After a tumultuous year of uncertainties and a record number of deaths due to the COVID-19 Pandemic, Finance Minister Nirmala Stharaman has announced the Union Budget for the fiscal year 2021-2022. The Union Budget outlines the total spending of the Central Government for the year and also details the spending of various sectors of the Government. The major emphasis of this year’s budget was on healthcare and infra sectors.
The fiscal deficit has been pegged at 9.5% of the GDP by SItharaman, with FY22 fiscal deficit target at 6.8% of the GDP. The Central Government plans on bringing the deficit below 4.5% by FY26.
The FY22 capital expenditure is Rs. 5.54 lakh crore as compared to 4.39 lakh crore for FY21. Of this, Rs.44,000 crores will be given to the Department of Economic Affairs There has been no direct tax change announced for FY21 but, there are steps taken to ease compliance for taxpayers indirect tax incentives. The FM proposed that advance tax liability on dividend income shall arise only after payment of dividend. She also looked at pre-filled tax forms with respect to details like salary income, tax payment, and TDS.
There will be no income tax for senior citizens over the age of 75 with only pension and interest income. A dispute resolution committee for small taxpayers is being planned. Anyone with a taxable income of up to Rs.50 lakh, disputed income of up to Rs.10 lakh is eligible to approach the dispute resolution committee.
A key point in the announcement was the introduction of the Agri Infrastructure and Development Cess. This cess would be applicable on a number of items including fuel and liquor. The budget imposed an Rs.2.5 per liter Agri infra cess on petrol, Rs.4 on diesel, and 100% on alcoholic beverages.
The FM outlined six pillars of proposals to strengthen the vision of Atmanirbharta. These pillars are health and wellbeing, capital and infrastructure, inclusive development, reinvigorating human capital, innovation, and R&D, and, minimum government and maximum governance.
Healthcare spending has increased by 137% as compared to the previous budget with the allocation of Rs. 2 lakh crores. This allocation would be for preventive and curative health care as well as well being. Rs.35,000 crores has been allocated to COVID-19 vaccination expenditure.
There are multiple disinvestments that will be made, according to the FM. The Government plans to get 1.75 lakh crores through disinvestments in 2021-2022. It planned to raise 2.1 lakh crores in FY21 but fell short. The government is planning to privatize the Central Public Sector Enterprises (CPSE) in all but 4 sectors.
The much-awaited LIC IPO will take place in FY22, with the government privatizing 2 banks and 1 general insurance company. It will also complete disinvestments of BPCL, CONCOR, and SCI in 2021-22. The Government plans to monetize land and will set up an SPV to carry out this activity.
The Government will borrow Rs 80,000 crore in the remaining two months to meet FY21 expenditure and is projected to borrow about Rs 12 lakh crore in FY22.
The FM also announced the linking of 1000 more Agriculture Produce Marketing Committees or Mandis to the e-National Agricultural Market (e-NAM).
A hike in the cost of commonly used items like refrigerators, air conditioners, mobile phones, and LEDs was announced due to an increase in the customs duty on imported parts. The customs on phone parts and battery have been raised from nil to 2.5%.
The FM also announced deposit insurance of Rs.5 lakhs. That is, in case depositors are unable to access their money as a bank has failed or if there is a huge financial pressure in the banks, the depositors will be able to access up to Rs.5 lakh of their deposits.
The Government is planning to set up a Development Financial Institution(DFI) with Rs.20,000 crore to get it off the ground. The DFI will have a lending portfolio of Rs.5 lakh crore in 3 years. The National Monetisation Pipeline for brownfield projects will be launched with NHAI and PGCIL, having sponsored 1 InvIT each.
In an effort to push the automobile sector, there would be fitness tests after 15 years for commercial vehicles and after 20 years for private vehicles. The FM also announced a voluntary vehicle scrapping policy.
The Govt plans to allot Rs.20,000 crore for bank recapitalization of PSBs. The FM proposed to revise the definition under the Companies Act, 2013 for small companies by increasing their threshold for capitalization.
The minimum wages will now apply to workers in all categories. Women will also be allowed to work in all categories with adequate protection.
Projects for building highways in Assam, West Bengal, Kerala, and Tamil Nadu will be awarded by March 2022 with West Bengal seeing highway projects worth Rs.25,000 crores.
The Government also aims to set up 7 textile parks over the next 3 years under the scheme of mega-investment textile parks. The parks are to be set up over 1,000 acres of land with world-class infrastructure and plug-and-play facilities. This will be, in addition to the Rs.10,683-crore, production linked incentive (PLI) scheme for technical textiles and manmade fibers.
The Budget sets an agriculture credit target of Rs.16.5 lakh crore for FY22, and will further increase provision to rural infra development fund to Rs.40,000 crore, from earlier Rs.30,000 crore.
FM Sitharaman proposed to consolidate provisions of the Sebi Act, Depositories Act, Securities Contracts Regulation Act, and the Government Securities Act. The Government also aims to amend the Insurance Act to allow higher FDI, increasing the FDI limit in the insurance sector to 74% from 49%, and allowing foreign ownership.
Railways are to be allocated Rs.1,10,055 crore. Of this, Rs..1.07 lakh crore will be for capital expenditure in FY22. The FM also announced plans for the east coast corridor, east-west corridor, north-south corridors. She also said 100% electrification of broad-gauge routes will be completed by December 2023.
The interest earned by the Provident Fund contributions above Rs 2.5 lakh a year will now be taxed at the normal rates. This will only apply to the employee’s contribution and not that of the employer.
The MSME allocation is doubled, with the FM proposing to set aside Rs.15,700 crore for medium and small enterprises in FY22.
The Government will not impose restrictions on paid-up capital and turnover of one-person companies. NRIs will also be allowed to incorporate one person companies in India.
The government has withdrawn a tax benefit for mergers and acquisitions (M&A) that would result in a marginal increase in the cost of transactions.
The budget has also allocated Rs.4,000 crore for the Deep Ocean Mission and Rs 13,949 for the Department of Space.
The FM also announced the construction of a new Central University in Leh.
The Centre has allocated about Rs.1,66,547 crore to the Ministry of Home Affairs with a majority of the funds going to the police forces.
Over Rs.257 crore has been allocated to the Personnel Ministry for the next financial year for domestic and foreign training of bureaucrats and augmenting necessary infrastructure while Rs..1,000 crores has been allocated for the welfare of tea workers especially women and their children in Assam and West Bengal.
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