Union Budget 2021- Budget at a glance, Key Takeaways & Highlights

The Union Budget 2021-22 was presented by the Hon’ble Finance Minister Nirmala Sitharaman on 1st February 2021 in the Parliament. The Budget speech was given by the FM from 11 a.m. to 1 p.m.

This year’s Budget lays focus on the six pillars for reviving the economy -
1. Health and Wellbeing,
2. Physical and Financial Capital and Infrastructure,
3. Inclusive Development for Aspirational India,
4. Reinvigorating Human Capital,
5. Innovation and R&D, and
6. Minimum Government Maximum Governance.

Several regulations around the securities market are proposed to be merged as a single code. Several direct taxes and indirect taxes amendments were also proposed.

The Union Budget 2021-22, which has come at a time when India’s economy is reeling under the aftereffects of the Covid-19 induced lockdown, was presented by Union Finance Minister Nirmala Sitharaman at Parliament Monday. This was Sitharaman’s third budget under the National Democratic Alliance (NDA) government led by Prime Minister Narendra Modi. In a significant departure from the tradition, this year’s Budget was unique as it was paperless. The papers did not get printed for the first time since Independence, due to the COVID-19 pandemic.

Here are the Top 11 Key Takeaways of Union Budget 2012-22:

1. Equity Markets Rally 3.5% on Budget Speech with No Negatives.
2. Long, Slow Fiscal Glide path; Fiscal deficit to reduce from 9.5 % in FY 21 to 6.8% in FY22 and 4.5 % by FY 2026.
3. 137% increase in Health Spend.
4. Big Infra push via 34.5 % higher Capital Budget @ Rs. 5.54 lakh crore; Infra monetisation via InVITs.
5. Gross Expenditure up 13 % @ Rs 35 lakh crore for FY 21; Same Expenditure number for FY 22.
6. DFI @Rs 20000 Cr Capitalisation + Bad Banks (No amount Provided yet) + PSU Bank recap @ Rs 20000 Cr.
7. Divestment Target at Rs 1.75 lakh Crore; 2 PSU Banks + 1 General Insurance Co. + LIC IPO + Air India + BPCL+SPV for PSU Land Sale.
8. 7 Mega Textile parks to be setup over three years; FDI in insurance raised from 49% to 74%.
9. Yet another Power Discom rescue scheme @ Rs 3.05 lakh crore over 5 years.
10. Proposal to Consolidate SEBI Act, SCRA Act[Securities Contract (Regulation) Act], Government Securities Act into one.
11. Forthcoming Census could be India's first Digital Census.

Union Budget 2021-22 at a glance on which sector received how much allocation?

1) Health and Well Being:

a) Total allocation: Rs 2,23,846 crore (138% increase than previous Budget).
b) PM Aatmanirbhar Swastha Bharat: Rs 64,180 crore over 6 years.
c) Urban Swachcha Bharat Mission: Rs 1,41,678 crore over 5 years.
d) Voluntary vehicle scrapping policy. Vehicles will undergo fitness tests after 20 years for PVs, 15 years for CVs.

2) Manufacturing:

a) Capital expenditure for FY 21-22: Rs 5.54 lakh crore
b) Mega Investment Textiles Parks over 3 years, in addition to PLI.
c) Bill to set-up a Development Finance Institution (DFI), capitalised with Rs 20,000 crore.
d) DFI for infrastructure financing: Bill will be passed to set up the DFI with a target lending portfolio of Rs 5 lakh crore in 3 years
e) Capital expenditure for FY 21-22: Rs 5.54 lakh crore (an increase by 34.5% YoY).
f) To launch National Monetisation Pipeline for brownfield projects, NHAI and PGCIL have sponsored one InvIT each

Roads Connectivity:

a) Allotment to Ministry of Road Transport & Highways: Rs 1.18 lakh crore.
b) To award 8,500-km of highways by March 2022 and 11,000-km of national highway corridor to be completed.
c) Highway works proposed:i) 3,500 km corridor in Tamil Nadu.ii) 1,100 km in Kerala at investment of Rs 65,000 crore.iii) 675 km in West Bengal at a cost of Rs 95,000 crore.iv) 1,300 km in Assam in the next 3 years.
d) 3500 km of national highway work being planned in Tamil Nadu at an estimated investment of Rs 1.3 lakh crore.
e) 1500 km of national highway work being planned in Kerala at a cost of Rs 65,000 crore.
f) Government to undertake future freight corridor development projects.
g) The govt to work towards raising the share of public transport with an outlay of Rs 18,000 crore.

Railways:

a) Total allocation: Rs 1,10,055 crore.

Power:

a) Scheme to assist Discoms will be launched: Outlay over Rs 3 lakh crore.
b) Ujjwala scheme to be expanded to over 1 crore more beneficiaries.
c) City gas distribution network to be expanded to 100 more districts.
d) Independent gas network operator will be set up.

Disinvestment:

a) Divestment target for FY22: Rs 1.75 lakh crore.
b) Proposal to strategically divest 2 PSU banks & 1 general insurance co.
c) Proposal to take up 2 PSBs and one general insurer for divestment.
d) To bring IPO of LIC in FY22.
e) Approved policy for divestment in strategic and non-strategic sectors.
f) Set up a separate administrative structure for cooperatives.
g) Approval policy for divestment in strategic and non-strategic sectors.
h) Non-core assets like surplus land will be monetised. SPVs will be set up to carry out this activity.

Startups/MSMEs:

a) Innovators would be allowed to form 1-person companies without restrictions, paid-up capital, or turnover norms.
b) Govts says provided Rs 15,700 crore to MSME sector, more than 2x of the previous year.
c) Proposal to reduce the margin money requirement from 25% to 15% doe Stand Up India for SCs, STs, and women, and to also include loans for activities allied to agriculture.
d) Proposal to provide Rs 1,000 crores for the welfare of Tea workers especially women and their children in Assam and West Bengal. A special scheme will be devised for the same

Agriculture and Allied Services:

a) For wheat procurement in 2020-21 to farmers: Rs 75,060 crore.
b) Enhanced agriculture credit target for FY22. Additional allocations for rural infrastructure & irrigation.
c) Micro-irrigation corpus doubled to Rs 10,000 crore.
d) Agriculture infra funds will be made available to APMCs.
e) Rural infra fund increased to Rs 40,000 crore.
f) Set up multi seaweed park in Tamil Nadu.

Social security:

a)  '1 Nation 1 Ration Card' plan under implementation by 32 states & UTs. To launch a portal to collect data on migrant workers.
b) Social security benefits will be extended to gig and platform workers.
c) To launch a portal to collect data on migrant workers.
d) Social security benefits will be extended to gig economy workers.
e) Women will be allowed to work in all areas and in night shifts.

Education and Skill Development:

a) Introduction of legislation for setting up of higher education commission. Will set up a central university in Leh.
b) 15,000 schools to be strengthened as per National Education Policy
c) 100 new Sainik schools to be set up in partnership with NGOs.
d) Raise allocation for 'Eklavya' schools to Rs 38 crore & Rs 40 crore in hilly areas
e) For skill initiatives for the youth: Rs 3,000 crore to be set aside.
f) National Research Foundation to be allocated Rs 50,000 crore over 5 years

Digital Payments:

a) To boost digital payments.
b) For financial incentives for digital payments: Rs 1,500 crore earmarked.
c) NRF to get Rs 50,000 crore over 5 years. NRF will focus on the Research system being strengthened in the industry.

Expenditure target:

a) FY21 revised expenditure target: Rs 34.50 lakh crore.
b) Govt to approach the market for additional Rs 80,000 crore to fund the FY21 fiscal deficit.
c) Fiscal deficit will reach below 4.5% by FY26.
d) Gross market borrowing target at Rs 12 lakh crore for FY22.
e) 41% devolution to states retained.
f) Contingency Fund of India to be enhanced: Rs 30,000 cr.
g) Propose to discontinue loans to FCI. Have provided support in budget.
h) 15th Finance Commission reconfirming share of States at 41%.
i) Fiscal deficit in the revised estimate for FY21 pegged at 9.5% of GDP
j) Need another Rs 80,000 crore for FY21.
k) Will approach market in next the 2 months for the additional Rs 80,000 crore.
l) Fiscal Deficit Estimated at 6.8% for FY22.
m) Gross Borrowing Estimated at around Rs 12 lakh crore for FY22
n) Will look to bring the fiscal deficit below 4.5% by 2025-2026 (FY26).
o) Expect a fairly decent decline of Fiscal Deficit up to FY26.

Income Tax:

a) Senior citizens above 75 years with only pension and interest income exempted from filing returns.
b) Reopening of tax cases only till after 3 years Vs 6 years earlier.
c) To set-up a faceless dispute resolution mechanism for small taxpayers.
d) To make Income Tax Appellate Tribunal faceless.
e) Proposal to Propose to increase the threshold for tax audit to Rs 10 crore Vs Rs 5 crore (for those transacting 95% digitally).

Affordable Housing:

a) Affordable housing deduction extended by one year to FY22.
b) Tax exemption to notified rental housing projects
c) Notified infra debt funds to be eligible to raise tax-efficient zero-coupon bonds.

Other Taxes:

a) FPI to get a deduction of tax on the dividend at a lower treaty rate.
b) Tax exemption for aircraft leasing companies. Tax holiday for Aircraft leasing business in Gift city.
c) Details of cap gains, div income, interest income to be pre-filled in tax forms.
d) Late deposit of employee’s contribution will not be allowed as a deduction for the employer.
e) Extension of cap gains tax exemption for investment into start-ups by another year.
f) Delayed contribution of EPF by an employer for the employee will not be allowed as a deduction.
g) Proposal to review more than 400 old exemptions in customs this year.
h) To put into place new customs duty structure by Oct-1, 2021.
i) Withdrawal of exemptions on some parts of mobile phones. Some parts of mobiles to move from NIL to 2.5% rate.
j) Exemption of duty on steel scrap for a specified period. Revocation of ADD and CVD on certain steel products.
k) Cut in duty on copper scrap 2.5% from 5%.
l) Cut in Basic Customs Duty rate on nylon chips & nylon fiber.
m) Rationalisation of customs duties on gold and silver.
n) Introduction of a phased manufacturing plan for solar cells & panels.
o) Withdrawal of exemption on tunnel boring machines, to be taxed at 7.5%.
p) Increase in customs duties on some auto parts.
q) Withdrawal of exemption on certain kinds of leather imports.
r) Raise in customs duty on cotton and raw silk.

6 budget proposals which may impact the salaried class and the common man:

1. Proposal to exempt senior citizens from filing ITR

The FM has proposed to exempt senior citizens from filing of income tax return if they are of the age 75 years or above, having only pension and interest income.

“There were expectations that the Budget would provide relief in terms of reduction in tax rates or increase in deductions, which to the dismay of the common man have been left untouched by the Finance Minister. However, relief has been provided to senior citizens of 75 years and above wherein they have been exempted from filing of tax return if they have only pension income and interest income in specified bank accounts subject to conditions. This would certainly bring a smile to an important strata of our society, being senior citizens,” says Divya Baweja, Partner, Deloitte India.

2. Faceless assessment

The focus of the FM has been to make the tax processes efficient and transparent. This was achieved by introduction of faceless assessment, appeal and penalty processes earlier. In line with these principles, the FM has proposed faceless proceedings at the Income Tax Appellate Tribunal (ITAT) so as to bring more transparency in disposal of appeals at the ITAT and also achieve equitable distribution of work amongst different benches of ITAT.

3. Interest earned on PF contribution

An interesting change not covered in the Budget Speech relates to taxation of interest earned by employees on their Provident Fund. Interest earned on annual PF contribution exceeding Rs 2.5 lakh from April 2021 will now be taxable. In the 2020 Budget, the FM had capped the tax exemption on employers contribution to PF, NPS and Superannuation fund exceeding an aggregate of Rs 7.5 lakh p.a.

“While last year’s change on taxation of employer contributions would impact higher salalried employees, the change proposed in today’s Budget with respect to interest earned on employee’s contribution will have a much wider impact,” says Alok Agrawal, Partner, Deloitte India.

4. NRI taxation

A further fillip to the NRIs is proposed. “Upon return to India a challenge is faced by the NRIs w.r.t. tax on accrued income in foreign retirement accounts in terms of tax credit for foreign taxes – this arises on account of differential tax years. Specific rules for NRI will be notified to removing hardship of double taxation,” says Tapati Ghose, Partner, Deloitte India.

5. Dividend payment to REIT/ InvIT exempt from TDS

The FM has proposed to make dividend payments to REITs (Real Estate Investment Trusts) and INVITs (Infrastructure Investment Trusts) exempt from TDS. “The Indian real estate sector is at an interesting juncture and I strongly believe REITs will define the future as they allow investors to expand their range of properties. The Finance Minister’s plan to introduce a Bill to set up a DFI (developmental financial institution) for long-term funding infra projects with a capital of Rs 20,000 crore and lending Rs 5 lakh crore in the next 3 years is a great move for India’s sustainable infrastructure,” says Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd.

Sahil Vachani, MD & CEO, Max Ventures & Industries (MaxVIL), says, “The decision of not to deduct TDS on REITs and InVITs is a welcome move for the real estate industry, particularly the commercial category. It will help attract investment in commercial real estate assets and thereby will help boost the demand for A-grade office spaces across the country especially in the bigger cities, which are hubs of employment activities.”

6. Affordable housing

The Budget aims to give affordable housing a boost. The measures include, additional deduction of interest, up to Rs 1.5 lakh, for loans taken to buy an affordable house has been extended for loans taken till March 2022; tax holiday for Affordable Housing projects has been extended till March 2022; and tax exemption has been allowed for notified Affordable Rental Housing Projects.

Dr. Niranjan Hiranandani, National President NAREDCO, says, “The proposals for the annual budget reinforce the government’s focus on affordable housing. For the home buyer, the second extension of the deadline till 31 March 2022 for the additional Rs1.5 lakh tax deduction given on loans taken to buy a house in an affordable housing project is welcome, as is the developer whose affordable housing projects also get an extension for tax benefits, for projects completed till March 31, 2022. Similarly, tax exemption for notified affordable housing for migrant workers, and the deduction on payment of interest for affordable housing being extended by a year will give a fillip to this emerging segment.”

Views of India Inc on Budget

The focus on growth over fiscal consolidation, healthcare spending and steps to further help the startup ecosystem came in for praise from industry leaders across different sectors.

'Coming in the backdrop of a global pandemic of the century, it boldly spells the government's growth agenda and a march towards building a new and prosperous India. The budget clearly has the stamp of our Prime Minister with a clarion call for 'Sabka Saath Sabka Vikas' and 'Vocal for Local',' Founder and Chairman of Bharti Enterprises Sunil Bharti Mittal said.

The first budget of this new decade reimagines India in the form of Aatmanirbhar Bharat like never before, he added.

Echoing similar views, Vedanta Resources Executive Chairman Anil Agarwal tweeted, 'Congratulations to @narendramodi and FM @nsitharaman for a very reformist #Budget2021 with many big ideas including strategic disinvestment of two public sector banks & one insurance company. Thrust on infrastructure will boost growth.' Mahindra Group Chairman Anand Mahindra said in a time of unprecedented economic stress, the government's responsibility was to spend enough to revive the economy or else face enormous human suffering.

'So I had one expectation from this budget: that we should be very liberal in terms of the targeted fiscal deficit. Box ticked,' Mahindra tweeted.

Lauding the finance minister for the focus on healthcare spending and immunization especially for COVID-19 and the pneumococcal vaccines, Serum Institute of India CEO Adar Poonawalla said this will help India recover rapidly from this pandemic.

'Hopefully, this will also encourage more innovation and expansion in the sector,' he added.

Apollo Hospitals Group Chairman Prathap C Reddy said Sitharaman's announcements to develop primary, secondary and tertiary healthcare systems will provide access to medical care for all in India, fuel job creation and boost economic momentum.

Bringing in the cricketing angle, RPG Enterprises Chairman Harsh Goenka tweeted,'Combination of Pujara & Pant innings - consistency and flamboyance! Steady focus on infra, commercial laws, ease of business with big shots of monetising PSU assets, new divestments, insurance FDI. India won in Australia. Now India shall rise above in new world order'.

Terming the budget visionary and growth-oriented, ITC Chairman and Managing Director Sanjiv Puri said it provides further impetus to build India's competitiveness as also foster inclusive growth.

Congratulating Sitharaman for presenting a 'pathbreaking, inclusive budget in these unprecedented times', Hinduja Group co-Chairman Gopichand Hinduja said,'The high fiscal deficit would be a worry for many, however, these uncertain times call for high government spending'.

Essar Capital Director Prashant Ruia said the Budget 'attempts to put a medium to long term foundation to the emergency measures undertaken by the government in the first nine months of the pandemic. By all measures, the government has done a fine job at reviving the growth impulses in the economy'.

Ficci President Uday Shankar said the budget is a clear-headed and growth-oriented one that lays a strong foundation for an Aatmanirbhar Bharat.

'The fact that government chose growth over fiscal consolidation is indeed heartening. There is a sharp focus on capital expenditure,' he said.

CII President Uday Kotak said Sitharaman has delivered on her promise of unveiling a 'Budget Like No Other' with a raft of prudent measures aimed at rejuvenating government spending towards critical areas of increasing allocation on infrastructure expansion, education, housing and health as India rolls out a vaccine drive to inoculate 1.3 billion people.

Assocham President Vineet Agarwal said the finance minister has given a booster dose to the economy through six pillars of mega rise in capital expenditure on healthcare, physical infrastructure without putting much pressure on the taxpayers.

Similarly, PHD Chamber President Sanjay Aggarwal said the step is highly encouraging and would go a long way to build a New India.

Stating that the Budget 2021 holds out various positives for the startup sector, Snapdeal Co-Founder and CEO Kunal Bahl said the move towards providing social security benefits for gig workers will add a much-needed safety net that will help this sector grow in a sustainable way and help the many millions that are a part of it.

PepsiCo India President Ahmed ElSheikh said the steps to improve ease of doing business and efforts towards aiding startups, MSME and R&D will drive greater local innovation and value addition, and will eventually push up consumer demand and further the country’s transformation towards a globally competitive economy.

National President of CAIT BC Bhartia said the Union Budget is a comprehensive and progressive economic document which ensures development of each sector in a structured way and providing ease of doing business to traders.

Please click here to read :Budget 2021 PIB

Source: https://pib.gov.in/PressReleseDetailm.aspx?PRID=1693908 ; Money Control , Financial Express, Bloomberg, Cleartax, , Indian Express