By presenting a digital Budget, Finance Minister Smt Nirmala Sitharaman has departed from the traditional way of presenting the Budget.At the time of the lockdown, caused due to outbreak of the Covid-19 pandemic, the Central Government had announced the Atmanirbhar Bharat package (in three parts) to sustain the recovery. The total financial impact of all packages, including measures taken by the RBI was estimated to about Rs27.1 lakh crore which amounts to more than 13% of GDP.
These Atmanirbhar Bharat packages accelerated the pace of structural reforms initiated by the government. Redefinition of MSMEs, commercialisation of the mineral sector, agriculture and labour reforms, privatisation of Public Sector Undertakings,‘One Nation One Ration Card’, and production-linked incentive schemes aresome of the notable reforms carried out during this period. Faceless Income Tax Assessment, DBT and Financial Inclusion are the others.
As India has two vaccines available with it today, and has begun medically safeguarding its citizens, the nation hopes to recover from the Covid-19-induced economic crisis, all the eyes were on the Union Budget. In view of the economic devastation that has been caused by the Covid-19 pandemic and the resultant lockdowns and market disruptions, the Budget was slated to be one of the most important and anticipated one.
While presenting the Budget,with a strong holding on the lines of Atmanirbhar Bharat, reforms, disinvestment, and long-term infrastructure development have been the focus of this year’s Budget. As expected, the government stepped up expenditure on various large-scale projects to provide impetus to the economy and largely relied on asset monetisation and borrowings to fund the same.Administrative reforms were aimed at helping gain further on ease of doing business.
The Indian share market also welcomed the moves taken by the government in the Budget presentation. The Sensexended with increase of 2,314 points; whereas, the Nifty index gained 646 points. This was once in a lifetime jump seen on Budget day in India, with Sensex and Nifty rising over 5% each. Almost all the sectors gained with the Budget announcements in the range of 3-6% each.
In the words of the Finance Minister, being Atmanirbhar is not a new idea and Ancient India was largely self-reliant,and equally, a business epicentre of the world.Atmanirbhar Bharat is an expression of 130-crore Indians who havefull confidence in their capabilities and skills.
Six Pillars
The Finance Minister in her speech mentioned that the Budget proposals announced for the fiscal year 2021-22, weaved along six key pillars:
- 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
Atmanirbhar Bharat – Production-Linked Incentive scheme (PLI)
In order tocreate manufacturing global champions for an Atmanirbhar Bharat, a Production-Linked Incentive schemehas been announced for 13 sectors.This initiative willhelp bring scale and size in key sectors, create and nurture globalchampions and provide jobs to the youth.
For this purpose, the government has committednearly Rs1.97 lakh crore, over 5 years starting FY 2021-22.
Disinvestment and Strategic Sale of PSUs
The Government have worked towards the strategicdisinvestment of Public Sector Undertakings (PSUs). A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML,Pawan Hans, NeelachalIspat Nigam limited among others are proposed to becompleted in the fiscal year 2021-22. Other than IDBI Bank, as already proposed earlier, now it is further proposed to take up theprivatisation of two more PSBs and one General Insurancecompany in the year 2021-22. Legislative amendments are also proposed accordingly.Further, as the FM had unveiled the plan of Central Government to sell a partial stake in LIC through an IPO in Budget 2020, she announced that the same will be completed during the upcoming financial year.
Revision in turnover-based threshold for audit for SMEsss
In order to incentivise non-cash transactions, and to promote digital economy, and also to reduce the compliance burden of small and medium enterprises, it is proposed to increase the threshold of Tax audit u/s 44AB, from INR 5 Crores to INR 10 Crores, for those businesses who carry out less than 5% of their business transactions in cash (to be considered separately for receipts as well as payments).
Package for affordable housing projects: Same as last year, there was separate package for the affordable housing projects in the budget,this year as well. Such package includes benefits for both, the developer as well as buyer of affordable housing projects.
For developer: In order to boost the supply of affordable houses in the country, a tax holiday is being provided on the profits earned by the developers of affordable housing projects. After the extension of scheme, such tax holiday will be available for the projects getting approval on or before March 31st, 2022. Further, it is also proposed to allow the deduction for rental housing projects as well.
For buyer:Similarly, the benefit of additional deduction of up to INR 1.50 Lacsbeing provided for interest paid on loans taken for purchase of an affordable house is now proposed to extend for the loans being sanctioned upto March 31st 2022.
Concession to real estate transactions: In order to provide a significant relief to Home buyers, and also to real estate developers, it is proposed to increase the safe harbour thresholds, while taxing income from business profits and other sources in respect of transactions in real from existing rate of 10% to 20%, subject to fulfilment of certain conditions.In simple words, the tolerable range, for difference in the Stamp duty valuation of property, and the actual transaction value, in respect of new units built by real estate developers, is proposed to be extended till 20%.
Tax incentive to start-ups: Start-ups were not disappointed with the Budget proposals at all. In order the help the eligible start-ups and to help investments therein, it is proposed to extend the benefit of existing Section-80IAC, for the start-ups incorporated up to March 31, 2022. Similarly, the benefit of deduction under Section-54GB can now be claimed for the residential properties transferred up to March 31, 2022.
Dispute Resolution Committee: In order to minimise the litigations, it is proposed to constitute one or more DRCs who shall resolve the disputes of class of person, as specified by the board. Only those cases will be considered by DRC, where the returned income is up to Rs50 lakh, and amount disputed is up to Rs10 lakh.The DRC shall have the powers to reduce or waive any penalty imposable under the Act, or grant immunity from prosecution for any offence under the Act.
Bonanza for Trusts/ Hospitals/ Institutions: As per the existing laws, the income received on behalf of “university or educational institution” and the income of “hospital or institution” is exempt, subject to the condition that the annual receipts of person claiming such exemption should not be more than Rs1 crore. To provide a significant relief, such threshold has been increased from Rs1 crore to Rs5 crore.
Removal of requirement of audit under the GST laws: A very big step is being taken by the government in respect of GST laws. The mandatory requirement of getting annual accounts audited and reconciliation statement under the GST, is proposed to be omitted.
Conclusion:Given the current situation of nation,the Budget-2021 was no ordinary Budget, having followed a year full of catastrophic challenges and uncertainty.There is a strong sense of optimism in the air as we leave the worst behind us.The Finance Minister was confident enough to state that the Government isfully prepared to support and facilitate the economy’s reset, and this Budgetprovides every opportunity for our economy to raise and capture the pacethat it needs for sustainable growth.This policy-oriented Budget with a view to rejuvenating and strengthening both sectors and institutional frameworks, over the short and long run, was actually the need of hour.Bharat has the potential to become one of the fastest economies to recover post the pandemic and this Budget showcases a blueprint on how we will start to do exactly that.
Chart: V-Shaped Recovery of GDP Growth rate post Covid-19 outbreak
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