Budget 2021: Relief For Senior Citizens, Additional Benefit On Home Loans
While no major relaxation in tax rates or thresholds was announced, Finance Minister Nirmala Sitharaman made tweaks in personal tax to help senior citizens and salaried individuals. The government also announced changes in taxability of provident fund to plug tax leakage in certain instances.
Senior Citizens: The income tax law classifies individual taxpayers into three broad categories on the basis of age. A person above 60/80 years is classified either as a senior or super senior citizen. Any person having a taxable income is required to file a tax return irrespective of his age.
The government has now announced that a senior citizen of 75 years or above will get a relaxation from filing tax returns if he is a resident of India and only has a pension income which is received in a bank. The relaxation will also apply to interest income received from the same bank.
Provident Fund: The Section 10 of the Income Tax Act specifies a list of incomes that won’t be included in total income of persons while calculating their tax liability. This includes interest or payment received against contributions made by a person to an employee provident fund or a recognised provident fund. At present, there’s no threshold for interest income earned from the contribution.
The government has specified that the tax benefit won’t apply on the interest income arising from provident fund contributions over Rs 2.5 lakh in the previous year. This is after the tax department found certain instances where individuals obtained an exemption on account of very high contributions to provident fund.
Home Loan: Salaried employees who have taken a home loan can now avail an additional deduction of Rs 1.5 lakh on the interest component. Employees, at present, can claim a deduction of Rs 2 lakh subject to certain conditions.
Currently, a taxpayer is entitled to claim deduction on interest paid on a home loan up to Rs 2 lakhs under Sec. 24(1). To boost housing, the government introduced Sec. 80EEA to provide an additional deduction of Rs 1.5 lakh to a first-time homebuyer based on certain conditions. A taxpayer was entitled to this benefit on home loans taken up to March 31, 2021. The government has now extended this date till March 31 next year.
To avail this benefit, a homebuyer must fulfil the following conditions:
Stamp duty value of the residential house property must not exceed Rs 45 lakh.
Taxpayer must now own any other house at the time of sanction of the loan.
The amendment will become effective from April 1 this year.