16 Feb 2021 | 5 min read
Finance Minister delivered Union Budget 2021 on February 1, 2021. Health, Industry, Infrastructure, Urban Development, Financial Reforms, Education, Inclusive Development, Human Capital, Fiscal Position, Tax Proposals, and Indirect Tax were the pillars of this budget. The majority of attention was given to the healthcare sector. As per the statistics, India is expecting a V-shaped recovery by 2021 in the GDP growth rate. The budget clearly indicates that the government's economic policy is in the right direction.
The impact of the budget can be seen in stock markets. Unit Linked Insurance Plans (ULIPs) brought under tax bracket. Earnings from ULIPs will subject to Capital Gains Tax from April 1 if the premium exceeds Rs. 25000 annually and Securities Transaction Tax (STT) shall be made applicable on the maturity or partial withdrawal of such ULPIs issued after February 1, 2021.
When NRIs return to India, they face issues related to accrued incomes in their foreign retirement accounts, which mainly occurs due to a mismatch in taxation periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions, leading to double taxation, Now, there is a relaxation for non-residents Indians (NRIs) for facing double taxation issues. After the amendment, the income of such a specified person’s account will be non-taxable on an accrual basis and will be taxed by a foreign country at the time of withdrawal. This amendment will be effective from April 1, 2022.
Interest on employee’s share of contribution to EPF on or after April 1, 2021, will be taxable during the time of withdrawal if the amount exceeds Rs. 2.5 lakh in any year. Due to this, HNI, who make higher contributions will be supposed to pay the additional tax liability. This will also discourage voluntary EPF contributions. Return on PF would not be completely tax-free so this will have an impact on the retirement corpus. Pre-filled income tax returns will also include details of capital gain from listed securities, dividend income, interests from banks, post office, etc. in addition to salary income, bank accounts, tax payments, and TDS details.