Our Hon’ble Finance Minister Nirmala Sitharaman presented the Union Budget 2021-2022 in the Parliament on 1st February 2021 from 11 a.m. to 1 p.m. The budget focuses on reviving the economy that is hit by the coronavirus pandemic.
The budget’s main focus is on seven pillars to rebound the economy- Health and Wellbeing, Physical and Financial Capital and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D, and Minimum Government Maximum Governance.
A significant change to both direct and indirect taxes has been proposed starting with the extension of tax holiday for startups, new rules for removal of double taxation for NRIs, and so on.
Economic Reforms and Other Schemes
- For the financial year 2012-2022, the aggregate capital expenditure is estimated at Rs.5.54 lakh crore
- The finance minister proposes the formation of a new centrally sponsored scheme, PM Aatmanirbhar Swasth Bharat Yojana. The PM Aatmanirbhar Swasth Bharat Yojanawith is estimated with an outlay of about Rs.64,180 crore over six years.
- Health and well-being outlay is estimated to be Rs.2,23,846 crore for FY 2021-22. This estimation brings about a rise of 137% year-on-year-basis along with an aim to strengthen the national health institutions, National Centre for Disease Control (NCDC), Health Emergency Operation Centers, and mobile hospitals.
- The FDI limits have been increased from 49% to 74% for the insurance industry.
- Government allots ₹20,000 crores for bank recapitalization
- Proposal of a farm cess of ₹2.5/litre on petrol along with ₹4 on diesel
- Several securities code w.r.t. Securities market to be merged into one single code, A New Rationalised Securities Markets Code
Direct Tax Reforms
The direct tax proposals will provide relief to individual taxpayers along with startups and small businesses. By increasing the tax audit limit u/s 44AB from 5 crores to 10 crore many corporate houses will be relieved from the compliance u/s 44AB. However, 95% of the transactions must be through any digital mode.
The following are the proposed amendments around direct taxation.
- The tax holiday for startups has been extended to one more year i.e. up to 31st March 2022. Tax holidays extended to aircraft leasing and rental companies as well.
- The tax deduction under section 80EEA against the interest on home loans for affordable housing additional deduction is extended till 31st March 2022. The tax benefit extends to affordable rental projects as well.
- In case an employer fails to deduct and not deposit the employee’s PF contribution, then the employer cannot claim a deduction against it.
- Section 44ADa was applicable to every taxpayer being a resident in India. As per budget 2021, section 44ADA will not available only for a resident individual, Hindu Undivided Family (HUF), or a partnership firm, other than LLP.
- Advance tax will be applicable on dividend income only after its declaration.
- The budget 2021 proposes amendments to income tax returns as well. Pre-filling of income tax returns will be allowed for salary, tax payments, TDS/ TCS. The details of capital gains from listed securities, dividend income, etc. will be prefilled in the ITR.
- Earlier the assessment proceedings were open up to 6 years in every case. Now any assessment proceeding except serious tax evasion can remain open up to 3 years only.
- Constitution of a Dispute Resolution Committee with the aim to resolve the issue at the initial stage and prevent new disputes. Every assessee with a disputed income of Rs.10 lakh and a taxable income of up to Rs.50 lakh can approach this committee
- The budget proposes an exemption for senior citizens from filing an income tax return. However, the exemption will be applicable only if the senior citizens have interest and pension as their sole source of income. To support this cause, section 194P has been introduced to allow a bank to deduct tax on interest and pension income earned by senior citizens aging 75 years or above.
- The stamp duty value can be up to 120% (earlier 110%) of the consideration if the transfer of “residential unit”, which means an independent housing unit is made between 12th November 2020 and 30th June 2021.
- Formation of a National Faceless Income Tax Appellate Tribunal Centre before the Income Tax Appellate Tribunal (ITAT). The aim is to increase transparency in the proceedings, reduce the cost of compliance associated with the proceedings, and effective administration.
Indirect Tax Reforms
- Introduction of a new initiative, ‘Turant Customs’ as a faceless, paperless, and contactless customs measure.
- Withdrawal of the exemption of leather import and the same is being produced domestically now.
- Revision of custom rates on the following products which are applicable from 2nd February 2021 onwards.:
- Increase in duty on solar inverters from 5% to 20%
- Increase in duty on solar lanterns from 5% to 15%
- An increase in duty on cotton, silks, alcohol, etc. being agricultural produce
- Reduction of duty on copper scrap from 5% to 2.5%
- Reduction in basic customs duty on gold and silver
- A reduction in Basic and Special additional excise duty on petrol and high-speed diesel oil (both branded and unbranded)
- Rationalization duty on textile, chemicals, and other products
- Levy of Agriculture Infrastructure And Development Cess (AIDC) on petrol at Rs 2.5 and diesel at Rs 4.
- Exemption of Social Welfare Surcharge on the value of AIDC imposed on gold and silver.
- Insertion of new tariff items under the HSN 2404 11 00 and 2404 19 00 w.r.t. the HS 2022 nomenclature. The tariff items under the HSN 2404 11 00 and 2404 19 00 to attract NCCD of 25% with effect from 1st January 2022.
- The following are the proposal for an amendment to CGST Act:
- A retrospective charge of interest on net cash liability with effect from the 1st July 2017 under section 50 of the CGST Act
- Amendment to section 16 will allow taxpayers to claim an input tax credit on the basis of GSTR-2A and GSTR-2B.
- Earlier it was mandatory to submit a reconciliation certificate which is certified by a specified professional. Section 35 and Section 44 is amended to allow the taxpayers to file an annual return through self-certification. The Commissioner can exempt a class of taxpayers from the requirement of filing the annual return