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The Union Budget-2021 Highlights

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The first-ever digital Union Budget was presented by Smt. Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs, on 1st February 2021 in the Parliament. Throwing some light over the fact that the battle against Covid-19 continues into 2021 and Nirmala Sitharaman added that these transformations post-Covid, indicate the dawn of a new era, in which India is prepared to be a land of hope and promise.  

The Union Budget 2021-2022 lays focus on the six key pillars for restoring economic growth – Health and Wellbeing, Physical and Financial Capital and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D, Minimum Government and Maximum Governance. However, to make it easy to interpret, we have compiled a list of key highlights of the Budget-2021 below:  

Direct and Indirect Tax Proposals 

There were some specific tax proposals made in order to provide relaxation to individual taxpayers and start-ups as well to some extent. Let’s quickly dive in and have a look at the proposed amendments:  

  • Relief to Senior CitizensThe compliance burden on senior citizens who are 75 years of age and above is reduced. The senior citizens who have pension income and interest income as the only source of annual income, will be exempted from filing income tax returns.  
  • Reduction in the Time for Income Tax Proceedings: Apart from the serious tax invasion cases, the time-limit for re-opening of assessment shall be reduced to 3 years from the present 6 years. 
  • Setting up the Dispute Resolution CommitteeAny individual with a taxable income up to 50 lakhs and disputed income up to 10 lakhs shall be eligible to approach the Committee under Section 245MA and get the issues resolved.  
  • National Faceless Income Tax Appellate Tribunal CentreThe provision is made to establish Faceless Income Tax Appellate Tribunal Proceedings which can further help in reducing the cost of compliance for taxpayers.  
  • Relaxation to NRI: Proposed to notify rules for removing their hardship for double taxation. 
  • Exemption from Audit:  For those who carry out 95% of their transactions digitally, the limit for tax audit shall be increased from 5 Cr to 10 Cr to incentivize digital transactions and reduce compliance burdens.  
  • Relief for DividendThe advance tax liability on dividend income shall arise only after the declaration/payment of dividend. 
  • Tax Holiday: In addition to tax incentives, tax holiday was proposed for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors; tax incentive for relocating foreign funds in the IFSC; and to allow tax exemption to the investment division of foreign banks located in IFSC. 
  • Pre-filling of Returns: The details of salary income, tax payments, TDS, etc. will already come pre-filled in income tax returns. Further to ease filing of returns, details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. will also be pre-filled. 
  • Relief to Small Trusts: To reduce the compliance burden on small charitable trusts running educational institutions and hospitals, the blanket exemption limit shall be increased to 5 Cr.  
  • Disallowance of PF Contribution: The late deposit of employee’s PF contribution or in case the PF is deducted but not deposited, then it will not be allowed as a deduction for the employer.  
  • Incentives for Start-upsThe eligibility for claiming tax holiday for start-ups shall be extended by one more year i.e. 31st March 2022.  
  • Chemicals and Textiles: Reduced Custom Duty Rates on chemicals to encourage domestic value addition and to remove inversions. And rationalized duties on raw material inputs to manmade textiles. 
  • Gold and Silver: Rationalized custom duty on gold and silver.  
  • Agricultural Products: Custom duty shall be increased for agricultural products such as cotton, raw silk, silk yarn, alcohol, etc.  

Economic Reforms 

  • Vehicle Scrapping Policy: Vehicles shall undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles and 15 years in case of commercial vehicles 
  • Vaccines: The budget of 35,000 crores is allocated for Covid-19 vaccine for year 2021-22.  
  • Textiles: 7 Textile Parks shall be established over 3 years. 
  • Capital Budget: Sharp increase in capital expenditure and 5.54lakh crores has been allocated.  
  • Ministry of Roads: Rs. 1.18lakh crore has been allocated for Ministry of Road Transport and Highways. 
  • Railway Infrastructure: A sum of 1.10 lakh crores has been proposed for railways of which 1,07,100 crores is for capital expenditure. 
  • Insurance Sector: Proposed to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% in Insurance Companies and allow foreign ownership and control with safeguards.    
  • Deposit Insurance: Amendments made to the DICGC Act, 1961, to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover.  
  • Companies Act: Proposed to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from “not exceeding 50 Lakh” to “not exceeding 2 Crore” and turnover from “not exceeding 2 Crore” to “not exceeding 20 Crore”.
  • Disinvestment: Disinvestment of companies shall be completed in FY 2021-22. Also, the IPO of LIC shall be launched in FY 2021-22.  

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