Important Changes applicable from 1st April 2021

Important Changes applicable from 1st April 2021

April 1 has marked the beginning of the financial year 2021-22 and will bring a slew of income tax, GST and other important changes. Some of them were announced by the Union Finance Minister Nirmala Sitharaman while presenting the Union Budget 2021 in February.

These changes are going to affect your money matter to a large extent. Changes like new salary structure, rise in NPS fund manager's charges, banking rules due to merger of banks, income tax rule changes in terms of EPF investment, etc. are some of the glaring changes that are going to take place from 1st April 2021. Here are the most important changes that are going to have its direct impact on your budget and monetary affairs.

TDS & TCS Rates restored from April 1, 2021:

  • Due to Covid-19 Pandemic, TDS and TCS rates for interest income, dividend income, rent payments, and other non-salary payments were lowered by 25% by the government in May 2020.
  • The lower rates were applicable for a term from 14th May, 2020 to 31st March, 2021, in order to provide more funds at the taxpayers' hand.
  • However, from 1st April, 2021 regular TDS/TCS rates are restored.

Hike in TDS Rates for Non-Filers:

  • In budget 2021, FM Nirmala Sitharaman said that TDS rates on bank deposits will be double if a person does not file IT Return. That means, even if an earning individual doesn't fall in the income tax slab, the TDS rate levied on them will be doubled (in case the earning individual does not file ITR).
  • This initiative is taken to make more people file income tax returns (ITR).
  • Budget 2021 proposed to insert two new Sections i.e. Section 206AB and Section 206CCA as a special provision for the deduction of higher rates of TDS and TCS, respectively for the non-filers of an income tax return.

Senior Citizens above 75 years exempted from filing ITR:

  • In a bid to make individual taxpayers’ life easier, Finance Minister Nirmala Sitharaman, in the Union Budget 2021, announced that senior citizens above the age of 75 years, who only have pension and interest as a source of income will be exempted from filing the income tax returns.
  • Please note that interest income received from SCSS, bank fixed deposit etc. is taxed as per one’s income slab under the head ‘income from other sources. Pension from the ex-employer is taxed under the income tax head of Salary while family pension is taxed as ‘income from other sources’.

New EPF Tax Rules:

  • From 1st April 2021, contribution in EPF account is not free from the income tax any more.
  • In her budget 2021 announcements, the FM had proposed that the interest earned on an employee’s contribution above Rs 2.5 lakh in a year will become taxable in the hands of the employee.
  • As of today, the entire PF contribution earns a tax-free return and the PF amount enjoys EEE status. But from 1st April 2021, the interest earned on contribution above Rs 2.5 lakh per annum will be taxable as per one’s tax slab similar to how interest income from bank fixed deposit is taxed.
  • Almost 12 percent of an employee's basic salary and performance wages is compulsorily deducted as provident fund, while the employer contributes another 12%.
  • The move will mainly impact the high-income earners and High Net-worth Individuals (HNIs).

Pre-filled ITR forms:

  • In order to ease compliance for the taxpayer, details of salary income, tax payments, TDS, etc. individual taxpayers will be given pre-filled Income Tax Returns (ITR).
  • To further ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled.
  • The move is aimed at easing the filing of returns.

Introduction of New Wage Code:

  • There are speculations that the Centre may implement the New Wage Code Bill in Financial Year 2021-22. This move will directly impact the take-home salaries of employees from April 1st, as the companies will be required to restructure salary packages.
  • As per the new compensation rules, the allowance component cannot exceed 50 percent of the total salary or compensation. Lower allowances will increase proportion of basic salary in CTC up to 50% leading to higher PF contributions. The move will lesser take home salary of employees.

E-invoicing Mandatory from 1st April:

  • The Central Board of Indirect Taxes and Customs (CBIC) notified that e-invoicing will be mandatory for business to business (B2B) transactions for taxpayers having turnover of over Rs 50 crore from April 1, 2021.
  • At present, issuing electronic invoices is mandatory for businesses with turnover of Rs 100 crore and more, which has been put into effect from January 1, 2021, while for companies having turnover of Rs 500 crore plus was made effective from October 1, 2020.
  • E-invoicing replaces the physical invoice and will soon replace the existing e-way bill system, and taxpayers will not have to generate separate e-way bills.
  • The government expects e-invoicing to have also other major advantages, such as improving the payment cycle for industry and giving boost to invoice-based lending to MSMEs.

Exemption from E-Invoicing:

  • The Entities which are exempted for e-invoices are:
  • Special Economic Zone (SEZ) Units;
  • Insurer or a banking company or a financial institution, including a non-banking financial company;
  • Goods transport agency supplying services in relation to transportation of goods by road in a goods carriage;
  • Suppliers of passenger transportation service;
  • Suppliers of services by way of admission to the exhibition of cinematograph films in multiplex screens.

HSN Codes Requirement:

  • With effect from 1st April 2021 vide Notification No. 78/2020 – Central Tax, dated 15th October 2020, it is mandatory to put 4 digit HSN code in case turnover is less than Rs 5 Crore for B2B invoices and 6 digit in case turnover is more than Rs 5 Crore in all invoice i.e. B2B and B2C.
  • The Taxpayers whose aggregate Turnover is up to Rs. 5 crores in the preceding Financial Year HSN code of 4 digits is mandatory for all the B2B tax invoices and optional for B2C tax invoices on the supplies of Goods and Services.
  • The Taxpayers whose aggregate Turnover is more than Rs. 5 crores in the preceding Financial Year HSN code of 6 digits is mandatory for both B2B and B2C tax invoices on the supplies of Goods and Services.
Turnover in Preceding FY B2B B2C
5 Crore or Less 4 Digit HSN Code Optional
More than 5 Crore 6 Digit HSN Code 6 Digit HSN Code

What is HSN?

  • Harmonized System of Nomenclature (HSN) code is a system that was introduced for the systematic classification of goods all over the country or world.
  • It is a 6-digit uniform code that categorizes and classifies more than 5,000 products.
  • Notably, the codes are accepted worldwide. The codes are developed by the World Customs Organisation (WCO), and they came into effect in 1988.
  • There are about 5,000 commodity groups which are identified by a six-digit code.
  • The codes are arranged in a logical and legal structure which is supported by well-defined rules to achieve uniformity in classification.

New Document Series:

  • New/unique series of invoices to be raised for FY 2021-22 as per Rule 46(b) of the CGST Rules, so that there is no duplication or repetition of invoices with the preceding financial year.

Quarterly Return Monthly Payment Scheme for F.Y. 2021-22:

The window to Opt-In or Opt-Out of the QRMP Scheme for the first quarter of FY 2021-22 i.e., From April 1, 2021 to June 30, 2021 is open now at GST Portal.

Other Changes:

NPS fund managers to charge more:

The Pension Fund Regulatory and Development Authority (PFRDA) has allowed pension fund managers (PFMs) to charge their customers higher fees from 1st April.

With the hike in fees, most PFMs will turn profitable. The old cap of 0.01 per cent of assets under management (AUM) on fees forced PFMs to operate with extremely low costs. The new cap will allow most to turn profitable.

Impact due to merger of some public sector banks:

  • The account holders of seven public sector banks will need to get their passbook and cheque book updated as they will become non-functional from April 1, 2021.
  • If you have bank account in any of these seven public sector banks — Dena Bank, Vijaya Bank, Corporation Bank, Andhra Bank, Oriental Bank of Commerce, United Bank of India and Allahabad Bank — then your passbook and cheque book will become non-functional from 1st April 2021. This will happen because of the merger of these banks in various other banks.


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