For the greater good
A slew of measures to be implemented in the new fiscal year will improve the financial life of people and enhance the government's income
In the new fiscal year that started from April 1, 2021, many changes have been made or are going to be made, which will affect the financial life of the common man. The salaries and allowances of employed people will be changed after implementation of new wage code shortly. An interest received on a fixed deposit of a certain amount in a financial year in the provident fund will be taxed from April 1. Many important changes in the income tax rules have been made from 1 April 2021. Changes have also been made in the filing of income tax returns. According to the provisions made in the budget, the elderly aged 75 years or more have been given relief in filing income tax returns from April 1, while for those who do not deliberately file income tax returns, action has been proposed to be taken against them.
Investments up to Rs 2.5 lakh in the provident fund account have been exempted from April 1, 2021, from income tax, but interest on Rs 2.5 lakh or more will be taxed. The investor will have to pay tax on the amount of interest. This provision has been made by the government, so that as per Income Tax Act, investors cannot take advantage of excess amount as an income tax exemption by investing more in the provident fund. However, there will be no loss to those employed people who are earning a salary up to Rs two lakh every month. To reduce the compliance burden on senior citizens, the finance minister has exempted the elderly aged 75 years or above from filing income tax returns in the budget presented for the financial year 2021-22. This exemption has been given to those elderly citizens, who are fully dependent on income from pensions or fixed deposits for their livelihood.
The Central government has tightened TDS rules to promote the trend of filing ITR from April 1. For this, the Government has added section 206 AB to the Income Tax Act. According to the new rule, double tax deducted at source (TDS) will have to be paid from April 1, 2021, for not filing ITR. TDS means deduction at source. It is a part of income tax and a way to measure income tax. For those who have not filed income tax returns, tax collection at source (TCS) will be higher. TDS and TCS are two methods of tax collection. Under the new rules, with effect from July 1, 2021, the rates of TDS and TCS with penal charges will be 10 to 20 per cent, which is usually 5 to 10 per cent in normal circumstances.
For those not filing ITR, the rate of TDS and TCS will be 5 per cent or double the fixed-rate whichever is higher. The Finance Minister has added 206 AB and 206 CCA sections in the Income Tax Act to increase the scope of TDS and TCS. Till now, the higher TDS rate was applicable only when the income taxpayers had not registered their PAN number with the Income Tax Department. The Government has come to understand that there has been an increase in cases of taking PAN cards due to the increased TDS rates on non-PAN cardholders. For the convenience of employees and to make the process of filing income tax returns easy, the individual income taxpayer will now be provided with a pre-field ITR form from April 1, 2021, which will make it easier for them to file income tax returns.
The Government may implement the new Wage Code Bill in FY 2021-22, which will have a major impact on the financial lives of workers. Earlier, this change was going to come into effect from April 1, 2021, but there may be some delay in implementing it.
After passing this bill, the basic salary of private employees will be at least 50 per cent of the total salary and accordingly, the amount will be deducted from their salary for the provident fund. Currently, private companies pay a very small percentage of CTC as basic pay to their employees. A large part of the salary is given to them as allowances. An increase in basic salary will increase the contribution of private employees to provident fund and gratuity, which will benefit the employees on retirement. However, their salaries will be reduced slightly in immediate terms.
For companies in which the basic salary is 40 per cent of the overall salary, the expenditure on the salary of the employees is expected to increase by 3 to 4 per cent. If the expenditure on the basic salary of a company is 20 to 30 per cent, then the expenditure on the salary of its employees will increase by 6 to 10 per cent. In addition, companies will have to pay gratuity to contractual or permanent employees, whether they have completed five years at a job or not. After the implementation of the new Wage Code Bill, employees can also take advantage of leave encashment at the end of every year. According to the new labour law, if an employee works even more than 15 minutes, he or she will have to pay overtime.
The Pension Fund Regulatory and Development Authority (PFRDA) has allowed the Pension Fund Manager (PFM) to charge higher fees from its customers from April 1, which will put a higher financial burden on the common people. However, this step taken by the Government will attract more foreign investment in this area. Significantly, the pension regulator had proposed a higher fee structure for the proposals released in 2020, which the Government has implemented.
At present, the passbook and cheque book for those whose accounts are in Dena Bank, Vijaya Bank, Corporation Bank, Andhra Bank, Oriental Bank of Commerce, United Bank of India, and Allahabad Bank have been changed from April 1 2021. Their IFSC and branch codes have also been changed. This has happened due to the merger of the banks. For example, Dena Bank has been merged with Vijaya Bank and Bank of Baroda. Oriental Bank of Commerce and United Bank of India have been merged with Punjab National Bank, while Corporation Bank and Andhra Bank have been merged with Union Bank of India.
In the new financial year, the Government has made several changes in the economic sector, which have a direct impact on the employed people, public and the elderly.
However, these changes have been made to improve the financial life of the people. The changes under the provident fund and income tax will increase the income of the Government, which will enable it to implement development-focused work. The new wage code has not been implemented since April 1, 2021, but it is expected to be implemented as soon as possible. After the implementation of this code, the employees of the private sector will benefit at the time of retirement as well as they will also get some other benefits. Not only this, from April 1, the elderly income taxpayers will also get relief from filing income tax returns. Even though the merger of public sector banks will pose some difficulty for the public, it is expected that they will be benefited in the long term.
Views expressed are personal