Income tax changes that have come into effect from FY20-21

New personal tax regimeThinkStock Photos
New personal tax regime
A new also optional taxation regime, with reduced rates was announced in Budget 2020. From the new FY, individual taxpayers with no business income will have the option to choose between the two regimes, I.e. either continue with the existing one and avail deductions and exemptions or go for the new one with lower income tax rates but without any deductions and exemptions.

Some grey areas remain under this proporsal, such as the working of TDS under the new tax regime, switching between the two regimes during the financial year and more. We are yet to receive clarity on these.
Dividend taxable for individualsGetty Images
Dividend taxable for individuals
The dividends you receive from mutual funds and domestic companies will now be taxable in your hands. Till FY 2019-20, dividend distribution tax (DDT) was levied on dividends paid by these entities, it made dividends up to Rs 10 lakh in the hands of an individual tax-exempt. But now, the dividend will be added to an individual's income and will be taxed at the applicable income slab rate.

Further, such dividend received by an individual will also attract tax deduction at source (TDS) at 10 per cent, if it exceeds Rs 5,000 in a financial year.
New rules to determine NRI statusThinkStock Photos
New rules to determine NRI status
The final criteria as passed by the Parliament to determine the non-resident Indian (NRI) status of a person differs from that proposed in the Budget. An NRI visiting India will be considered 'Resident but not ordinarily resident', if his taxable income accruing in India exceeds Rs 15 lakh, stay in India exceeds 120 days and total stay in India in the last four financial years is at least 365 days. If the taxable income is below Rs 15 lakh, he will be treated as an NRI for income tax purposes if his stay is not more than 181 days.

Also read: New criteria for NRI status and how income will be taxed in India effective from FY2020-21

Further, an Indian Citizen will be deemed as an Indian resident if he is not liable to pay tax in any other country by domicile, residence or any other criteria. This will only be applicable if the income accrued in India exceeds Rs 15 lakh in a financial year.
More time to avail deduction on loan taken for affordable houseThinkStock Photos
More time to avail deduction on loan taken for affordable house
In Budget 2020, the deadline to avail a loan taken to purhase an affordable house, to avail deduction under section 80EEA of the Income-tax Act, 1961 has been extended till March 31, 2021.

Prior to this, individuals could avail deduction of Rs 1.5 lakh on the interest on home loan for property value not more than Rs 45 lakh, if the loan was sanctioned on or before March 31, 2020, a deduction was available in addition to the deduction of Rs 2 lakh under section 24 for interest paid on home loans. Now, such a deduction can be claimed in FY 2020-21 as well if a loan is taken before March 31, 2021 for buying an affordable house of stamp duty value not more than Rs 45 lakh.
Deferring tax payment for ESOPs incomeThinkStock Photos
Deferring tax payment for ESOPs income
Under employee stock ownership plan (ESOPs), employees are allotted the company's shares. Budget 2020 provided relief to employees of startups, here's how- as per the tax amendment, TDS on shares under ESOPs can now be deducted when the employee is leaving the company or selling shares or if the shares have expired after five years from the end of the relevant financial year in which they were allotted, whichever is earlier.
​Taxability of employer's contribution to EPF, superannuation funds, NPSThinkStock Photos
​Taxability of employer's contribution to EPF, superannuation funds, NPS
As announced in Budget 2020, if employer contribution to Employees' Provident Fund (EPF), National Pension System (NPS) and superannuation fund on an aggregate basis exceeds Rs 7.5 lakh in a financial year, the excess will now be taxable in the hands of the employee. Any interest or dividend earned on the excess contribution will also be taxable in the hands of an employee.
​Introduction of a Taxpayer's CharterGetty Images
​Introduction of a Taxpayer's Charter
The Finance Minister also announced in Budget 2020 to get a Taxpayer's Charter inserted into the Income-tax Act, the aim which is to provide time-bound services to citizens. However, the contents of this Charter are yet to be announced.
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