Key Highlights of Union Budget 2021-22 | From a CA’s Perspective

by CA Mohit Jain, Partner, Manoj Chhabra & Co  

1) ESI/PF related additions

It has been specifically proposed to tax employers in case they fail to deposit PF/ESI/other funds related to employees on time given under the relevant acts. It has been included in the budget that the said provision is there to penalise the employers and hence no relief will be available if employee related dues are not deposited on time. Further, please note that if any litigation is pending in this regard, it will be very difficult to get relief for the same.

2) Revised/Belated ITRs

The time limit for filing revised/belated ITRs has been reduced to 31-Dec of relevant year from 31-Mar.

3) Reduction in time limit for completion of assessment

 W.e.f AY 2021-22, assessment proceedings need to be completed within 9 months from end of assessment year, ie, for FY 2020-21, relevant for AY 2021-22, assessments have to be completed by Dec-2022.

4) Important changes for charitable organisations (wef FY 2021-22)

 a) Corpus donations need to be invested in a manner prescribed in section 11(5) and application out of corpus will not be considered as application of income for charitable purposes

b) Application out of loans will not be considered as application of income for charitable purposes. However when the loans are repaid, they can be considered as application of income

c) More importantly, it has been clarified that excess application of income in earlier years will not be considered as application of income in the year under consideration

5) Taxability of ULIPS

 a) Wef Feb 01,2021, if any new ULIP policy is purchased by an individual the premium for which is more than Rs 2.5 lakhs, it will be considered as a capital asset (similar to equity linked mutual funds) and tax benefits on maturity will not be available. Further, if multiple ULIPs are purchased on or after Feb 01, 2021, tax benefits on maturity will only be avialble for ULIPs with premiums upto 2.5 lakhs in total.

b) Partial withdrawal/maturity of such policies will attract STT.

c) The above is not applicable on sum received on death of a person.

6) Depreciation of Goodwill

 Wef AY 2021-22, no depreciation will be allowed on goodwill, whether purchased or otehrwise.

7) Time Limit for issuing notice u/s 143(2) [Scrutiny Assessment]

 Wef AY 2021-22, notice u/s 143(2) will be issued by bu June 2022.

8) TDS on purchase of goods (from July 01, 2021)

 a) Buyers with turnover above Rs 10 crores require to deduct TDS @ 0.1% if value of purchase exceeds Rs 50 lakhs from a seller in the previous year . (Budget is not clear whether the amount is to be calculated inclusive of GST or not).

b) If on a transaction, TCS has to be collected (on sales above Rs 50 lakhs to a party) and the above clause is also applicable, then only TDS will be deducted and no TCS will be required to be collected.

9) Higher Rate of TDS if received has not filed ITR (from July 01, 2021)

 a) If a person has not filed ITR for the last two years, but has furnished PAN, then TDS/TCS has to be levied at twice the applicable rate or 5%, whichever is higher. This provision is not applicable on payment of salary.

b) So it becomes important to take a copy of ITR for last two years along with PAN when payments are made to contractors, professionals, commission agents etc

10) ITC under GST

 Specific restriction under GST Act has been proposed to ensure that ITC is taken on only such invoices that have been uploaded by the seller/service provider on the portal. Hence, now tax credit above amount reflected in GSTR-2A can’t be taken.

11) Removal of Audit under GST

 The requirement of audit under GST (GSTR-9C) has been done away with. This provision will be applicable from the date of notification. Please note that reconciliation statement (GSTR-9) is still applicable.

12) Interest on GST

 With the introduction of a retrospective amendment, interest under GST will be chargeable only on net cash liability, ie tax payable reduced by ITC credit.

About the Author – Mohit Jain 

Mr Jain is a leading Chartered Accountant based at NCR Delhi, India. He handles accounts and audits of the finest organisations in the country. He is a leading authority on Corporate Finance, Corporate Governance and Compliances. He can be reached at +919871735391,