Nirmala Sitharaman, the incumbent Finance Minister of India, recently presented the Union Budget for 2021-22, which was prepared, keeping in mind the current financial crisis caused due to the ongoing COVID-19 pandemic. The Budget for 2021-22 has six pillars at its core—physical and financial capital and infrastructure, health and well-being, 'Minimum Government, Maximum Governance', inclusive development for aspirational India, and innovation and R&D.
Here are some ways in which the Budget will impact your personal finances:
No filing of income tax returns for senior citizens
Senior citizens aged 75 or above who earn interest from deposits and get pension will no longer have to file income tax returns. The move will reduce the tax compliance burden that senior citizens had to bear until recently. However, there are clauses to this—both, pension and interest income, must be deposited in your savings accounts opened with specific government banks. The government will notify the public about these banks soon. Senior citizens who earn dividends or any other form of income must file their income tax returns.
Descriptive pre-filled tax forms
Income tax return forms will now have details of salary income, tax deducted at source (TDS), interests from post offices and banks, capital gains from listed securities, tax payments, and dividend income. These forms will ease the compliance burden on the taxpayer, and help them file their taxes faster and more efficiently as the taxpayer no longer has to fill in this information manually.
The mandate to deposit employees' contribution to social security funds by the due date
Failure on part of the employer to deposit employees' contributions towards superannuation funds, provident funds, and other labour welfare funds by the due date will not be allowed and will attract deduction to the employer. This provision will ensure employers deposit deductions on time and will help employees accrue higher interest on their deposits.
Platform and gig workers will be eligible for social security benefits
Due to COVID-19, several tax-paying citizens lost their jobs and had to take up freelancing jobs. With the Budget for 2021-22, the government will extend social security benefits to these workers. Additionally, e-commerce workers will now be included under the minimum wage rule, Employees' Provident Fund (EPF), and Employees' State Insurance Scheme (ESI). Women will be allowed to work night shifts in all categories.
The penetration of both life and non-life insurance in India is low (2.74% and 0.97% respectively). The new Budget proposes amending the Insurance Act of 1938 to increase the limit on foreign direct investment in insurance companies from 49% to 74%. This will bring relief to Indian citizens at a time when they realize insurance is necessary more than ever—insurance companies can bring innovation and offer better products and more choices to citizens.
Further, given the ongoing pandemic and the financial difficulties caused by it, better health insurance policies can offer peace of mind and better financial protection to citizens. Signing up for a health insurance policy can also help save money as it reduces your annual income tax liability by offering benefits under Section 80D of the Income Tax Act, 1961. The premium paid for a health insurance policy is deductible from your taxable income.
Excess EPF contributions will be taxable
Basis the new Budget, salaried employees who make annual mandatory and voluntary contributions of more than 2.5 lakh rupees to their EPF will now have to pay taxes on excess contributions. This primarily targets high-income employees who leave funds in their EPF to earn tax-free interest.
As it can be observed, the Union Budget for 2021-2022 has quite a few provisions aimed to help the public get through these uncertain times.