Finance Minister Nirmala Sitharaman presented the Union Budget on 1st February 2021 in the Parliament. This was the first-ever Union Budget after the Covid-19 pandemic where a large number of sectors that have been hit, were hoping for revival packages.
The economy is projected to contract by 7.7% in the current fiscal year, although the government forecasts growth of 11% for the coming fiscal year. Fiscal deficit was estimated at 9.5% of GDP for 2020-21 and for 2021-22, the Fiscal deficit is estimated at 6.8% of GDP.
Here are some of the key highlights from the union budget 2021:
- This year’s budget laid down six pillars for reviving 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. Several regulations around the securities market are proposed to be merged as a single code and various direct and indirect taxes amendments were also proposed.
- A total spend of Rs 2,23,846 crores was announced on healthcare with Rs 35,000 crores for the Covid-19 vaccine, promising further funds if required.
- Sitharaman also proposed a sharp increase in capital expenditure to ₹5.54 lakh crore in the Union Budget 2021, which is 44.5% higher than last year’s expenditure of ₹4.39 lakh crore.
- Except in cases of serious tax evasion, assessment proceedings in the rest of the cases shall be reopened only up to three years, against the earlier time limit of six years. Provisions were also made for faceless proceedings before the Income Tax Appellate Tribunal (ITAT) in a jurisdiction less manner to reduce the cost of compliance for taxpayers, and increase transparency in the disposal of appeals.
- The limit for tax audits under section 44AB of the Income Tax Act, has been increased from Rs 5 crore to Rs 10 crore (only where 95% of payments are digitized), providing relief to many corporate houses.
- The budget for this year announced that senior citizens aged 75 years and above who are living only on pension and interest income need not file income tax returns while NRIs will be spared from double taxations as the government shall notify rules on foreign retirement funds. Housing for migrant workers by exempting notified affordable rental projects from tax was also mentioned in the budget.Startups will also get an extension in their tax holiday for an additional year. In addition to TDS and salaries that come pre-filled, details like capital gains, bank interest details and other investments will also come pre-filled.
- Sitharaman announced the advance tax liability on dividend income shall arise after the declaration of payment of dividend. Sitharaman assured that all the divestments announced so far will be completed by the end of 2021-22. The target is to raise as much as ₹1.75 lakh crore by the end of next year. The companies where divestment is announced include BPCL, Concor, Pawan Hans and more. Added to that, the government will also prepare a new list of divestments and also form a special purpose vehicle (SPV) to monetize lands owned by it.
- The budget also proposed to increase agriculture credit target to Rs 16.5 lakh crore. Sitharaman, in her union budget 2021 speech, claimed that the procurement of crops like paddy, wheat, pulses and cotton has jumped manifold in the last six years and 43.36 lakh wheat-growing farmers benefited from govt procurement under MSP as against 35.57 lakh previously.
- The finance minister also declared a boost to the auto sector with a voluntary vehicle scrapping policy where passenger vehicles older than 20 years and 15 years for the commercial vehicle will undergo fitness tests. More details will be announced soon.
- In an attempt to boost infrastructure, the finance minister announced ₹1.1 lakh crore allocation for Indian Railways in the Union Budget 2021. Of this, ₹1.07 lakh crore would be for capital expenditure. The Indian Railways papered a National Rail Plan for India to create a future-ready railway system by 2030
- Furthermore, the budget proposed an outlay of ₹1.18 lakh crore for the Ministry of Road Transport and Highways. This is mainly to offer major highway projects for four poll-bound states in the country which are 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).
- Finance Minister also announced a Rs. 3.05 lakh crore outlay for the power sector and added that 100 more cities to be added in the next 3 years to the gas distribution network announcing announced a new gas pipeline project for the state of Jammu and Kashmir.
- Over 15,000 schools to be qualitatively strengthened under National Education Policy as proposed by Sitharaman
- A proposal to launch a hydrogen energy mission for the next fiscal to generate hydrogen from green power sources was also included. Rs 1,000 crore to solar energy corporation and Rs 1,500 to renewable energy development agencies were also announced.
- Sitharaman said that the forthcoming Census could be India’s first digital Census allocating Rs 3,768 crore for FY21.
The first part of the Budget Session is scheduled to continue till February 15, 2021 while the second part of the session will be held from March 8 to April 8, 2021.