Major income tax provisions applicable from this financial year

Unit Linked Insurance Policies (ULIPs) are subject to new taxation rules (ULIP)

Income from life insurance policies, including unit-linked insurance plans (ULIPs), is normally tax-free, provided the premium paid in that year does not exceed a specific proportion of the sum assured. Because long-term capital gains on equities mutual funds are now taxable at 10% after the initial exemption of Rs 1 lakh, consumers used to invest in ULIPs and enjoy tax-free income. To create a level playing field, certain ULIPs issued after February 1, 2021 are now taxable in the hands of policyholders. The money received by the beneficiaries upon the policyholder's death is tax-free.

The modified rule applies if the premium paid in any of the years covered by the rule exceeds Rs 2.50 lakh. If the amount payable exceeds Rs 1 lakh during the year, the insurance firms will deduct 5% tax from the difference. Equity mutual funds are taxed on the difference between the premiums paid and the amount received, whilst other ULIPs are taxed on the difference between the premiums paid and the amount received.

Tax on interest earned on contributions made to a provident fund in excess of certain thresholds.

Currently, your provident fund balance yields you around 8.50% per year in interest. This is higher than any other safe debt yield. Investment returns and security have prompted many high-earners such as corporate executives and promoters to make additional contributions to their provident funds. It has been clarified that any interest received on your provident fund contribution in a year (whether mandatory or optional) that exceeds Rs 2.50 lakh is now taxable in your hands. If your employer does not contribute to your EPF, you are entitled to a Rs 5 lakh yearly maximum.

To give effect to this provision, the provided fund offices would keep two distinct provident fund accounts for each member, one with tax-free interest and the other with fully taxable interest for all yearly contributions exceeding Rs 2.50 lakh or Rs 5 lakh, as applicable.

The time period for claiming the unique tax benefit on affordable housing loans has been extended.

In addition to the deduction allowed under Section 24 of the Income Tax Act, you can claim a tax deduction for interest paid on a home loan sanctioned between 1 April 2019 and 2021 for a residence valued at up to Rs 45 lakh (b). The deadline for obtaining a home loan sanctioned has been extended from March 31, 2021 to March 31, 2022.

Senior citizens who meet certain criteria will not be required to file an ITR with the IRS.

In order to relieve senior citizens over the age of 70 years of the burden of having to file their Income Tax Returns (ITRs), the law has been amended to provide that senior citizens who receive pension will not be required to file their ITRs if they furnish a declaration to the bank from which the pension is disbursed about their interest earnings provided they do not have a bank account with any other bank other than the bank disbursing the pension and do not have any other assets. Previously, senior citizens who received pension Section 87A provides that the bank will deduct the appropriate amount of tax from such income, including pension, after providing the benefits of deductions and rebates to the eligible senior citizen, thereby relieving him or her of the obligation to file an ITR.

Increased TDS/TCS for failing to file your ITR for a period of two years.

If you fail to file your income tax returns for two consecutive years immediately preceding the year of deduction by the due date for filing your ITR and the total amount of tax deducted from your income in these two years exceeds fifty thousand dollars, the payer will be required to deduct tax at a higher tax rate than the rate that is applicable in your case.