The Finance minister Nirmala Sitharaman on 1st February presented the first-ever digital Union Budget in which she announced higher capital expenditure for the financial year 2021-22 and focused on providing a major boost to healthcare and infrastructure building. In her budget speech, she mentioned that this year’s budget focused on six pillars- that are
- 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,
Key provisions of the Union Budget 2021
- The investment on Health and Infrastructure in this Budget has increased substantially. In the union budget financial minister proposed to increase spending to 2,200 crore in health and wellbeing sector to improve public health system and fund a huge vaccination drive to immunize the people.
- The budget announces 2.27 lakh highway projects for 4 states namely Tamil Naidu, West Bengal, Assam and Kerala.
- In agricultural sector the ministry of agriculture and farmers welfare has received 5.63% more allocation at1/31,531 crore and half of which will be spent on the flagship PM-KISAN Scheme and slightly higher fund are made available for agricultural infrastructure and irrigation program.
- If we talk about Defence sector, there is no such big increase. India did spend an additional unbudgeted Rs. 20,776 crore on emergency arms procurement in the current fiscal. The overall defence expenditure has been increased by a party sum to Rs. 4,78,196 crore from last year’s budgetary allocation of Rs 4,71,378 crore which amounts to a mere 1.4 hike.
- The main source of economy is center’s borrowing and liabilities so, the government restored to borrowing more in order to uplift inactive economy. Apart from this, GST and Income tax are the two important aspects of revenue. The government also proposed to increase the FDI limit in insurance sector to 74% to aim at attracting greater overseas capital.
- Senior citizen above the age of 75 with only pension and interest income have been exempted from filing ITRs and it has been noted that the ITRs has increased to 6.48 by now. The cases of default or offence of concealment of income of over fifty lakh can be reopened even after 10 years.
- The bill also provides for constitution of a Dispute Resolution for small taxpayers. Person with the taxable income up to fifty lakh and disputed income of ten lakh shall be eligible to approach committee.
- The government capital expenditure picks up to 1.7% in 2020 to 2.3% in 2021 and further to 2.5% in 2022 which will be a 17-year figure and will enhance medium term growth prospects.
The union budget 2021, is basically comprised of two important features namely spending in the well-being and infrastructure sector and it was noted that the said budget comes at the time when the government deemed to give necessary demand push to uplift the economy. The Union Finance Minister in the budget directed to spend big on infrastructure which length across roads, power generation, bridges, ports etc. and volume for better health management had to be brought in light of what we had gone through last year.
Non-Resident Indians (NRI)
The financial bill or the digital bill 2021, not only benefited the corporate and capital markets but also proposed various measure for the person residing outside the India that could ease many of the difficulties confronted by the NRI’s. The budget introduces greater liberation to the NRI’s thinking of investing in India.
- Only an Indian resident who stayed in the country for over 180 days in the previous year could set up a person company but now it has been incorporated in the budget that relaxation should be promised and the limit of staying of an Indian citizen shall be reduced from 182 days to 120 days to set up an one person and allow NRI’s to comprise one person companies.
- When an NRI returns to India after the retirement, he is often forced to again pay tax on their income earned in foreign lands and in many of the cases they do not have any right to claim the credit they paid overseas due to taxation period mismatch but now there is no more Double tax on retirement as the government promised to elimination the double taxation of retirement fund.
- In the real estate sector, the government boosts this segment by extending the period of extra deductions of Rs. 1.5 lakh available for loan up to 31st march, 2022. The deduction provided is over and above the deduction of 2 lakh rupees for interest under section 24 of income Tax Act. Due to which loan rates have fallen to less than 7% that bring an excellent opportunity for the NRI’s to invest in real estate in India and the extension of the tax holidays for builder will insure a good supply of housing by developers.
- The audit limit for tax will increase from 5 crore to 10 crore for NRI’s but TDS rule still remain to continue to be a major problematic point.
- Residents investors in stocks and mutual funds are not subjected to TDS but NRI’s have to cover out 15% on short term capital gain from stocks and equity funds and even higher for gain from property and gold i.e. 20%.
- As for the bank deposits, NRI’s to pay upto 30% TDS.
The financial bill contains many such provisions that affect various sector including economy, agriculture, real estate, health, taxes and the law and judicial system of India. There are various judgments passed by the respectable courts which are overruled by the present financial bill of 2021. Following are the matters in which the respected courts passed judgment which are contradictory to the provisions of the Financial Bill of 2021 relating to direct taxes and indirect taxes.
- The judgment relating to the section 50B of the Income Tax Act regarding slump sale is proposed to make amendment. It is proposed to remove the reference to “sale” and substitute it with “any means”.
- The other judgment is in relation to section 36(va)of IT Act which provide deductions for the employees contribution to provident fund or employees state insurance on or before due date on which the employers claims deductions. The term due date has been explained under the IT, Act now the present bill directed that delay deposit of employees contributions in PF/ESI not allowable as business expenditure.
- In Commissioner of Income versus Smifs Securities, it was held that goodwill is an asset on which the benefit of depreciation can be claimed. This judgment is overruled and goodwill is, now no longer be a depreciable asset.
- With respect to certain classes of non residents and income, the IT Act provides special rate of tax which can sometimes be higher than the beneficial tax rate provided in DTAA. The court in a judgment held that if it is valid then he can claim refund of the same but now it was proposed to amend that benefit of DTAA can be considered while deducting TDS.
- It was held by the Supreme Court that there cannot be a sale transaction between a club and its members. Under the doctrine of mutuality there is no distinction between a club and its members. The bill proposed to include supply of the good and services by a club to its members and doctrine of mutuality is no longer applicable under the CGST, Act 2017.
- Section 83 of the CGST Act, 2017 provides the department with the power to provisionally attach properties, including bank accounts of a taxable person, the Bombay High court held that bank accounts cannot be attached merely based on the summons issued under section 70. The Bill proposed to substitute whole section.