The Budget 2021 is growth-oriented and proposes to realign India’s high growth story after a decline of 1-2 years because of Covid and ongoing global recession.
The budget focuses on 6 leading growth enablers: health & well-being, physical & financial capital & infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation & research & development, minimum government and maximum governance.
The fiscal deficit for FY21 was pegged at 9.5% of GDP, which is 2.5 times higher than FY20 and will come down to 6.8% in FY22. So the Budget discounts in the hit due to higher expenses because of the Rs 20 trillion Covid package.
The budget expenditure of Rs 2,23,846 crore, a 137% increase from the previous year, is for health and welfare focused on the preventive, curative and holistic healthcare.
Recapitalization of banks, investments in R&D and expanding FDI in Insurance are praiseworthy steps.
The Finance Minister proposed increasing Foreign Direct Investment (FDI) limit in the insurance sector increase to 74% from 49%.
Finance Minister said that for a $ 5trillion economy, manufacturing sector has to grow in double digits on a sustainable basis. To achieve this, production schemes to create manufacturing global champions for an Aatma Nirbhar Bharat have been announced for 13 sectors. For this, the government has committed Rs 1.97 lakh crore in the next 5 years starting FY 22.
The disinvestment target for FY22 is plugged at Rs 1.75 lakh crore. This will include the shedding of Centre’s stake in 2 state-owned banks and a general insurance company, and large-scale asset sales. The divestment programme will also include the planned initial public offering (IPO) of Life Insurance Corporation of India (LIC) and the privatisation of Air India, Bharat Petroleum Corporation Ltd (BPCL), Container Corporation of India Ltd, or CONCOR, Pawan Hans, NINL and Shipping Corporation of India (SCI).
Adequate funding has been stipulated for agriculture, industries, infrastructure, skilling and policies have been launched for better governance and higher financial inclusion. Fertilizers and food subsidies, Social Assistance scheme funds have been reduced while Drinking water scheme, health, education have been given importance.
Part B Tax reforms are as follows:
- Relief to senior citizen: The budget proposes exemption of income tax for senior citizen having only pension and interest income.
- Reassessment: The budget proposal will amend section 148 of the Income Tax where the time limit for reassessment has been reduced to 3 years from 6 years. The proposal addresses serious tax evasion, where evasion evidence is Rs.50 lakhs or more can be re-opened within 10 years.
- Dispute resolution committee: Anyone with total income less than 50 lacs and disputed income less than 10 Lacs can approach this, faceless committee.
- No Tax Audit for Companies having turnover upto 10 crores.
- Advance tax liability on dividend will arise only after declaration of dividend
- Affordable housing 1.5 lac deduction will now be even available for loan taken till 31.3.2022
- Budget also extended incentive provided under 80IBA extended till 31.3.2022.
- Tax incentive of affordable renting housing project extended till 2022.
- Pre filled income tax return will have pre filled data regarding Dividend, post office interest income, salary etc.
So the budget 2021 is a remix of the old hits and the 6 pillars of growth are similar to the yesteryears. In these current tough times of recession, the budget, like a vaccine is focusing on the recovery of the economy.
Views expressed above are the author’s own.
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