• Tax duty on cotton raised from 0 to 10%.
• Agricultural infrastructure and development are proposed in a number of areas, including urea, apples, soy and sunflower oil, crude palm oil, cabbage chana, and peas.

Economy and Finance

• Shortages amounted to 9.5% of GDP, an estimated 6.8% in 2021-22.
• Proposal to allow countries to increase lending to up to 4% of GSDP this year.
• The Integrated Security Market Code will be developed, including the provisions of the Labor Law, Depot Law, and two other laws.
• The proposal to increase the FDI limit from 49% to 74%.
• A restructuring company will be set up to take out a depressed loan.
• Deposit insurance is increased from Rs 1 lakh to Rs 5 lakh deposits.
• Proposal to contravene the Limited Liability Partnership Act of 2008.
• Two PSU banks and one general insurance company to be disbursed annually.
• The first LIC IPO of this money.
• The strategic sale of BPCL, IDBI Bank, and Air India will be finalized.

Agriculture

• The Agricultural Infrastructure Fund will be available to APMs to supplement their infrastructure.
• 1,000 Mandis will be re-assembled in the E-NAM market.
• Five major fishing centers, including Chennai, Kochi, and Paradip, will be built.
• A multi-purpose beach park to be established in Tamil Nadu.

Occupation

• A website will be launched to keep track of gig and construction workers.
• Social security will be extended to gig staff and staff on the platform.
• The required margin of borrowing through the Stand-up India program has been reduced from 25% to 15% for SCs, STs, and women.

After acknowledging the Union budget 2021-22, it is safe to say the investment can be difficult for some, especially when viewed from a tax-exit perspective. Salaried professionals may find it hard to invest in provident funds with the introduction of new tax reforms.

However, other investment instruments like Unit-Linked Insurance Plans (ULIPs) remain safe from tax brackets in the union budget 2021 income tax announcements. A good ULIP can help you achieve your specific financial goals without compromising.

Investment avenues from Canara HSBC Life Insurance can help budding and experienced investors save money and build their finances.