The Union Finance Minister Mrs. Nirmala Sitharaman announced the third union budget for the financial year 2021-22, which was applauded by the Prime Minister of India citing it as a “budget that has the potential to instill confidence and India’s confidence in it. A total sum of nearly 2 trillion on sectors like healthcare and mega national highway projects has been announced in the States of Tamil Nadu, West Bengal, Assam, and Kerala. The whole of 2021-22 Union Budget rested on the following six pillars-
1. Health and Well-being of the Nation
2. Physical, financial capital and infrastructure,
3. Inclusive development for aspirational India,
4. Strengthening Human Capital,
5. Innovation and R&D and
6. Minimum government and maximum governance.
Some major notifications included an increase in FDI limits, a Securities market Code which will contain important acts like the SEBI Act, Depositories Act, and which will also enhance the role of the Securities & Exchange Board of India (SEBI) as a gold exchange regulator.
Apart from this, section-wise descriptions of several provisions for Budget 2021 included the following-
a. Ensuring Welfare of Farmer’s Community-
The Finance Minister maintained that the Union Government is firm and committed to ensuring the welfare and happiness of the farmer community of the country and is committed for the same. The provisions related to the Minimum Support price assure agro prices that should be at least near to 1.5 times the cost of production expended by the farmers across all commodities. Further, a sum equal to Rs 75,060 crore is paid to farmers for wheat procurement in 2020-21.
The Union FM also proposed a budget allocation of Rupees 1000 crores towards the tea workers in the State of Assam & West Bengal including children.
b. Provisions for a Self -Reliant India-
Mrs. Sitharaman further provided the intent of union Government to strengthen India and make it a “self-reliant” or Aatmnirbhar country and announced the measures to be followed for ensuing the same. She maintained that the “Sankalp of A Self-Reliant India “is based on these six pillars including- Health & Well-being, Inclusive Development, Human Capital, Innovation and R&D, which shall include an investment of amount 64,180 Crores in totality. Further, she provided that the availability of two COVID vaccines in India has not only supported it to turn into a self –reliant economy but also has encouraged it to help more than 100 countries, and a budget of rupees 35,000 crores has been planned to be allocated to the same as per the Budget Estimates.
i. Budget Allocation for Health & Wellbeing-
A sum of Rs 2, 23, 846 crores has been budgeted to be allocated for Health & Well-being Budget Estimates for the FY 2021-22, as against Rs, 94,452 crores, which is a 137% add on to the previous budget amount.
ii. Launch of Jal Jeevan Mission for water availability
For ensuring ease in water availability especially in urban areas, the Government proposed to launch the Jal Jeevan Mission for urban areas, and a budget of Rupees 2, 87,000 crores have been allocated for the same for the period of five years.
iii. Eliminating Pollution from Urban Areas-
For ensuring a safe environment in rural as well as in urban areas of India, a budget allocation of rupees 1, 41, 678 Crores is proposed to be expended for a period of five years. Similarly, to take care of increasing air pollution especially in urban areas, the Government has proposed to allocate a sum of Rs 2,217 crores to be spread over 42 urban centers across India.
iv. Strengthening MSMED Sector in India -
A total sum of Rs.15,700 crores has been proposed to be allocated towards the promotion & encouragement to the MSMED Sector, and there is further add on to the Rural Infrastructure Development Fund for which the budget is proposed to be raised from the previous 30,000 crores to 40,000 crores for the FY 2021-22.
v. Encouraging use of Solar Energy
Capital infusion of Rs.1000 Crores is proposed to be made towards Solar Energy Corporation of India along with a total sum of Rs. 1500 crores to be made towards Indian Renewable Energy Development Agency.
vi. Expansion of Pipeline Infrastructure in India-
Finally, the National Infrastructure Pipeline has proposed to be expanded up to 7400 projects.
c. Provisions for Education & Skilling sector-
i. Encouraging primary & Higher Education
For the purposes of encouraging school education and strengthening Human Capital, the Union Finance Minister proposed the following-
• A total of 15,000 schools will be supported by effecting all NEP components, which shall act as ideal schools in their regions for mentoring other institutions.
• Establishment of further 100 new Sainik Schools in partnership with NGOs/private schools/states.
• Introduction of new legislation for the purposes of setting up the Higher Education Commission of India as an authority with four distinct vehicles for standard-setting, accreditation, regulation, and funding;
• Formation of formal umbrella structure to include all Govt. colleges, universities, research institutions within a city for greater synergy.
• Establishment of a Central University in Leh for accessibility of higher education in the Ladakh region.
ii. Welfare of SC s & ST communities
For Scheduled castes and Tribes, the union government has announced its proposal to establish a total of 750 residential schools in tribal areas along with the following-
• Increase in the unit cost of each school up to a sum of Rupees 38 crores in the FY 2021-22 and for the hilly and difficult areas to a total of 48 crores in total.
• More emphasis to be laid establishment of a robust infrastructure especially in the tribal areas.
• Post- Matric Scholarship for SC community to include a sum of Rs 35,219 crores enhanced Central Assistance for the next 6 years till 2025-2026 a benefit of rupees 4 crores benefit for the same.
iii. Development of Human Capital through Skills Enhancement-
• For facilitation of skill enhancement for the youth population of India, the Union FM has proposed amendments to the legislation of Apprenticeship Act 1961.
• A total amount of Rupees 3000 Crores has been allocated for the readjustment of the existing National Apprenticeship Training Scheme (NATS) which provides for a post-education apprenticeship, training of graduates, and diploma holders in Engineering.
• Entering further formal partnerships with nations to facilitate skill development and knowledge for Indian youth, which included the creation of benchmark skill qualifications, assessment, certification, and deployment of certified workforce with UAE and a collaborative Training Inter Training Programme (TITP) to ensure facilitation of skills, technique, and knowledge with Japan.
d. Provisions related to Income-Tax & GST
i. Change in Taxes System
According to the Union Finance Minister of India, our country needs a tax system that would place a minimum amount of burden on the Indian masses. She neither suggested any change in slab rates for the year 2021-22, nor any announcement related to much anticipated COVID cess.
To ease and encourage tax- compliances, the Union Government proposed a faceless dispute redressal mechanism to be launched, through a Faceless Income Tax Appellate Tribunal Centremaking the system more transparent through electronic communication and without any prescribed limits of jurisdiction and the same to be facilitated through reduction of timelines for income tax proceedings proposed. And for ensuring the same objective, the FM has announced the case assessment to be reduced to 3 years from the previous limit of six years.
Finally, to encourage a digital economy and reduce compliances, the limit of tax audit has been raised from 5 Crores to 10 crores, such individuals undertaking 95% of their total transactions digitally.
ii. Provisions on Senior Citizen Income & Deposit Interests
The Government proposed that the Senior citizen of the country (who are either 75 in age or above), and who are not in receipt of any income apart from pension and interest on deposits would no longer be required to submit Income Tax Returns. However, any interest income earned on EPF over and above Rs 2.5 lakh will be subject to taxes.
iv. Indirect Tax & GST Proposals-
The Finance Minister also proposed to reduce inverted duty structures by reviewing over 400 old exemptions in indirect taxes by way of widespread discussions to be initiated from October 2021, with a view to provide reliefs and take all necessary steps required for the same.
However, a new cess namely, the Agriculture Infrastructure and Development Cess has been proposed to be levied on petrol as Rs. 2.5 rupees per litre and Rs. 4 per litre on diesel. Similarly, unbranded petrol and diesel have been proposed to attract a basic excise duty of Rs. 1.4 and Rs.1.8 per litre on petrol and diesel respectively. The same shall be levied on Alcoholic Beverages at a percentage of 100%.
v. TDS Exemption on Dividend Payment to REIT &InvITs
Reflecting on the Government’s earlier decision to abolish the payment of Dividend Distribution Tax (DDT), from the hand of companies and making it payable from the pockets of shareholders, now, the FM has proposed to make dividend payments in the hands of Real Estate Investment Trusts (REITs) and Infrastructure Investments Trusts (InviTs) exempt from the payment of TDS to further incentivize investments. Also, Foreign Portfolio Investors or the FPIs allowed tax deductions on dividend income at a lower treaty rate.
v. Pre-filled ITR Forms
The Union Government has also proposed to simplify the ITR procedure to encourage tax –payments among the Indian population. The union Budget 2020-21 provided details like capital gains, income from list securities, dividend income, income from interest on bank deposits to be presented as pre-filled in ITR forms.
vi. Dispute Resolution Mechanism for small taxpayers
For the purpose of easing compliances and making them hassle-free, the Government of India has proposed to initiate a dispute resolution mechanism for small taxpayers, and such disputes shall be resolved through the means of a Dispute Resolution Committee.
e.Taxation Provisions for Unit Linked Insurance Plan(ULIPs)
With an objective to rationalize taxation of ULIPs, the Government has recommended an exemption up to 2.50 lakh of the annual premium associated with ULIPs, which shall be applicable on ULIP policies taken on or after 01.02.2021. However, nothing shall be subject to tax which is received on death without any limit on the annual premium.Additionally, for ensuring transparency, the amount chargeable to tax under ULIP shall be granted similar concessional capital gains as are available to the Mutual Funds at present.
f. Exemption on Certain Foreign Income of NRI’s-
Considering the hardships & difficulties faced by the Non-Residents with their foreign incomes on retirement due to taxation data mismatches, the Union FM suggested notifying rules to match the taxation incomes and eliminate such hardships.
g. Affordable Housing through Attractive Tax benefits
Taking a further leap towards its objective to provide affordable housing to the Indian population, the Union FM has proposed an extension of the time-period to avail housing loans by a further one year of time to further avail further tax benefits of Rs 1.5 lakh u/s 80EEA of the Income Tax Act, the concerned section allows tax benefits up to Rs 1.5 lakh on the interest paid on loans taken for Residential House Property for affordable housing. Such benefit is over and above, the tax exemption allowed under section 24B of the Income-Tax Act 1961, which allows deduction on interest on loan availed for purchase/construction of House Property.
h. Encouraging Incorporation of OPCs by NRI’s-
Keeping the prospects of the development of the Indian economy open and wide for the global competition and markets, the Union Government has also allowed Non-Resident Indians to incorporate and operate One Person Companies (OPCs) in India, along with the benefit of no pre-condition for any paid-up capital and turnover of the company, apart from Indian citizen who was only allowed to register OPCs in India.
i. Relaxation in FDI Provisions in Insurance Sector
Announcing the Initial Public Offer for shares subscription of the Insurance giant, Life Insurance Corporation in India in the same year, the Union Finance Minister has announced FDI in the insurance sector to be raised from 49% to 74% for the financial year 2020-21. This step is going to have a large impact on the Indian economy and is being hugely appreciated on the part of the Government. The same was being requested for many years now and has the potential to attract huge foreign investments and fortify the insurance sector.
j. Additional Measures-
Other significant measures proposed to be taken and announced through FY 2021-22 are as follows-
i. A total amount of rupees 1.97 crores is proposed to be expended for the next five years for the purposes of the Production Link Incentive Scheme (PLI) across 13 sectors;
ii. A total sum of Rupees 20,000 crores is proposed to be allocated towards setting up and capitalizing a Development Financial institution (DFI), having the purpose to act as a facilitator for the purpose of infrastructure financing.
iii. An amount of Rs. 1, 18,101 lakh crores, has been budgeted for the Ministry of Road Transport and Highways out of which a sum of rupees 1, 08,230 crores are for capital purposes.
iv. Rs. 1,10, 055 crores has been allocated towards the railway sector, of which Rs. 1,07,100 crores are for capital purposes.
v. A total sum of Rs. 3, 05,984 crores has been announced for the purposes of overhauled and reform-based and reform linked Power distribution Sector Scheme.
Conclusion
The Union Budget of 2021-22 has arrived with its bag full of surprises and encouragement from the Government to look forward towards a brighter, stronger, and a self-reliant economy. Major steps like FDI changes and changes in the taxation policies with no change in tax slabs and economic development initiatives this year are worth appreciation and do seem to have a far-fetching impact on the economy.
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