Nirmala Sitharaman presented the union budget 2021 highlights income tax in Parliament on 1st February 2021. FM gave the Budget speech from 11 a.m. until 1 p.m.
The Budget this year focuses on seven pillars for revitalizing the economy: Health and Wellbeing, Physical and Financial Capital and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and Research and Development, and Minimal Government Maximum Governance. There is a proposal to merge several securities market regulations into a single code. There were also several amendments proposed to direct taxes and indirect taxes.
2021 Budget Highlights – Economic Reforms & Schemes
- A total of Rs.5.54 lakh crore will be spent on capital expenditures in FY 2021-22. In response to the urgent need for improvement in the healthcare sector, FM proposed the PM Aatmanirbhar Swasth Bharat Yojana, with an outlay of approximately Rs.64,180 crore over six years.
- A 137% increase over FY 2021-22 is estimated for the Budget outlay for Health and Wellbeing in FY 2021-22. As a result of the increased allocation, existing national health institutions, the National Center for Disease Control (NCDC), Health Emergency Operation Centers, and mobile hospitals are expected to expand and improve.
- A major highlight was the increase in FDI limits from 49% to 74% in the insurance sector.
- Two PSUs and an insurance company will be divested by the government.
Budget Highlights 2021: Direct Tax Proposals
A number of direct tax proposals were introduced, easing tax burdens on individuals and startups to a certain extent. In FY 2021-22 (AY 2022-23), the corporate and individual tax rates remained unchanged. Corporate houses have been provided relief from tax audits under section 44AB by increasing the limit from Rs 5 crore to Rs 10 crore (only where 95% of payments are digitised). In addition, the following amendments are proposed:
- Senior citizens 75 years of age and older are entitled to IT relaxations:
Pension income and interest income are the only sources of income for senior citizens, so they do not have to file income tax returns. A new section 194P has been inserted to require banks to deduct tax from pensions and interest incomes of senior citizens over 75 years of age.
- IT proceedings are reduced in time:
The time limit for reopening assessment proceedings has been shortened to three years from six years previously, except in cases of serious tax evasion.
- The constitution of the ‘Dispute Resolution Committee’ is as follows:
Section 245MA allows taxpayers with a taxable income up to Rs.50 lakh (for small and medium taxpayers) and disputed income up to Rs.10 lakh to approach this committee. By doing so, new disputes will be prevented and the issue will be resolved at the beginning.
- The National Faceless Income Tax Appellate Tribunal is located at:
A jurisdiction-less procedure is provided for faceless proceedings before the Income Tax Appellate Tribunal (ITAT). Taxpayers will benefit from lower compliance costs, and appeals will be handled more transparently. Moreover, it will ensure efficient administration and an even distribution of work among benches.
- Startup tax incentives:
Tax holidays for startups have been extended by one year until 31st March 2022.
- NRIs are given the following relaxations:
Several rules are proposed to remove hardships associated with double taxation.
- Pre-filing of returns to be a priority:
For salary payments, tax payments, and TDS, pre-filling will be allowed. Additionally, capital gains from listed securities, dividend income, etc. will be prefilled.
- Dividend income is subject to advance tax:
Dividend income will now be subject to advance tax only after it is declared. Companies that lease or rent aircraft are proposed to receive tax holidays.
- Contribution to PF disallowed:
An employer cannot deduct an employee’s PF contribution if it was deducted but not deposited by him.
- The following amendments are made to section 43CA:
If the transfer of an independent housing unit takes place between 12th November 2020 and 30th June 2021, stamp duty can be up to 120% (previously 110%) of the consideration.
- Section 44ADA is amended as follows:
All assessees living in India were subject to the provisions of Section 44ADA. As of now, it only applies to individuals, Hindu Undivided Families (HUFs), and partnerships other than limited liability partnerships.
- The deduction under Section 80EEA has been extended:
It was extended until 31st March 2022 for the additional deduction for affordable housing. Affordable rental projects are exempt from taxes.
Budget highlights for indirect taxes in 2021
- Customs Duty Rates are being revised on the following items:
- Copper scrap duty reduced from 5% to 2.5%
- There is a reduction in the basic and special additional excise duty on petrol and high-speed diesel oil (both branded and unbranded)
- Inverters are now subject to a 20% duty instead of the previous 5%
- Solar lanterns are now subject to a 15% duty instead of 5%
- Gold and silver are subject to a reduced basic customs duty.
- Textiles, chemicals, and other products will be rationalized by the department
- From 2nd February 2021 onwards, the revised rates will apply.
- In accordance with the upcoming HS 2022 nomenclature, new tariff items have been added under 2404 11 00 and 2404 19 00. From 1st January 2022, these tariff items will have an NCCD of 25%.
- Petrol and diesel now have an agriculture infrastructure and development levy (AIDC) of Rs2.5 and Rs.4 per liter, respectively.
- Cotton, silks, alcohol, and other agricultural products are subject to higher customs duties.
- Gold and silver are exempt from the Social Welfare Surcharge. These items would therefore be subject to a surcharge at the normal rate, based on their value and basic customs duty.
- As leather is domestically produced, the exemption on imports will be withdrawn.
- ‘Turant Customs’ will introduce faceless, paperless, and contactless measures for customs.
- The CGST Act was amended to include the following provisions:
- Taxpayers can now claim input tax credits based on GSTR-2A and GSTR-2B under Section 16.
- On 1st July 2017, Section 50 of the CGST Act will be amended to provide for a retrospective charge of interest on net cash liabilities.
- Amendments made to sections 35 and 44: The requirement of submitting a GST reconciliation report signed by a specified professional has been relaxed to allow for the filing of annual returns on a self-certification basis. Annual returns can be exempted for a class of taxpayers by the Commissioner.