Summary of the Budget 2021-22

                                                                

PART-A

 

The Union Minister for Finance & Corporate Affairs presented the Union Budget 2021-22 which is the first budget of this new decade and also a digital one in the backdrop of unprecedented COVID-19 crisis.

• Laying a vision for AatmaNirbhar Bharat, this is an expression of 130 crore Indians who have full confidence in their capabilities and skills.
• Budget proposals will further strengthen the Sankalp of Nation First, Doubling Farmer’s Income, Strong Infrastructure, Healthy India, Good Governance, Opportunities for youth, Education for All, Women Empowerment, and Inclusive Development among others.

The Budget proposals for 2021-22 rest on 6 pillars.

• Health and Wellbeing
• Physical & Financial Capital, and Infrastructure
• Inclusive Development for Aspirational India
• Reinvigorating Human Capital
• Innovation and R&D
• Minimum Government and Maximum Governance

 

Health and Wellbeing

• There is substantial increase in investment in Health Infrastructure and the Budget outlay for Health and Wellbeing is Rs 2,23,846 crore in BE 2021-22 as against this year’s BE of Rs 94,452 crore, an increase of 137 percentage.
• A new centrally sponsored scheme, PM AatmaNirbhar Swasth Bharat Yojana, will be launched with an outlay of about Rs 64, 180 crore over 6 years.
• This will develop capacities of primary, secondary, and tertiary care Health Systems, strengthen existing national institutions, and create new institutions, to cater to detection and cure of new and emerging diseases. This will be in addition to the National Health Mission.
• Provision of Rs 35,000 crore made for Covid-19 vaccine in BE 2021-22.
• The Pneumococcal Vaccine, a Made in India product, presently limited to only 5 states, will be rolled out across the country aimed at averting 50,000 child deaths annually.
• To strengthen nutritional content, delivery, outreach, and outcome, Government will merge the Supplementary Nutrition Programme and the PoshanAbhiyan and launch the Mission Poshan 2.0. Government will adopt an intensified strategy to improve nutritional outcomes across 112 Aspirational Districts.
• JalJeevan Mission (Urban), will be launched for universal water supply in all 4,378 Urban Local Bodies with 2.86 crore household tap connections, as well as liquid waste management in 500 AMRUT cities. It will be implemented over 5 years, with an outlay of Rs. 2,87,000 crore.
• Moreover, the Urban Swachh Bharat Mission will be implemented with a total financial allocation of  Rs 1,41,678 crore over a period of 5 years from 2021-2026.
• Also to tackle the burgeoning problem of air pollution, government proposed to provide an amount of Rs. 2,217 crore for 42 urban centres with a million-plus population in this budget.
• A voluntary vehicle scrapping policy to phase out old and unfit vehicles was also announced.
• Fitness tests have been proposed in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles.

Physical and Financial Capital and Infrastructure

• For a USD 5 trillion economy, manufacturing sector has to grow in double digits on a sustained basis.
• Manufacturing companies need to become an integral part of global supply chains, possess core competence and cutting-edge technology.
• To achieve all of the above, PLI schemes to create manufacturing global champions for an AatmaNirbhar Bharat have been announced for 13 sectors.
• For this, the government has committed nearly Rs.1.97 lakh crore in the next 5 years starting FY 2021-22. This initiative will help bring scale and size in key sectors, create and nurture global champions and provide jobs to our youth.
• Similarly, to enable the textile industry to become globally competitive, attract large investments and boost employment generation, a scheme of Mega Investment Textiles Parks (MITRA) will be launched in addition to the PLI scheme. This will create world class infrastructure with plug and play facilities to enable create global champions in exports. 7 Textile Parks will be established over 3 years.
• The National Infrastructure Pipeline (NIP) which the Finance Minister announced in December 2019 is the first-of-its-kind, whole-of-government exercise ever undertaken. The project pipeline has now expanded to 7,400 projects.
• A professionally managed Development Financial Institution is necessary to act as a provider, enabler and catalyst for infrastructure financing. Accordingly, a Bill to set up a DFI will be introduced. Government has provided a sum of Rs 20,000 crore to capitalise this institution and the ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time.
• A “National Monetization Pipeline” of potential Brownfield infrastructure assets will be launched.
• An Asset Monetization dashboard will also be created for tracking the progress and to provide visibility to investors.
• By March 2022, Government would be awarding another 8,500 kms and complete an additional 11,000 kms of national highway corridors.
• To further augment road infrastructure, more economic corridors are also being planned.
• An enhanced outlay of Rs. 1,18,101 lakh crore for Ministry of Road Transport and Highways, of which Rs.1,08,230 crore is for capital, the highest ever.
• Indian Railways have prepared a National Rail Plan for India – 2030 to create a ‘future ready’ Railway system by 2030.
• It is expected that Western Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022.
• Introduction of aesthetically designed Vista Dome LHB coach on tourist routes to give a better travel experience to passengers has been proposed.
• High density network and highly utilized network routes of Indian railways will be provided with an indigenously developed automatic train protection system that eliminates train collision due to human error.
• Government will work towards raising the share of public transport in urban areas through expansion of metro rail network and augmentation of city bus service.
• A new scheme will be launched at a cost of Rs. 18,000 crore to support augmentation of public bus transport services.
• Two new technologies i.e., ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lesser cost with same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.
• A revamped reforms-based result-linked power distribution sector scheme with an outlay of Rs. 3,05,984 crore over 5 years has been proposed. The scheme will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements.
• Major Ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them. For the purpose the budget proposes to offer  more than Rs. 2,000 crore by Major Ports on Public Private Partnership mode in FY21-22.
• A scheme to promote flagging of merchant ships in India will be launched by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs. An amount of Rs. 1624 crore will be provided over 5 years. This initiative will enable greater training and employment opportunities for Indian seafarers besides enhancing Indian companies share in global shipping.
• Ujjwala Scheme which has benefited 8 crore households will be extended to cover 1 crore more beneficiaries.
• Government will add 100 more districts in next 3 years to the City Gas Distribution network.
• A gas pipeline project will be taken up in Union Territory of Jammu & Kashmir.
• An independent Gas Transport System Operator will be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis.
• The Finance Minister proposed to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code.
• The Government would support the development of a world class Fin-Tech hub at the GIFT-IFSC.
• Insurance Act, 1938 will be amended to increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with safeguards. Under the new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50% of Directors being Independent Directors, and specified percentage of profits being retained as general reserve.
• A number of disinvestment transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, NeelachalIspat Nigam limited among others would be completed in 2021-22.
• Other than IDBI Bank, Government propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22.
• In 2021-22, Government would also bring the IPO of LIC.
• Government has kept four areas that are strategic where bare minimum CPSEs will be maintained and rest privatized. In the non-strategic sectors, CPSEs will be privatised, otherwise shall be closed.
• To fast forward the disinvestment policy, NITI Aayog will work out on the next list of Central Public Sector companies that would be taken up for strategic disinvestment. Government has estimated Rs. 1,75,000 crore as receipts from disinvestment in BE 2020-21.

Inclusive Development for Aspirational India

 Agriculture:

• Early this year, PM launched SWAMITVA Scheme. Under this, a record of rights is being given to property owners in villages. Up till now, about 1.80 lakh property-owners in 1,241 villages have been provided cards and the Finance Minister proposed during FY21-22 to extend this to cover all states/UTs.
• To provide adequate credit to our farmers, Government has enhanced the agricultural credit target to Rs. 16.5 lakh crore in FY22.
• Similarly, the allocation to the Rural Infrastructure Development Fund increased from Rs. 30,000 crore to Rs. 40,000 crore.
• The Micro Irrigation Fund, with a corpus of Rs.5,000 crore has been created under NABARD will be doubled.
• Scope of ‘Operation Green Scheme’ that is presently applicable to tomatoes, onions, and potatoes, will be enlarged to include 22 perishable products.
• 1,000 more mandis will be integrated with e-NAM.
• The Agriculture Infrastructure Funds would be made available to APMCs for augmenting their infrastructure facilities.

 Fisheries:

• Substantial investments in the development of modern fishing harbours and fish landing centres have been proposed. To start with, 5 major fishing harbours – Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat – will be developed as hubs of economic activity.

 Migrant Workers and Labourers:

• The remaining 4 states and UTs will be integrated under the One Nation One Ration Card scheme in the next few months.
• Government proposes to conclude a process that began 20 years ago, with the implementation of the 4 labour codes.

 Financial Inclusion:

• To further facilitate credit flow under the scheme of Stand Up India for SCs, STs, and women, the Finance Minister proposed to reduce the margin money requirement from 25% to 15%, and to also include loans for activities allied to agriculture.
• Government has provided Rs. 15,700 crore to MSME sector – more than double of this year’s BE.

 Reinvigorating Human Capital

• 100 new Sainik Schools will be set up in partnership with NGOs/private schools/states.
• A Higher Education Commission of India, as an umbrella body having 4 separate vehicles for standard-setting, accreditation, regulation, and funding will be set up.
• For accessible higher education in Ladakh, Government proposed to set up a Central University in Leh.
• Government has set a target of establishing 750 Eklavya model residential schools in tribal areas with increase in unit cost of each such school from Rs. 20 crore to Rs. 38 crore, and for hilly and difficult areas, to Rs. 48 crore.
• An initiative is underway, in partnership with the United Arab Emirates (UAE), to benchmark skill qualifications, assessment, and certification, accompanied by the deployment of certified workforce.
• The Government also has a collaborative Training Inter Training Programme (TITP) between India and Japan to facilitate transfer of Japanese industrial and vocational skills, technique, and knowledge and the same would be taken forward with many more countries.

 

Innovation and R&D

• National Research Foundation outlay will be of Rs. 50,000 crore, over 5 years. It will ensure that the overall research ecosystem of the country is strengthened with focus on identified national-priority thrust areas.
• Government will undertake a new initiative – National Language Translation Mission (NTLM). This will enable the wealth of governance-and-policy related knowledge on the Internet being made available in major Indian languages.
• The New Space India Limited (NSIL), a PSU under the Department of Space will execute the PSLV-CS51 launch, carrying the Amazonia Satellite from Brazil, along with a few smaller Indian satellites.

 

Minimum Government, Maximum Governance

• A number of steps to bring reforms in Tribunals in the last few years for speedy delivery of justice have been undertaken and budget proposes to take further measures to rationalised the functioning of Tribunals.
• Government has introduced the National Commission for Allied Healthcare Professionals Bill in Parliament, with a view to ensure transparent and efficient regulation of the 56 allied healthcare professions.
• Forthcoming Census could be the first digital census in the history of India and for this monumental and milestone-marking task, 3,768 crore allocated  in the year 2021-2022.

 

 Fiscal position

• Pandemic’s impact on the economy resulted in a weak revenue inflow.
• Once the health situation stabilised, and the lockdown was being slowly lifted, Government spending was ramped up so as to revive domestic demand.
• As a result, against an original BE expenditure of Rs. 30.42 lakh crore for 2020-2021, RE estimates are Rs. 34.50 lakh crore and quality of expenditure was maintained.
• The capital expenditure, estimated in RE is Rs. 4.39 lakh crore in 2020-2021 as against Rs. 4.12 lakh crore in BE 2020-21.
• Fiscal deficit in RE 2020-21 is pegged at 9.5% of GDP and it has been funded through Government borrowings, multilateral borrowings, Small Saving Funds and short term borrowings.
• Government would need another Rs 80,000 crore for which it would be approaching the markets in these 2 months.
• The fiscal deficit in BE 2021-2022 is estimated to be 6.8% of GDP.
• The gross borrowing from the market for the next year would be around 12 lakh crore.
• Government plans to continue the path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period.
• In accordance with the views of the 15th Finance Commission, Government is allowing a normal ceiling of net borrowing for the states at 4% of GSDP for the year 2021-2022.
• The FRBM Act mandates fiscal deficit of 3% of GDP to be achieved by 31st March 2020-2021. The effect of this year’s unforeseen and unprecedented circumstances has necessitated the submission of a deviation statement.
• The Government has laid the 15^th Finance Commission’s report, along with the explanatory memorandum retaining the vertical shares of the states at 41%. On the Commission’s recommendation, the Budget provided  1,18,452 crore  as revenue deficit grant to 17 states in 2021-22.

PART-B

 

 DIRECT TAX PROPOSALS

• The Budget seeks to reduce compliance burden on senior citizens who are of 75 years of age and above. Such senior citizens having only pension and interest income will be exempted from filing their income tax return.  The paying Bank will deduct the necessary tax on their income. 
• The Budget proposes to notify rules for removing the hardship of non-Resident Indians returning to India on the issue of their accrued incomes in their foreign retirement account.
• The Budget proposes to make dividend payment to REIT/InvIT exempt from TDS.
• For Foreign Portfolio Investors, the Budget proposes deduction of tax on dividend income at lower treaty rate. 
• The Budget provides that advanced tax liability on dividend income shall arise only after the declaration or payment of dividend.
• The Finance Minister proposed to extend the eligibility period for claim of additional deduction for interest of Rs. 1.5 lakh paid for loan taken for purchase of an affordable house to 31st March, 2022.
• In order to increase the supply of affordable houses, budget also announced extension of eligibility period for claiming tax holiday for affordable housing projects by one more year to 31st March, 2022. 
• For promoting supply of affordable rental housing for the migrant workers, budget announced a new tax exemption for the notified affordable rental housing projects.
• In order to incentivize start ups in the country, budget announced extension in the eligibility for claiming tax holiday for start ups by one more year till 31st March, 2022 and the Capital Gains exemption for investment in start ups by one more year till 31st March, 2022.
• In order to ensure timely deposit of employee’s contribution to welfare funds by the employers, budget announced that late deposit of employee’s contribution shall never be allowed as deduction to the employer.
• In order to reduce compliance burden, the Budget provides reduction in the time-limit for reopening of income tax proceeding for three years from the present six years. 
• In serious tax evasion cases, where there is evidence of concealment of income of Rs. 50 lakh or more in a year, the assessment can be reopened upto 10 years but only after the approval of the Principal Chief Commissioner.
• To further reduce litigation of small tax payers, budget proposed to constitute a Dispute Resolution Committee. Anyone with a taxable income upto Rs. 50 lakh and disputed income upto Rs. 10 lakh shall be eligible to approach the Committee. 
• Budget also announced setting up of National Faceless Income Tax Appellate Tibunal Centre.
• To incentivize digital transaction and to reduce the compliance burden of the person who is carrying almost all of the transactions digitally, the Budget proposes to increase the limit for tax audit for persons who are undertaking 95 per cent of their transaction digitally from Rs. 5 Crore to Rs. 10 Crore.
• To attract foreign investment into infrastructure sector, the Budget proposes to relax certain conditions relating to prohibition on private funding, restriction on commercial activities and direct investment in infrastructure. 
• In order to allow funding of infrastructure by issue of zero coupon bonds, the Budget proposes to make notified infrastructure debt funds eligible to raise funds by issuing tax efficient zero coupon bonds.
• In order to promote International Financial Services Centre (IFSC) in GIFT City, the Budget proposes more tax incentives.
• The Budget proposes that details of capital gains from listed securities, dividend income and interest from banks, post office etc. will also be pre-filled to ease filing of returns. Details of salary income, tax payment, TDS etc already come pre-filled in returns.
• In order to reduce compliance burden on the small charitable trust running educational institutions and hospitals, the Budget proposes to increase the limit on annual receipts for these trusts from present Rs.1 Crore to Rs. 5 Crore for non-applicability of various compliances.

 

 

 INDIRECT TAX PROPOSALS

• Finance Minister assured the House that every possible measure shall be taken to smoothen the GST further and remove anomalies such as the inverted duty structure.
• Budget proposed to review 400 old exemptions in the custom duty structure this year.
• From 1st October, 2021, a revised custom duty structure free of distortions will be put in place.
• Any new custom duty exemptions henceforth will have validity upto to the 31st March following 2 years of the date of its issue.
• Budget announced withdrawal of a few exemptions on parts of chargers and sub-parts of mobile phones further some parts of mobiles will move from “NIL” rate to a moderate 2.5 per cent.
• Budget also announced reducing custom duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy and stainless steel.
• It also announced exempting duty on steel scrap for a period upto 31st March 2022.
• It announced bringing nylon chain on par with polyester and other man-made fibers, uniform deduction of the BCD rates on Caprolactam, nylon chips and nylon fiber and yarn to 5 per cent, rationalization of custom duty on gold and silver.
• A phased manufacturing plan for solar cells and solar panels will be notified to build up domestic capacity. She announced raising duty on solar inverter from 5 per cent to 20 percent and on solar lanterns from 5 per cent to 15 per cent.
• It announced revision in duty rates on certain items immediately including tunnel boring machine and certain auto parts.
• The Budget proposes certain changes to benefit MSMEs which include increasing duty on steel screws, plastic builder wares and prawn feed.
• It also provide for rationalizing exemption on import of duty free items as an incentives to exporters of garments leather and handicraft items. It also provides withdrawing exemption on imports of certain kind of leather and raising custom duty on finished synthetic gem stones.
• To benefit farmers, budget announced raising custom duty on cotton, raw silk and silk yarn.
• It also announced withdrawing end-use based concessions on denatured ethyl alcohol.
• budget also proposed an Agriculture Infrastructure and Development Cess on a small number of items. 
• Regarding rationalization of procedures and easing of compliance, budget proposed certain changes in the provisions relating to ADD and CVD levies.