Finance Minister Nirmala Sitharaman presented the Union Budget 2021- 22 in the Parliament, on 1st February 2021. The budget laid more emphasis on the infrastructure and healthcare sectors. Along with significant changes in the taxation process, the FM also announced the scrapping of income tax for senior citizens under certain conditions; no other significant change was made to the income tax. Among the other measures, reduction in the period of tax assessments and new rules of double taxation for NRIs were also introduced. Start-ups get an extension in their tax holiday for an additional year. She also announced that the advance tax liability on dividend income should arise after the declaration of payment on the dividend.
In her Speech, FM announced that, as per the Revised Estimates, India’s fiscal deficit is set to jump to 9.5 per cent of the Gross Domestic Product (GDP) in 2020-21, with Financial Year 2022 Fiscal deficit target at 6.8 per cent. This is higher than 3.5 per cent of the GDP that was projected in the Budget Estimates. A collapse in government revenues during the COVID-19 pandemic has led to a sharp rise in the deficit and market borrowing.
The Capital Expenditure provided for FY22 is up 34.5 per cent, at Rs 5.54 lakh crore. Rs 44,000 crore, coming under capital expenditure will be given to the Department of Economic Affairs in FY22. The Capital Expenditure for FY21 is seen at Rs. 4.39 lakh crore.
The government’s direct taxes are left unchanged but has taken steps indirect tax incentives to ease compliance for taxpayers. This was proposed so that the advance tax liability on dividend income would arise only after the dividend payment. The Budget also looked at pre-filled tax forms concerning tax payment, salary income and TDS.
Senior Citizens and Small Taxpayers
No tax filing is required for senior citizens above 75, with only pension, interest income. For the small taxpayers, a dispute resolution committee is being planned. Anyone who has a taxable income of up to Rs. 50 lakh, disputed income of up to Rs 10 lakh is eligible to approach the dispute resolution committee.
Cess on Liquor and Fuel
It was announced that Agriculture Infrastructure and Development Cess is imposed on several items, including fuel and liquor. Still, the Finance Minister also added that there would be no additional burden on the consumer. The Budget imposed a Rs. 2.5 per litre Agri infra cess on petrol, Rs 4 on diesel and 100% on alcoholic beverages.
Faceless Resolution Committee
The Budget also proposes in setting up of a faceless dispute resolution committee for the individual taxpayers, making the Income Tax Appellate Tribunal faceless and also constituting the dispute resolution committee for small taxpayers.
The Vision of Atmanirbhar Bharat
The Finance Minister has outlined six pillars of proposals to the strengthen the visions of Atmanirbharta, mainly health and well-being, inclusive development, capital and infrastructure, strengthen human capital, innovation and research & development and maximum governance and minimum government.
The allocation for healthcare in this budget has increased substantially. Main areas of focus will be preventive and curative healthcare, along with well-being. The allocation is expected to be around Rs. 2,23,846 crores, a 137% rise from the budget of the previous year. Rs 35,000 crore has been allocated for the Covid-19 vaccination expenditure in FY22.
According to the Finance Minister, the government sees the fiscal deficit at 6.8% for FY22. Rs.1.75 lakh crore is aimed to be brought in through divestments in 2021-22. Central Public Sector Enterprises will eventually be privatising din all but four sectors.
The Budget 2021 has also given a renewed push to disinvestment and assets monetisation as the government is striving for capital creation. The monetisation of land will be taken up, and an SPV will be launched for carrying out this activity.
Agricultural Produce Market Committee
Nirmala Sitharaman announced that 1000 more agriculture product marketing committees or mandis would be linked to the e-national agriculture market (e-NAM). Subtly, she gives out the message that the government has no intention of dismantling the APMC system.
The Finance Minister has said that the government will borrow Rs. 80,000 crores in the remaining two months for meeting the FY21 expenditure and is also expected to borrow Rs. 12 lakh crores, approximately, in FY22.
It was announced that there are plans to privatise 2 PSU banks and one general insurance company in FY22. The Government will also bring in the long-awaited LIC IPO in FY22; it also plans to complete the divestments of BPCL, CONCOR and SCI in 2021-22.
Development Financial Institution
The Government is set to bring in a Development Financial Institution (DFI) and Rs. 20,000 crores will be provided to capitalise the same. It is aimed to have an ending portfolio of Rs. 5 lakh crores in 3 years. A National Monetisation Pipeline for brownfield projects is to be launched. Nirmala Sitharaman also announced that with NHAI and PGCIL have sponsored one InvIT each. She also added that vehicles would have to go under a fitness test after 20 years for PVs, 15 years for CVs and announced that a voluntary vehicle scrapping policy is being introduced.
Allocation for Companies
The Government plans to allot Rs 20,000 crore for bank recapitalisation of PSBs. It is also proposed to revise definition under the Companies Act, 2013 for the small companies by increasing their capitalisation threshold.
Minimum wages will now be applied to workers in all categories, and women will be allowed to work in all categories with adequate protection.
The Finance Minister said that projects for building 8,500 km of highways would be executed by March 2022. She also said that poll-bound, West Bengal will see highway projects worth Rs. 25,000 crores.
There has been a rise in the basic customs duties on importing the sub-parts of mobile phones and battery chargers from nil to 2.5% in FY21- 22. The impact on the prices will be known once the details are clear.
India aims to set up seven textile industries over three years under the scheme of mega-investment textile parks which was announced in this year’s Budget. These are expected to be set up over 1000 acres of land having world-class infrastructure, with plug and play facilities. This will be an addition to the Rs 10, 683 crore production linked incentive (PLI) scheme for the technical textiles and human-made fibres.
For the next fiscal year, a total of Rs 39.67 has been allocated to the Lokpal. The Budget said that this allocation is for the establishment and construction-related charged expenditure for the Lokpal.
A proposal to review more than 400 old exemptions to customs duty and from 1st October 2021 and revised customs duty structure will be put in place, free on any distortion. Govt plans on reducing customs uniformly to 7.5% on products of non-alloy, alloy and chrome steel, exempting duty on steel scrap till March 2022. To provide relief to copper recyclers, the government will be reducing duty on copper scrap to 2.5 %; earlier it was 5%.
Nirmala Sitharaman said that tax return filers increased to 6.48 crores in 2020 from 3.31 cores in 2014.
Extension of Tax Holiday
The government is expected to extend the eligibility of erstwhile tax on home loans. Affordable housing projects have availed a tax holiday for one more year. The fiancé Minister has also raised extension of tax holiday for star ups for another year, a tax exemption for relocating funds to IFSC and also a tax holiday for aircraft leasing business.
The government is to notify rules to eliminate the double tax for NRIs on foreign retirement funds.
First Digital Census
The Government has allocated Rs 3,726 crore for the forthcoming Census and has called it ‘The First Digital Census’.
Deep Ocean Mission
With an allocation of Rs 4,000 crore for over the next four years, India plans to launch Deep Ocean Mission.
Mergers and Acquisitions
The Government has withdrawn the tax benefit for mergers and acquit ions that would result in a marginal increase in the cost of transactions. It also said that no depreciation would be allowed on Goodwill.
Incorporation of One- person Companies
The govt plans to permit incorporation of one-person companies with no restriction on paid-up capital and turnover. The Finance Minister added that Non-resident Indians also would be allowed to include one-person companies in India.
Allocation for MSME
It is proposed that there will be a doubling of the MSME allocation, keeping aside Rs 15,700 crores for medium and small enterprises.
One Nation, One Ration Card
69 crore beneficiaries (86% beneficiaries) were covered under the One-Nation, One-Ration card implemented by 32 states and union territories.
The government on Monday said the free cooking gas LPG scheme, Ujjwala are going to be extended to at least one crore more beneficiaries. She further said city gas distribution network of providing CNG to automobiles and piped cooking gas to households will be expanded to 100 more districts.
Distribution of Electricity
Nirmala Sitharaman announced that the government would enable electricity connections portability to consumers by introducing competition within the power distribution space and kickstart a Rs 3 lakh crore reforms scheme for state power distribution companies.
An allocation of Rs 1,10,055 crores is to be made for the Railways sector. Out of this Rs 1.07 lakh crore is for the capital expenditure in FY22. The eastern and western dedicated freight corridors will be commissioned by June 2022; it had been announced. She also announced plans for East Coast corridor, east-west corridor, north-south corridors. 100% electrification of broad-gauge routes are going to be completed by December 2023.
The Budget set agriculture credit target of Rs 16.5 lakh crore for FY22, and can further increase provision to a rural infra development fund to Rs 40,000 crore from earlier Rs 30,000 crore. Sitharaman said the govt. Is committed to the welfare of farmers, pointing at how 1.54 crore farmers benefited from MSP in paddy and wheat in FY21. Furthermore, underlined that Rs 75,060 crore was paid to farmers for wheat in FY21 versus Rs 62,802 crore in FY20.
Nirmala Sitharaman proposed consolidating provisions of the Sebi Act, Depositories Act, Securities Contracts Regulation Act, and therefore the Government Securities Act. The government aims to amend the Insurance Act to permit higher FDI, increasing FDI limit in insurance to 74% from 49% and allowing foreign ownership.
Addressing the country after the Budget, Prime Minister Narendra Modi said that it speaks of “all-round development.” “From Covid-related reforms to Atmanirbhar resolve, we’ve moved ahead with this mantra in Budget 2021. It’s a lively and not a reactive budget,” he added, congratulating the Finance Ministry team.
This was Sitharaman’s third budget under the National Democratic Alliance (NDA) government led by Prime Minister Narendra Modi. During a significant departure from the tradition, this year’s Budget wasn’t printed and was only made available during a digital format.