Highlights of Union Budget 2021-2022

Prof. S. Thilak, Assistant Professor, SIMS

              Finance Minister Nirmala Sitharaman presented the budget on 01/02/221 for the financial year 2021-2022.  The budget proposal  rest on six pillars like health and well- being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, Innovation and R& D, and Minimum Government and Maximum Governance. The following were the highlights of the budget.

   GENERAL

• First digital Budget in the history of India
• Vehicle Scrapping Policy. Vehicle Fitness Test after 20 years in case of Personal vehicle and 15 years in case of commercial vehicles
• 64,180 crores allocated for New Health Schemes
• 35,000 crores allocated for Covid-19 Vaccine
• 7 Mega Textile Investment parks will be launched in 3 years
• 5.54 lakh crore provided for Capital Expenditure
• 1.18 lakh crore for Ministry of Roads
• 1.10 lakh crore allocated to Railways
• Proposal to amend Insurance Act. Proposal to increase FDI from 49% to 74 %. 
• Deposit Insurance cover (DICGC Act 1961 to be amended). Easy and time bound access of deposits to help depositors of stress banks.
• Proposal to revive definition of ‘Small Companies’ under Companies Act 2013. Capital less than 2 Cr. and Turnover Less than 20 Cr.
• Disinvestment: IPO of LIC, Announced Disinvestment of Companies will be completed in FY 2021-22

DIRECT AND INDIRECT TAX

• Senior Citizens: Reduced Compliance burden. 75 years and above. Proposal not to file ITR if only pension income and interest income. 
• Reduction in time for IT Proceedings: Reopening of Assessments period reduced from 6 years to 3 years except in cases of serious tax evasion cases
• Proposal to constitute ‘Dispute Resolution Committee’. (Taxable income 50 lakhs and disputed income 10 lakh).
• National Faceless Income Tax Appellate Tribunal Centre
• Relaxations to NRI: Propose to notify rules for removing hardship for double taxation.
• Tax Audit Limit: Proposal of tax audit increased from 5 Cr. to 10 cr. (Only for 95% digitized payments business)
• Propose to provide relief on advance tax liability on dividend income.
• Propose to include tax holidays for Aircraft leasing companies
• Prefiling of returns (Salary, Tax payments, TDS etc.)  Details of Capital gains from listed Securities, dividend income, etc. will be prefilled
• Small Charitable Trusts. Increased from 1 crore to 5 crores (Compliance limit)
• Late deposit of employee’s contribution by employer will not be allowed as deduction
• Incentive to startup: Tax holiday exemption for one more year
• Duties reduced on various textile, chemicals and other products
• Gold and Silver (BCD reduced)
• Agriculture Products: Custom duty increased on cottons, silks, alcohol etc.

 KEY IMPORTANT BUDGET TAKEAWAYS

1. An Expensive Budget:  Compared with a capex of Rs 4.12 lakh crore in Revised Estimate (RE) of 2020-21, capex has hiked 34.46 per cent to Rs 5.54 lakh crore in 2021-22.

2.  Improved Signal: Two public-sector banks and one state-owned general insurance company to be lined up for disinvestment. FDI in insurance to be hiked to 74% from 49% now. LIC will soon be in IPO.

3. No Populism, But Focus on Growth: The 2021-2022 budget has avoided giving any income tax relief. No increase in standard deduction, no raise in the tax slabs.

4. Health Gets Its Due: Due to Covid-19 Health Care get more attention in merited. Health allocation jumped 137% to Rs 2,23,846 crore in 2021-22 compared with Rs 94,452 crore in 2020-21. Budget provided Rs 35,000 crore for the Covid-19 vaccine, and promised to provide further funds, if required.

5. Bad Bank – A Good Idea: After wavering for almost six years, the government has finally decided to set up an asset reconstruction company that will take over the bad loans of banks, giving them flexibility to finance the economic recovery.

6. Development Finance Institutions (DFI) Reborn: The idea of merging IDBI and ICICI turning into banks. To provide debt to long development projects, a new DFI with a capital of Rs 20,000 crore. It will have statutory backing, but will be professionally achieved. Lending portfolio of Rs 5 lakh crore within three years.

7. Asset Monetization: National Monetization Pipeline of possible assets of NHAI, PGCIL, Railways, airports, warehouses, sports stadiums.

8. Eye on Elections: Four upcoming election states get major highway projects: Tamil Nadu (3,500 km – Rs 1.03 lakh crore), Kerala (1,100 km – Rs 65,000 crore), West Bengal (675 km – Rs 25,000 crore) and Assam (1,300 km – Rs 34,000 crore).

9. Strategic Disinvestment: After a poor show in 2020-21, the government has estimated disinvestment receipts at Rs 1,75,000 crore on NITI Aayog.

10. Growth Vs Prudence – Tilting Towards Growth: Fiscal deficit estimated at 6.8 per cent of GDP in 2021-22; it is estimated to touch 9.5% in 2020-21. It will be brought down to 4.5 per cent of GDP by 2025-26.