The Union Budget for the Financial Year 2021-22, announced by Hon’ble Finance Minister “Nirmala Sitharaman” on 1st Day of February 2021 at 11:00 PM. She has used Made in India Tablet for the delivery of the digital Budget, 2021. It shall be effective from the 1st day of April 2021. “It is unlike anything so far”, as this is a first digital Budget in the history of India. 

The union Budget 2021 comes in amid of the pandemic “COVID-19”, which is making it a significant budget for the Hon’ble Finance Minister.

Contents

KEY FEATURE FOR THE “UNION BUDGET 2021” ARE AS FOLLOWS:

GDP GROWTH:  The government has assumed a nominal GDP growth rate of 10% (i.e., real growth plus inflation) in 2020-21.  As the nominal growth is estimated for the F.Y 2019-20 was 12%.

  • KEY FEATURES OF BUDGET 2021 ON COMPANIES AND LLPS
    1. The definition of Small Companies been revive
  • Paid Up Capital: From  “not exceeding Rs. 50 Lakh” to “not exceeding Rs. 2 Crore”;
  • Turnover: “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Crore.

Please Note The complete definition of small Companies, as per section 2 sub-clause (85) of the Companies Act, 2013 shall be notified from 1st Day of February and the same will be available at http://ebook.mca.gov.in/default.aspx 

  • PROMOTING ONE PERSON COMPANY (OPC):
    • No limit on paid-up capital: There shall be no Limit on share capital or turnover for the One Person Company (OPC).
    • Incorporation by Foreigners (NRIs): The foreigners can incorporate one person Company (OPC) in India.
    • Residency Limit for Indian Citizen: Presence in India of reduced from 180 days to 120 days in a year is enough to start an OPC.
    • Conversion: Allowed OPC conversion to any other type of Company.
  • MCA21 VERSION 3.0 LAUNCHED SOON:

MCA21 version 3.0 expected to be launched soon; accordingly E-Scrutiny, E-Adjudication and Compliance management to be simplified.

  1. FDI IN INFRASTRUCTURE SECTOR: The permissible limit for FDI in the infrastructure sector increased to 74% from 49%.
  1. SMALL CHARITABLE TRUSTS: The Compliance Limit for small Charitable Trusts running hospitals and Educational Institutions (Schools) is now increased from 1 Crore to 5 Crore u/s 10(23c).
  2. FOR FASTER RESOLUTION OF CASES BY THE AUTHORITIES: 
    • Strengthen the NCLT Framework;
    • e-courts system, implementation;
    • Introduction of alternate methods for the special framework of MSMEs and debt Resolutions.
  3. The residency Criteria for directors revised: From 182 days to 120 days.
  4. The Decriminalization process for the LLP Act, 2008, notified soon.
  5. IPO of Life Insurance Corporation (LIC) will be announced soon in FY. 2021-22.
  6. A revised mechanism will be introduced for ensuring timely closure of sick or loss-making CPSEs (Central Public sector Enterprises).
  7. For Ease of Doing Business by the Cooperatives a “Separate Administrative structure” to streamline.

  • KEY FEATURES OF BUDGET 2021 ON TAXATION: FOR THE VISION OF TRANSPARENT AND EFFICIENT TAX SYSTEM, THE TAX BURDEN MINIMISED

KEY FEATURES OF BUDGET 2021 ON DIRECT TAX

ACHIEVEMENTS: 

  1. There is no change in slab rates.
  2. The Income Tax Return files increased to 6.45 Crore in 2020 from 3.31 Crore in 2014.
  3. NATIONAL FACELESS INCOME TAX APPELLATE TRIBUNAL (ITAT): ITAT become Faceless – Only electronic communication (Personal hearing) will be done through video Conferencing 
  4. Reducing the tax burden on small taxpayers, by the increase in Rebates.
  5. EASE OF FILING TAXES: Pre-Filling of Returns – Details of Capital Gains, Dividend Income and post office Interest income will be pre-filled in the returns (Salary, Tax payments, TDS etc.)

RELIEF TO SENIOR CITIZEN

  1. Senior citizen of 75 years and above age, having only pension and interest income: exempted from filing Income Tax Return and banks will do TDS.

RELAXATION TO NRIs

  • NRIs foreign retirement accounts: Rules to be notified soon for removing the hardships faced by NRIs.
  1. Proposes to notify the Rules, for removing hardship of Double Taxation.

REDUCING AND SIMPLYFUING SETTLEMENTS:

  1. VIVAD SE VISHWAS SCHEME: The scheme “VIVAD SE VISHWAS SCHEME” due date has been extended till 28th of February, 2021.
  2. RE-ASSESSMENT: The Time limit to re-open the Assessment Procedures under the Income Tax Act is reduced from 6 years to 3 years.
  3. SERIOUS TAX EVASION: Where evasion Evidence is of Rs. 50 Lakhs or more, the time limit for reopening the case is within 10 years. 
  4. Deposit Insurance cover (DICGC Act 1961 to be amended). It is Easy and time-bound access of deposits to help depositors from stress banks.
  5. EXCEPTION U/S 44AB OF INCOME TAX ACT: To Incentivise, the Tax Audit Limit to be increased to Rs.10 crores from Rs.5 crores for those having less than 5% cash transactions, Vice-Versa, where digital/bank transaction account for 95%.
  6. Reduction of litigation for small taxpayers:
  7. TDS ON E-COMMERCE TRANSACTIONS: on e-commerce transactions, the TDS of 1% will be levied

RELIEF FROM DIVIDEND

  1. Exemption of TDS, if Payment of dividend to Real Estate Investment Trusts.
  2. Advance tax liability on dividend income will arise only after declaration or payment of dividend.
  3. For Foreign Portfolio Investors – lower treaty rate benefit will be notified, on the deduction of tax on dividend income.

AFFORDABLE HOUSING FOR ALL

  1. Additional Interest deduction (Sec 80EEA) of Rs.1.5 lakhs to be extended for loans taken till 31st March 2022, for buying an affordable house.
  2. For Affordable Housing projects tax holiday extended till March 2022.
  3. For notified Affordable Rental Housing Project: Tax exemption allowed. 

TAX BENEFITS TO START-UPS AND IFSC

  1. START-UP INCENTIVE: Tax holiday exemption of 1year to the start-up.
  2. EXTENSION ON TAX HOLIDAY FOR START-UPS:  Capital Gains exemption on investment in start-ups also extended to 31s March 2022.
  3. Providing Tax Holiday for Capital Gains from the income of Aircraft Leasing Companies
  4. Tax Exemption to Lease paid to Foreign Persons, for aircrafts lease.
  5. Tax incentive for relocating the funds of outside India in the IFSC.
  6. Tax exemption to investment division of foreign banks located in IFSC

LABOUR WELFARE

  1. In case of late deposit of employee contribution of PF by the employer, will now be not allowed as deduction.

KEY FEATURES OF BUDGET 2021 ON INDIRECT TAX

GST MEASURES:

  1. Filing of Nil return through SMS;
  2. for small taxpayers: Quarterly return and monthly payment; 
  3. Electronic invoice system;
  4. Validated input tax statement;
  5. Pre-filling of GST return: It is also editable;
  6. Staggering of returns filing;
  7. GSTN SYSTEM ENHANCEMENT: Enhancement of capacity of GSTN system;
  8. identify tax evaders, by the use of deep analytics and Artificial Intelligence;

CUSTOM DUTY:

The customs duty has been raised on some items like; tableware, kitchenware footwear, fans and toys.

  • AGRICULTURE PRODUCTS: 

  • The customs duty on Cotton, silks, alcoholic been increased from 10% to 15 %.
  • On denatured ethyl alcohol:  Withdrawal of end-use based concession.
  • On a small number of items, Agriculture Infrastructure and Development CESS (AIDC) applied.
  • New customs duty exemptions to have validity up to the 31st March 2021 following two years from its issue date.
  • Elimination of more than 80 outdated exemptions.
    1. Reduction in duties on various Textile and chemicals and other products.
    2. The Basic Customs Duty (BCD) reduced on Gold and silver.
  • Basic Customs Duty (BCD) reduced to 5% on caprolactam, nylon chips and nylon fibre & yarn.
  1. Some exemptions on parts of chargers and sub-parts of mobiles being withdrawn.
  2. Duty on some parts of mobiles increased to 2.5% from ‘nil’ rate.
  3. Rectified customs duty rates on chemicals to encourage domestic value addition and to remove inversions.
  4. Duty on Naptha been reduced to 2.5%.

  • KEY FEATURES OF BUDGET 2021 ON GENERAL TOPICS

 

  1. INTRODUCTION OF GIG WORKERS AND PLATFORM WORKERS: Social security benefits to be extended to gig and platform workers for the first time. Minimum wages criteria will apply to all categories of workers.
  2. fiscal deficit for Financial Year 2021 pegged at 9.5% of GDP
  3. States to get 41% share of taxes as per 15th Finance Commission recommendation; Government has accepted the recommendation.
  4. Finance Minster allocates Rs.3, 726 Crore for the forthcoming census which will be the first digital census.
  5. A project of Seven port worth more than Rs.2000 crore investment announced in this budget.
  6. One Nation, one ration card plan under implementation in 32 states, 1union Territory.
  7. Government to infuse Rs. 20,000 crore into public sector banks in FY 2021-22 for bank recapitalisation
  8. Farmers paid ₹75,100 Crore on wheat MSP in FY21
  9. INDIAN STAMP ACT, 1899: In the case of transactions in stock exchanges and depositories established in international financial centres set up under the Special Economic Zones Act, 2005, no stamp duty will be charged.  
  10. Privatisation of IDBI Bank, One general Insurance Company and two public sector Banks

The key to the Budget document 2021 shall be available at https://www.indiabudget.gov.in/ 

 

“Faith is the bird that feels the light and sings when the dawn is still dark.” – Rabindranath Tagore

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CS Riya Khurana
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Cs Riya Khurana

Cs Riya Khurana