Budget 2021
Budget 2021
Budget 2021
Nirmala Sitharaman on 1st February 2021 in the Parliament. The Budget speech
was given by the FM from 11 a.m. to 1 p.m.
Emphasis on health sector- Rs 35,000 crores has been set aside for coronavirus
vaccine. Overall, budget has outlay of Rs 2,23,846 crore for health and wellbeing
this financial year as compared to Rs 94,452 crore last year (Increase of 137% over
last year). Over 30,000 health and wellness centers are to be opened in rural and
urban areas.
Voluntary vehicles scrapping policy- To phase out old and polluting vehicles.
Under this personal vehicle will undergo fitness test after 20 years while
commercial vehicles will require it after completion of 15 years. This will promote
fuel efficient and environment friendly vehicles while cutting on India’s huge
import bills.
Lower limitation period for reopening tax cases- Finance Minister reduced the
time limit for reopening of income tax return assessment cases to 3 years from 6
years for serious tax fraud cases, where concealment of income is Rs 50 lac or
more it will be 10 years. Allowing prescribed authority to issue notice under
Section 142 of the IT Act (i.e., inquiry before assessment) for conduct of inquiry
before assessment.
Easier compliance for senior citizens- Senior citizens after 75 years of age
having only pension and interest income will not be required to file income tax
return, banks paying the interest will deduct the tax on their behalf.
Focus on faceless dispute resolution- The budget proposes to start faceless
National Income Tax Appellate Tribunal (ITAT) for small tax payers, which
basically means that all procedures shall now be carried out electronically and the
hearing will be done via video conferencing. “To further reduce litigation for small
taxpayers, I propose to constitute a dispute resolution committee… which will be
faceless… to ensure efficiency, transparency and accountability. Anyone with a
taxable income up to Rs 50 lakh and disputed income up to Rs 10 lakh shall be
eligible to approach the committee,” finance minister said in her Budget speech.
Under this mechanism, the assessee would have an option to opt for or not opt for
the dispute resolution. The committee will have powers to reduce or waive any
penalty or grant immunity from prosecution for any offence under this Act.
In line with faceless assessment mechanism, the time limit for completion of
assessment proceedings has been reduced to nine months from 12 months, which
means that returns can be revised until December 31 of an assessment year instead
of March 31.
The Budget also proposed to discontinue Income-Tax Settlement Commission
(ITSC) on or after February 1, 2021, and constitute Interim Board of settlement for
pending cases
To discourage non-filers, the Budget has proposed charging twice the tax
deduction at source applicable or 5 per cent tax, whichever is higher in case a
person has not filed the return for the past two years for which the timeline of
filing the original return has expired. This will apply to cases where the aggregate
of tax deducted at source and tax collected at source in his case is Rs 50,000 or
more in each of these two previous years, according to the budget memorandum
To incentivise digital transactions, the Budget increased the tax audit limit to Rs
10 crore from Rs 5 crore currently for those carrying out 95 per cent of their
businesses digitally. The Budget has also proposed that interest earned on annual
PF contribution exceeding 250,000 from April 2021 will now be taxable.
NRIs won’t be taxed twice on foreign retirement account money- Budget 2021
proposes to provide relief from double taxation for non-resident Indians (NRIs) on
money accrued in foreign retirement accounts by claiming relief on tax deducted
on such money in India. “At present, the withdrawal from such funds may be taxed
on receipt basis in such foreign countries, while on an accrual basis in India. To
address this mismatch and remove this genuine hardship, it is proposed to insert a
new Section 89A to the Act to provide that the income of a specified person from a
specified account shall be taxed in the manner and the year as prescribed by the
Central Government," said the budget document. Insertion of new Section 89A to
the IT Act in order to provide that the income of a specified person from specified
account shall be taxed in the manner and in the year as prescribed by the Central
Government in order to remove the genuine hardship faced by the NRIs in respect
of their income accrued on foreign retirement benefit account due to mismatch in
taxation. This amendment will take effect from April 1, 2022.
Tax On Interest If Pf Above Rs 2.5 L
Individuals whose annual provident fund contribution is Rs 2.5 lakh or more will
not get tax net exemption on the interest earned from the next financial year. "In
order to rationalise tax exemption for the income earned by high-income
employees, it is proposed to restrict tax exemption for the interest income earned
on the employees' contribution to various provident funds to the annual
contribution of Rs 2.5 lakh,"
One year tax holiday for affordable housing projects- Finance minister Nirmala
Sitharaman during her budget speech announced the extension of the tax holiday
on affordable housing projects for one more year. Affordable housing projects can
avail tax exemption benefit until March 31, 2021 under Section 80-IBA of the IT
Act. This amendment will take effect from April 1, 2022. Affordable rental
housing projects are part of Pradhan Manti Gareeb Awas Yojana-Urban.
The affordable housing projects are mainly government focused real estate arena
aimed to ensure housing for all. In Budget 2020, the affordable housing developers
were provided with a tax holiday for a year. The tax holiday has been further
extended this year too.
Tax holiday for startups extended by one year. Exemption on capital gains on
investment in startups extended by one year. In order to incentivise setting-up of
more start-ups in the country, it is proposed to extend the eligibility period of
claiming capital gains exemption for investment made in the start-ups by one more
year to March 31, 2022. Additionally, the Union Minister added a new tax
exemption for notified Affordable Rental Housing Projects is in the pipeline to
encourage Affordable Rental Housing for migrant workers. "In order to incentivize
purchase of affordable house, it is 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 March 31, 2022."
Few of the items on which Customs Duty Rates are revised are as follows:
1. Reduced duty on copper scrap from 5% to 2.5%
2. Basic and Special additional excise duty on petrol and high-speed diesel oil
(both branded and unbranded) is reduced
3. Increased duty on solar inverters from 5% to 20%
4. Raised duty on solar lanterns from 5% to 15%
5. The basic customs duty on gold and silver reduced.
6. The department will rationalise duty on textile, chemicals and other products
7. The revised rates will be applicable from 2nd February 2021 onwards.
8. New tariff items under 2404 11 00 and 2404 19 00 have been inserted in
accordance with upcoming HS 2022 nomenclature. Further, NCCD of 25%
is prescribed on these tariff items with effect from 1st January 2022.
9. Agriculture Infrastructure And Development Cess (AIDC) has been newly
imposed on petrol and diesel at Rs2.5 and Rs.4 per litre respectively.
10.Regarding agricultural products, the customs duty is increased on cotton,
silks, alcohol, etc.
11.Exemption of Social Welfare Surcharge on the value of AIDC imposed on
gold and silver. Therefore, these items would attract surcharge at the normal
rate, only on value plus basic customs duty.
12.The exemption on import of leather will be withdrawn as they are
domestically produced.
13.A new initiative called ‘Turant Customs’ will be introduced for faceless,
paperless, and contactless customs measures.
14.CGST Act was amended for several provisions as follows:
Section 16 amended to allow taxpayers’ claim of the input tax credit based
on GSTR-2A and GSTR-2B.
Section 50 of the CGST Act is being amended to provide for a retrospective
charge of interest on net cash liability with effect from the 1st July 2017.
Section 35 and 44 amended: Mandatory requirement of furnishing the GST
reconciliation report signed by the specified professional is relaxed by
allowing the filing of annual return on a self-certification basis. The
Commissioner can exempt a class of taxpayers from the requirement of
filing the annual return.
Citing a Supreme Court ruling, the government has announced that no depreciation
will be provided on goodwill of a business or profession in any situation. The
government has proposed an amendment in the Income Tax Act to specify that:
Block of depreciable assets won’t include goodwill of a business or profession.
In case it was included in the block of depreciable assets, the tax department will
specify a method for calculating capital gains arising out of its transfer. The
amendment will also specify changes for certain other instances.