The FM’s third Budget tackles the considerable wishlist of industries and consumers that were impaired by the Covid-19 pandemic, while acknowledging the spending challenges of the administration.
Finance Minister Nirmala Sitharaman presented her third Union Budget on Monday, under the shadows of the coronavirus pandemic and protests against the Centre’s new farm laws. At a time when the country has been dealing with the fallout of the pandemic, experts and common man alike, expected the Minister to raise taxes, and even introduce a Covid cess, to help fund the Covid-19 fight.
None of that happened.
Not only did the Finance Minister leave direct tax rates unchanged, so as to not overburden citizens, instead, the ‘get-well’ budget lay much-needed emphasis on the healthcare and infra sectors.
In case you missed Sitharaman’s 110-minute long (or short, considering her past budgets) presentation, here are the highlights you need…
Your income taxes didn’t change, but your filings will soon become less taxing
The government left direct taxes unchanged, but took steps in direct tax incentives to ease compliance for taxpayers. According to the FM, ITR filers increased to 6.48 crore in 2020 from 3.31 crore in 2014. Here is what she proposed for them.
- Pensioners over the age of 75 years need not file ITR.
- A dispute resolution committee for small taxpayers is being planned.
- Anyone with taxable income of up to Rs 50 lakh, disputed income of up to Rs 10 lakh eligible to approach dispute resolution committee.
- Advance tax liability on dividend income shall arise only after payment of dividend.
- Pre-filled tax forms with respect to details like salary income, tax payment and TDS.
- Re-opening of past assessments has also been reduced from 6 years to 3 years in a bid to provide relief to the taxpayer.
- A faceless dispute resolution committee to be set up for individual tax payers and constituting the dispute resolution committee for small taxpayers.
- In a boost to NRIs, Government to notify rules to eliminate double tax for NRIs on foreign retirement fund.
- The interest earned by the Provident Fund contributions above Rs 2.5 lakh a year will now be taxed at the normal rates.
This will only apply to the employee’s contribution and not that of the employer. It will hit high-income salaried people who use the Voluntary Provident Fund to earn tax-free interest.
Tax holidays get extensions
- Govt to extend eligibility of erstwhile tax sop on home loan up to FY22.
- Affordable housing projects can further avail tax holiday for one more year.
- Extension of tax holiday for start-ups by one more year
- Tax exemption for relocating funds to IFSC
- Tax holiday for aircraft leasing business in Gift city
The cess on fuel and liquor has increased, but will that mean you pay more?
- A Rs 2.5 per litre agri infra cess has been imposed on petrol, Rs 4 on diesel
- 100% cess imposed on alcohol.
But, don’t worry. The Finance Minister has made it clear that none of these will affect your pockets.
No way out for filers of fake invoice invoices
- Empowering taxman to attach the properties of those who use fake invoices to evade tax.
- Penalty proceedings initiated for fake invoice/sham transactions of more than Rs 2 crore shall also be eligible for provisional attachment of assets.
The booster dose for healthcare
- The allocation is likely to be around Rs 2,23,846 crore
- That’s a , 137% jump from the previous budget
- Rs 35,000 cr has been budgeted for COVID-19 vaccination expenditure in FY22.
The FM has also said two more vaccines are expected to be rolled out this year, in addition to Covaxin and Covishield.
The divestment math: 2 PSU banks + one general insurance company + LIC IPO + Air India + BPCL + SPV for PSU land sale
- Govt aims to get Rs 1.75 lakh crore through divestments in 2021-22
- In FY21, it planned to raise Rs 2.1 lakh crore through divestments, falling short.
- CPSEs in all but four sectors will be eventually privatised.
- Govt aims to garner Rs 90,000 crore from the listing of the LIC and stake dilution in the IDBI Bank
- Strategic sale of the BPCL, the IDBI Bank, the Air India, Shipping Corp, Container Corp to be completed in 2021-22
- Monetising of land will be taken up. A SPV will be launched to carry out this activity
- Niti Aayog had been asked to come up with the list of companies that may be disinvested next
The big infra push
- 34.5% higher capital budget
- Over 13,000 km length of roads at a cost of Rs 3.3 lakh crore already awarded under Rs 5.35 lakh crore Bharatmala project
- 3,800 km has been constructed
- 11,000 km of national highway corridor expected to be completed by March 2022
- Projects for 8500 km will be awarded.
- More economic corridors to be set up in the future, hinting at 3500 km of national highway works at an investment of Rs 1.03 lakh crores.
The path to fiscal consolidation
- Fiscal deficit pegged at 9.5% of GDP, with FY22 fiscal deficit target at 6.8% of GDP
- Deficit to reduce from 9.5% in FY21 to 4.5% by FY26
- Govt will borrow Rs 80,000 crore in the remaining two months to meet FY21 expenditure
- Projected to borrow about Rs 12 lakh crore in FY22.
- FY22 capital expenditure provided is up 34.5% (vs FY21 BE) at Rs 5.54 lakh crore
- Rs 44,000 crore under capital expenditure will be given to Department of Economic Affairs in FY22
- FY21 capital expenditure is seen at Rs 4.39 lakh crore
Doing business to get easier
- Incorporation of one-person companies to be allowed with no restriction on paid-up capital and turnover.
- Non-resident Indians will also be allowed to incorporate one-person companies in India.
Securities, FDI recast
- Proposal to consolidate provisions of the Sebi Act, Depositories Act, Securities Contracts Regulation Act, and the Government Securities Act.
- Government aims to amend Insurance Act to allow higher FDI, increasing FDI limit in insurance to 74% from 49% and allowing foreign ownership.
Good bank, Bad bank
- Govt plans to allot Rs 20,000 crore for bank recapitalisation of PSBs
- Proposal to revise definition under Companies Act, 2013 for small companies by increasing their threshold for capitalisation
- Introduction of a Development Financial Institution (DFI) with Rs 20,000 crore capitalisation, with an aim to have a lending portfolio of Rs 5 lakh crore in 3 years.
Special mention for poll-bound states
- Rs 2.27 lakh highway projects for four states — Tamil Nadu, West Bengal, Assam and Kerala
- Rs 1.03 lakh crore highway projects for Tamil Nadu
- Rs 65,000 crore works for Kerala
Assam, Tamil Nadu, Kerala, West Bengal and Puducherry are scheduled to go to assembly polls in April-May this year.
Booster to govt schemes
- 69 crore beneficiaries (86% beneficiaries) were covered under the One-Nation, One-Ration card implemented by 32 states and union territories.
- Free cooking gas LPG scheme, Ujjwala will be extended to one crore more beneficiaries.
- City gas distribution network of providing CNG to automobiles and piped cooking gas to households will be expanded to 100 more districts.
- Minimum wages will now apply to all categories of workers and women will be allowed to work in all categories with adequate protection.
- Rs 50,000 crore has been earmarked for the Jal Jeevan Mission
The Home Ministry’s kitty
- Rs 1,66,547 crore allocated for the 2021-22 fiscal, with a majority of the funds going to the police forces.
- Rs 30,757 crore has been allocated to Jammu and Kashmir and Rs 5,958 crore for Ladakh — the two newly created Union Territories.
- Rs 1,03,802.52 crore for the central armed police forces like the CRPF, BSF, CISF etc.
Commence Mission Moon
- The Department of Space has been allocated Rs 13,949 crore, of which Rs 8,228 crore have been earmarked for capital expenditure.
- Rs 700 crore has been allocated for the New Space India Limited (NSIL), a newly formed PSU under the Department of Space.
- As part of the Gaganyaan mission activities, four Indian astronauts are being trained on Generic Space Flight aspects, in Russia.
The first unmanned launch is slated for December 2021.
Sitharaman subtly sent a message to farming groups that the government has no intention of dismantling an established APMC system.
- 1000 more agriculture product marketing committees (APMCs) or mandis will be linked to e-national agriculture market (e-NAM).
- Agriculture credit target of Rs 16.5 lakh crore set for FY22
- Provision to rural infra development fund increased to Rs 40,000 crore from earlier Rs 30,000 crore
- An allocation of Rs 1,10,055 crore to be made for Railways
- Of this, Rs 1.07 lakh crore is for capital expenditure for FY22.
- The eastern and western dedicated freight corridors will be commissioned by June 2022
- 100% electrification of broad-gauge routes will be completed by December 2023
The Customs tweak
- Propose to review more than 400 old exemptions to customs duty
- A revised customs duty structure, free of any distortion, to be put in place by October 1
- Reducing customs duty uniformly to 7.5% on products of non-alloy, alloy and stainless steel
- Exempting duty on steel scrap till March 2022
- Reducing duty on copper scrap from 5% to 2.5%