Significant changes in both Income-Tax as well as Goods & Services Tax (GST) will come into effect from April 1.

The five key changes in Income-Tax, assessed by BusinessLine, are in Employees Providend Fund (EPF), ULIP, TDS, re-opening of assessment, and benefits for senior citizens.

EPF contribution

With effect from April 1, if employees’ contribution to EPF is more than ₹2.5 lakh annually, the interest would be taxable like the tax on Fixed Deposit Receipts in a bank. For Government Provident Fund, the threshold will be ₹5 lakh.

“With these changes, the option of NPS has become equally attractive over EPF due to its market-linked returns and 100 per cent tax-free lump-sump withdrawal,” said Sujit Bangar, Founder, Taxbuddy.com.

On Unit-Linked Insurance Products (ULIP) schemes, the change is that if an ULIP is issued after February 1, and aggregate annual premium is more than ₹2.5 lakh, the maturity amount would be taxed at a rate of 10 per cent if its long-term gain (if gain is more than ₹1 lakh) and at the rate of 15 per cent if its short-term gain. Earlier, the maturity proceeds of ULIP schemes were tax-free.

“These changes will impact those who invest in ULIPS to get benefit of 80C deduction. Now, one can think replacing ULIPS with option of term insurance for purchasing life cover and ELSS for investing for growth. With these changes in EPF and ULIPS, taxpayers should do informed tax planning next year,” said Bangar.

As regards Tax Deducted at Source (TDS), if a taxpayer has not filed Income-Tax return for the preceding two previous years and there was TDS of ₹50,000 or more for each of those two years, then Budget 2021 has proposed excess TDS to the extend of twice the prescribed rate or 5 per cent, whichever is higher, to be taxed.

Senior citizens

Senior citizens above 75 years will not have to worry about filing returns, provided they get income from pension and interest from the same bank.

And the fifth major change is related to the reopening of assessments. Now, these could be reopened only up to three years against the earlier provision of up to six preceding assessment years. “This is a major change as it will help reducing litigation and corresponding anxieties of tax payer,” said Bangar.

On the GST front, a major change is the mandatory generation of e-invoice by businesses with turnover of over ₹50 crore.

Aditya Singhania, Partner at Singhania’s GST Consultancy & Co, feels that e-invoicing not only impacts the system of the supplier, but also has a bearing on the input tax credit of the recipient as he is allowed to claim his credit only on the basis of e-invoice, which is considered as valid invoice. “With the things getting completely digitalised at the taxpayer’s end, process of assessment may get easier, smooth and speedy on account of instant availability of information &/or documents in electronic medium,” he said.

Another change is the mandatory HSN (Harmonised System of Nomenclature) code on tax invoice. For aggregate turnover of up to ₹5 crore in the preceding financial year, the HSN code of 4 digits is to be mandatory for all B2B tax invoices and optional for B2C tax invoices. In case the aggregate turnover is more than ₹5 crore, then the HSN code of 6 digits will be mandatory for all tax invoices – B2B and B2C. In case of export of goods/services, the 8-digit HSN code is to be used.

Fake invoices

Other two key changes include enhanced penalty to 200 per cent from 100 per cent in case of resolving detention, seizure and release of goods and conveyances in transit, and more stringent action such as attachment of property and back account in case of fake invoices.

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