From taxation of EPF contributions to new wage code, life won't be the same in FY22.
From changes in taxation of EPF contributions, to the new wage code, a slew of changes have been proposed that will impact savings and salaries.
Some of the changes will come into force from Thursday and some others later in the year. Here is a look at some of the salient ones.
Changes that will come into effect from April1, 2021:
Interest on EPF self-contribution taxable above Rs 2.5 lakh
Impact: For employees in the 30 per cent tax bracket, the post-tax return on contributions above Rs 2.5 lakh will be 5.85 per cent.
Only instruments like Public Provident Fund (6.4 per cent tax free), Sukanya Samriddhi Yojana (6.9 per cent tax free) give better returns.
Seniors above 75, who only have pension income, exempt from tax filing
Impact: Life becomes easier for seniors. But they must check if they will still be exempt if they have income from tax-exempt sources, like PPF, agri income, etc.
Pre-filled income tax return forms
Impact: Filing returns to become easier.
But taxpayers must take care to include any other income they may have.
Higher TDS/TCS for not filing return
Impact: Will discourage non-filing of returns by people who have paid substantial TDS/TCS.
Reduced limit for reopening of cases
Impact: Income tax assessment cases will not be reopened after three years.
Only in cases involving serious tax evasion, or concealment of income of more than Rs 50 lakh, can cases be reopened until 10 years.
Term plan premiums to go up
Impact: A host of private life insurance companies are set to raise their term plan premiums by as much as 10-15 per cent due to increased comorbidity risks and adverse claims experience of reinsurers.
Changes that will come into force during the year
New Wage code implementation
Impact: It requires an employee’s ‘wage’ to be 50 per cent of total salary. Employee’s basic salary is expected to rise.
PF contribution will increase, so take-home is likely to reduce.
Gratuity paid by employer will also rise due to higher basic salary.
RBI rule on standing instructions
Impact: RBI has extended the deadline for all stakeholders to comply with the new auto debit terms, which otherwise would have impacted a lot of recurring payments made towards OTT platforms, bill payments, and insurance payments.
