The Union Budget 2021-22 was presented by the Hon’ble Finance Minister Nirmala Sitharaman on 1st February 2021 in the Parliament. This year’s Budget lays focus on the seven 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.
(A) Direct Tax Proposals
Certain direct tax proposals were introduced, providing relaxation to individual taxpayers and startups to some extent. The individual and corporate tax rates for FY 2021-22 (AY 2022-23) was left unchanged. In a major move, the limit for tax audits under section 44AB have been increased from Rs 5 crore to Rs 10 crore (only where 95% of payments are digitised), providing relief to many corporate houses. The following are other proposed amendments:
1) Income Tax relaxation for senior citizens of 75 years age and above:
It has been proposed to exempt the senior citizens from filing income tax returns if pension income and interest income are their only annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.
2) Reduction in time for Income Tax Proceedings:
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.
3) Constitution of ‘Dispute Resolution Committee’:
Those assessed with a taxable income of up to Rs.50 lakh (for small and medium taxpayers) and any disputed income of Rs.10 lakh can approach this committee under section 245MA. It will prevent new disputes and settle the issue at the initial stage.
4) National Faceless Income Tax Appellate Tribunal Centre:
Provision is made for faceless proceedings before the Income Tax Appellate Tribunal (ITAT) in a jurisdiction less manner. It will reduce the cost of compliance for taxpayers, and increase transparency in the disposal of appeals. Further, it will also help achieve even distribution of work in different benches and ensure efficient administration.
5) Tax incentives to startups:
The tax holiday for startups has been extended by one more year up to 31st March 2022.
6) Relaxations to NRI:
There is a proposal to notify rules for removing hardship for double taxation.
7) Pre-filing of returns to be forefront:
Pre-filling will be allowed for salary, tax payments, TDS, etc. Further, details of capital gains from listed securities, dividend income, etc. will be prefilled.
8) Advance Tax on dividend income:
Advance tax will henceforth be applicable on dividend income only after its declaration. Tax holidays are proposed for aircraft leasing and rental companies.
9) Disallowance of PF contribution:
In case the employee’s PF contribution was deducted but not deposited by the employer, it will not be allowed as a deduction for the employer.
10) Section 43CA stands amended:
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.
11) Amendment to Section 44ADA:
Section 44ADA applied to all the assessees being residents in India. Now onwards, it applies only to the resident individual, Hindu Undivided Family (HUF) or a partnership firm, other than LLP.
12) Section 80EEA deduction extended:
The affordable housing additional deduction was extended till 31st March 2022. The tax exemption has been granted for affordable rental projects.
(B) Indirect Tax Proposals
1) Few of the items on which Customs Duty Rates are revised are as follows:
i) Reduced duty on copper scrap from 5% to 2.5%
ii) Basic and Special additional excise duty on petrol and high-speed diesel oil (both branded and unbranded) is reduced
iii) Increased duty on solar inverters from 5% to 20%
iv) Raised duty on solar lanterns from 5% to 15%
v) The basic customs duty on gold and silver reduced
vi) The department will rationalise duty on textile, chemicals and other products
vii) The revised rates will be applicable from 2nd February 2021 onwards.
2) New tariff items under 2404 11 00 and 2404 19 00 have been inserted in accordance with upcoming HS 2022 nomenclature. Further, NCCD of 25% is prescribed on these tariff items with effect from 1st January 2022.
3) Agriculture Infrastructure And Development Cess (AIDC) has been newly imposed on petrol and diesel at Rs2.5 and Rs.4 per litre respectively.
4) Regarding agricultural products, the customs duty is increased on cotton, silks, alcohol, etc.
5) Exemption of Social Welfare Surcharge on the value of AIDC imposed on gold and silver. Therefore, these items would attract surcharge at the normal rate, only on value plus basic customs duty.
6) The exemption on import of leather will be withdrawn as they are domestically produced.
7) A new initiative called ‘Turant Customs’ will be introduced for faceless, paperless, and contactless customs measures.
8) CGST Act was amended for several provisions as follows:
i) Section 16 amended to allow taxpayers’ claim of the input tax credit based on GSTR-2A and GSTR-2B.
ii) Section 50 of the CGST Act is being amended to provide for a retrospective charge of interest on net cash liability with effect from the 1st July 2017.
iii) Section 35 and 44 amended: Mandatory requirement of furnishing the GST reconciliation report signed by the specified professional is relaxed by allowing the filing of annual return on a self-certification basis. The Commissioner can exempt a class of taxpayers from the requirement of filing the annual return.
(C) Economic Reforms and Schemes
1) 64,180 crores allocated for New Health Schemes.
2) 35,000 crores allocated for Covid Vaccine.
3) 7 Mega Textile Investment Parks will be launched in 3 years.
4) 5.54 lakh crores provided for Capital Expenditure.
5) 1.18 lakh crores for Ministry of Roads.
6) 1.10 lakh crores allocated to Railways.
7) Proposal to amend Insurance Act. Proposal to increase FDI from 49% to 74 %.
8) Deposit Insurance cover (DICGC Act 1961 to be amended). Easy and time bound access of deposits to help depositors of stress banks.
9) Proposal to revive definition of ‘Small Companies’ under Companies Act 2013. Capital less than 2 Cr. and Turnover Less than 20 Cr.
10) Disinvestment: IPO of LIC Announced, Disinvestment of Companies will be completed in FY 2021-22.
11) Target for clean water supply with budget of INR 2,87,000 crores for 500 Cities.
12) Production linked incentive of 1.94 lakh crores for 13 sectors in next 5 years.
13) A Budget of 22,000 crores for development of financial institutions in order to augment the growth of institutional Educational and bring financial prudence.
14) Bharat Malla Yojna regarding new roads development of 8500 Kilometers highways and completion of existing 11000 kilometer highway and corridor which is in progress.
15) 100 percent of Electrification of broad gaze line is targeted and for passenger safety, National security Gaurd coach is proposed to be added.
16) For urban transportation, 2000 new buses to start and budget outlay of 18,000 crores has been kept for this purpose.
17) Public private partnership to encourage in railway capital expenditure. New lines to broad gaze is of 4600 kilometers.
Author
CA Ankit Gupta