The income tax fraternity in India is governed by one central piece of legislation – the Income Tax Act of 1961. This act functions as the authoritative law surrounding all matters of income tax within the country. However, it should be noted that the Act hasn’t remained static since its implementation. It has been subject to numerous amendments to better fit the evolving economy and income climate. To stay informed and ensure compliance, it’s essential to stay updated about these changes. In this article, we explore some key amendments in the Income Tax Act 1961.
I. Revised Tax Slab Rates
The most prominent change in the income tax 1961 law that impacts almost everyone is the revision of tax slab rates. Based on recommendations from different sectors and to stimulate overall growth, the government has altered these rates multiple times. Now, individuals and Hindu Undivided Family (HUF) having a taxable earning up to INR 5 lakh fall under the nil tax rate. The new rates have given some leeway to middle-income households, simplifying their tax infrastructure.
II. Standard Deduction
With the 2018 budget, a significant amendment was established for salaried taxpayers and pensioners. A standard deduction of INR 40,000 on their taxable income got introduced to replace transport and medical reimbursements. This move was initiated to streamline the income tax 1961 law, and bring some simplification and relief to salaried individuals.
III. Reduction of Corporate Tax
To foster the growth of the business sector, the government has cut down corporate tax rates multiple times. Most recently in 2019, the Finance Minister announced a reduced domestic company tax rate of 25.17% inclusive of surcharge and cess.
IV. Digital Taxation
Recognizing the increasing importance of e-commerce and digital services, the income tax 1961 act was amended to include ‘Equalisation Levy.’ This digital tax of 6% applies to payments exceeding INR 1 lakh in a fiscal year to a non-resident service provider for specific services.
V. Tax Levied on Long-Term Capital Gains
Long-term capital gains (LTCG) on equity shares and equity-oriented mutual funds are now liable for tax, making it a significant change in the law. If the gain exceeds INR 1 lakh in a financial year, it will attract a 10% tax without indexation benefit.
VI. Income Tax Login and E-filing System
To make the process of income tax filing more accessible and efficient, the Income Tax Department introduced the income tax login and e-filing system. It has turned a cumbersome paper-filled procedure into a convenient and quick online one.
VII. Expansion of Tax Deduction at Source (TDS)
Keeping the increasing base of income tax payers in mind, the scope of Tax Deduction at Source (TDS) has been expanded. The income tax 1961 Act amendments expand the provisions of TDS on payments like rent, insurance commission, and fees for professional services.
VIII. Advance Tax Payments
The amendment about Advance Tax is of significant importance for freelancers, senior citizens, and professionals who don’t have employers to deduct TDS. As per the law, any individual liable to pay tax exceeding INR 10,000 in a fiscal year will have to pay the tax in advance in four installments.
IX. Relaxation for NRIs
In a move to boost foreign remittances, the government has made the income earned by Non-Resident Indians from foreign deposits tax-free. Also, NRIs are permitted to interchange PAN and Aadhar for income tax login and return filing.
Conclusion
With the fast-paced economic environment, amendments in the Income Tax Act 1961 ensure that the legislation remains relevant and in sync with the changing tax infrastructure. While this presents a summarized view of the critical amendments, understanding tax laws can often be complex. It is advisable that taxpayers stay vigilant, use handy tools like income tax login for simple tax-related tasks, and seek professional advice when necessary. Insight into these amendments allows taxpayers to anticipate their tax liabilities accurately and file their tax returns correctly.
