Budget 2021: Key Updates and Highlights

Tally Solutions |Updated on: July 30, 2021

After a tumultuous 2020, as businesses came to a halt, this financial budget was extremely crucial especially for MSMEs. Owing to the covid-19 outbreak, several businesses had to pause their activities with no idea of normalcy. Today, as honourable finance minister, Smt Nirmala Sitharaman announced various initiatives planned by the government to aid the growing economy, the entire nation bated breath to learn about the new developments in the country’s financial structure.

Here are the major highlights of budget 2021-22. Our FM starts the budget2021 announcement by mentioning the challenges during the pandemic and the vision of the Pradhan Mantri Garib Kalyan Yojana. Nirmala Sitharaman proposes to review more than 400 old exemptions in customs this year. To put into place new customs duty structure by Oct-1, 2021.

• Revoking ADD and CVD on certain steel products
• Reducing duties on copper scrap from 5% to 2.5%
• Some parts of mobiles to move from NIL to 2.5% rate
• Cutting duty on copper scrap 2.5% from 5%
• Exempting duty on steel scrap for a specified period

Finance Minister Nirmala Sitharaman said the government will borrow Rs 80,000 crore in the remaining two months to meet FY21 expenditure. "Govt to borrow about Rs 12 lakh cr in FY22; expenditure pegged at Rs 34.83 lakh cr, including Rs 5.54 lakh cr of capital spending," Sitharaman said.

Boost to NRIs in 2021 budget

• Government to notify rules to eliminate double tax for NRIs on foreign retirement funds

Tax tricks in this year's budget

• The FM proposes extension of tax holiday for start-ups by one more year
• Income tax return filers increased to 6.48 cr in 2020 from 3.31 cr in 2014, says FM
• Government to provide tax exemption for relocating funds to IFSC
• For ease of compliance, dividend payment for REIT and InVIT exempted from tax
• Govt proposes to increase threshold for tax audit to Rs.10 crore vs Rs. 5crore (for those transacting 95% digitally)
• Govt to set-up a faceless dispute resolution mechanism for small taxpayers
• Advance tax liability on dividend to arise only after declaration
• FPI to get deduction of tax on dividend at lower treaty rate
• Tax exemption for aircraft leasing companies
• Sitharaman also scrapped income tax for senior citizens under certain conditions and said new rules will be notified for removal of double taxation for NRIs, and also announced a reduction in the time period of tax assessments among other measures.
• Finance Minister allocates Rs 3,726 crore for forthcoming Census. This will be the first digital census, Sitharaman said
• To reduce time limit for reopening of tax records to three years from six years
• Govt to extend eligibility of erstwhile tax sop on home loan up to FY22; propose that affordable housing projects can avail tax holiday for one more year
• Govt proposes to extend exemption available for the purchase of affordable houses & to provide tax exemption for affordable rental housing projects

Government announces multi-state co-operative for ease of doing business

• Minimum wages to now apply to all categories of workers. Women to be allowed to work in all categories with adequate protection
• MSME allocation to be doubled. Government to set aside Rs 15,700 crore in FY22
• Government also proposes to reduce margin money requirement from 25% to 15% for startups
• 69 crore beneficiaries or 86% covered under one-nation, one-ration.

Farmers find a way in the bahi khata

• FM announces enhanced agri credit target for FY22, gives update on welfare schemes

Scheme updates

• 54 crore farmers benefited from MSP in paddy and wheat in FY21 vs 1.24 crore YoY
• Amount paid to farmers for wheat in FY21 was Rs 75,060 crore vs Rs 62,802 crore in FY20
• Amount paid to farmers for paddy in FY21 seen at Rs 1.72 crore Rs vs Rs 1.41 lakh crore in FY20
• Amount paid to farmers for pulses in FY21 seen at Rs 10,530 crore vs Rs 8,285 crore in FY20

Government to privatise 2 PSU banks, one general insurance company in FY22: Nirmala Sitharaman

• It will complete the divestments of BPCL, CONCOR and SCI in financial year 2021-22.
• Will bring IPO of LIC in FY22

Fiscal support in FY22 depends on revenue generation from the success of these programmes.

The one man show

• Government to now allow one-person companies
• No restriction on paid-up capital and turnover, to incentivise incorporation of one-person companies
• Conversion of one-person company to any other kind, reducing residency limit from 182 days to 120 days
• Allow non-resident Indians to incorporate one-person companies in India

Government to amend Insurance Act to allow higher FDI

• FDI limit in insurance increase to 74% from 49%
• Govt allows foreign ownership in insurance with safeguards
• Finance Minister Nirmala Sitharaman proposes to consolidate provisions of SEBI Act, Depositories Act, Securities Contracts Regulation Act, Government Securities Act

Ujjwala Scheme will be extended to cover 1 cr more beneficiaries.

• 100 more districts to be added in the next 3 years for city gas distribution
• An independent gas transport system operator to be set up
• Pipelines of GAIL (India) Ltd, Indian Oil Corp (IOC) and HPCL will be monetised, says FM in Budget for 2021-22

Providing Rs 1.15 lk cr for railways, privatising airports

• Out of the Rs 1.15 lk cr for Railways, Rs 1.07 lk cr is towards CAPEX
• Indian Railways national rail plan for India to prepare a future-ready railway system by 2030, says the FM
• Indian Railways have a National Rail Plan for 2030
• Next lot of airports to be privatized in tier 2 and 3 towns and cities

Highway infra work proposed include building 8,500-km of highways by March 2022.

• 3,500 km corridor in Tamil Nadu
• 1,100 km in Kerala at investment of Rs 65,000 cr
• 675 km in West Bengal at a cost of Rs 95,000 cr
• 1,300 km in Assam in the next 3 years

National monetisation pipeline for brownfield projects to be launched.

• NHAI and PGCIL have sponsored one InvIT each
• 5 operational roads with estimated enterprise value of Rs 5,000 cr being transferred to NHAI InvIT
• Transmission assets worth Rs 7,000 crore to be transferred to PGCIL InvIT

Government to set-up a Development Finance Institution (DFI), capitalised with Rs 20,000 crore

• India will introduce bill to set up new Development Financial Institution
• New DFI aims to have lending portfolio of Rs 5 lakh crore in 3 years

FM lays out a Rs 64,180 crore spending plan for healthcare over the next six years

• Will be spent on primary, secondary and tertiary healthcare
• In addition to the National Health Mission
• 17,000 rural and 11,000 urban health and wellness centres to be set up
• Integrated public health labs to be set up in each district
• India has two COVID-19 vaccines available and we expect two more vaccines soon, the Finance Minister says

A vision for Atmanirbhar Bharat in part of Sitharaman's first part. FY22 budget proposals based on six pillars. This is to further strengthen the sankalp of Nation-first. Including,

• Health & Well-being
• Inclusive Development Human Capital
• Innovation and R&D
• Physical & Financial capital and infrastructure
• Minimum government, maximum governance

Other crucial updates

• Vehicles to undergo fitness tests after 20 yrs for PVs, 15 years for CVs, says FM, announcing a voluntary vehicle scrapping policy
• India to launch Deep Ocean Mission, with allocation of Rs 4,000 crore over 4 years
• The Finance Minister proposed to revise definition under Companies Act, 2013 for small companies by increasing their threshold for capitalization to not exceeding Rs 50 lakh to not exceeding Rs 2 crore and turnover not exceeding Rs 2 crore to not exceeding Rs 20 crore
• Government allots Rs 20,000 crore for bank recapitalisation, as FM emphasizes the need to clean up banks' books
• To increase provision to rural infra development fund to Rs 40,000 crore from Rs 30,000 crore Five major fishing harbours to be developed as hubs for economic activity
• Aviation gets a boost, Sitharaman gives tax holiday for aircraft leasing business in Gift city
• The total estimate of all relief measures announced by govt & RBI so far is Rs 27.1 lakh cr (13% of GDP), the Finance Minister says.

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