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Download Memorandum Explaining the Provisions in the Financial Bill 2021

download-memorandum-explaining-the-provisions-in-the-financial-bill-2021


The Finance Ministry has issued the Memorandum Explaining the Provisions in the Financial Bill, 2021. The Finance Bill, 2021 has been presented by the Finance Minister Nirmala Sitaraman in Parliament today on 1st February 2021. A copy of the Finance Bill, 2021 is available for download in pdf format here. A copy of the Memorandum Explaining the Provisions in the Financial Bill, 2021 is available for download in pdf format.


FINANCE BILL, 2021 


PROVISIONS RELATING TO 

DIRECT TAXES 


Introduction


The provisions of Finance Bill, 2021 (hereafter referred to as "the Bill"), relating to direct taxes seek to amend the Income-tax Act, 1961 (hereafter referred to as 'the  Act'),  Prohibition  of  Benami  Property  Transactions  Act,  1988  (hereafter referred to as ―PBPT Act‖), Finance (No 2) Act, 2004 and Finance Act, 2016 and the Direct Tax Vivad se Vishwas Act, 2020 to continue reforms in direct tax system through tax-incentives, removing difficulties faced by taxpayers and rationalization of various provisions. 



With a view to achieving the above, the various proposals for amendments are organized under the following heads:—

(A)    Rates of income-tax;

(B)    Tax incentives;

(C)   Removing difficulties faced by taxpayers;

(D)   Rationalisation of various provisions.


DIRECT TAXES 


A. RATES OF INCOME-TAX 


I.   Rates of income-tax in respect of income liable to tax for the assessment year 2021-22.


In  respect  of  income  of  all  categories  of  assessee  liable  to  tax  for  the assessment year 2021-22, the rates of income-tax have either been specified in specific sections (like section 115BAA or section 115BAB for domestic companies, 115BAC for individual/HUF and 115BAD for cooperative societies) or have been specified in Part I of the First Schedule to the Bill. There is no change proposed in tax rates either in these specific sections or in the First Schedule. The rates provided  in  sections  115BAA  or  115BAB  or  115BAC  or  115BAD  for  the assessment year 2021-22 would be same as already enacted. Similarly rates laid down in Part III of the First Schedule to the Finance Act, 2020, for the purposes of computation of ―advance tax‖, deduction of tax at source from ―Salaries‖ and charging of tax payable in certain cases for the assessment year 2021-22 would now  become  part  I  of  the  first  schedule. Part  III  would  now apply  for  the assessment year 2022-23 and would remain unchanged except that it would also apply to proposed section 194P. 


(1) Tax rates under section 115BAC and section 115BAD—


From the assessment year 2021-22 (FY 2020-21), individual and HUF tax payers have an option to opt for taxation under section 115BAC of the Act and the resident co-operative society has an option to opt for taxation under the newly inserted section 115BAD of the Act.


On satisfaction of certain conditions as per the provisions of section 115BAC, an individual or HUF shall, from assessment year 2021-22 onwards, have the option to pay tax in respect of the total income at following rates:


Total Income (Rs) Rate

Upto 2,50,000 Nil

From 2,50,001 to 5,00,000 5 per cent.

From 5,00,001 to 7,50,000 10 per cent.

From 7,50,001 to 10,00,000 15 per cent.

From 10,00,001 to 12,50,000 20 per cent.

From 12,50,001 to 15,00,000 25 per cent.

Above 15,00,000 30 per cent.

Similarly, a co-operative society resident in India shall have the option to pay tax at 22 per  cent for assessment year 2021-22 onwards as per the provisions of section 115BAD, subject to fulfilment of certain conditions.


(2) Tax rates under Part I of the first schedule applicable for the assessment year 2021-22


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Download Memorandum Explaining the Provisions in the Financial Bill, 2021 in pdf format.

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