Earlier this month, Finance Minister Nirmala Sitharaman presented the first ever digital Union Budget 2021-22 to get India back on the road of recovery post an unprecedented pandemic.
The budget unveiled revolves around six broad pillars – Health and wellbeing, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and R&D and Minimum Government- Maximum Governance, to reset India’s growth trajectory.
Here are some of the key highlights of budget 2021:
Fiscal Deficit Target
The fiscal deficit target rose to 9.5% of the GDP from the budgeted 3.5% due to the double impact of the reduced income as a consequence of the economic downturn during COVID and the increased Government spending in attempt to revive the economy. For 2021-22, the fiscal deficit target has been set 6.8%.
The Government plans to borrow INR 80,000 crores to fund the deficit this year and Gross Market borrowing for the next year is pegged at INR 12 Lakh crores. A new path for fiscal consolidation has been announced for the continued efforts to revive the economy.
Budget 2021 has brought some tax relief measures for the corporate sector. The threshold limit for Tax Audit is increased from 5 crores to 10 crores in case of the assesses undertaking 95% of their transactions digitally. Increase in threshold limit will encourage businesses to make digital payments ensuring better cash flows and faster reconciliation of books.
Advance tax liability in case of dividend income is to be computed after declaration or payment of dividend whichever is earlier.
Additional Read: Taxation and the union budget. All you need to know
Ease of Doing Business
While there are no GST rate cuts announced in the budget, a relaxation has been offered with the abolition of GST Audit. Companies can file annual returns using self-certified reconciliation statements instead of CA-certified statements to promote ease of doing business.
Additionally, in an attempt to ease the process of Tax Assessment and increase the efficiency, the Finance Minister proposed several measures in Income Tax Act. The measures include allowing faceless dispute resolution committee for small taxpayers and faceless appellate proceedings scheme extended to appellate tribunal.
FDI in Insurance
Budget 2021 has permitted a hike in FDI investments in insurance companies up to 74% from the previous 49%. This step will increase capital inflow to insurance companies and support their expansion. The additional focus on health and well-being will drive capital inflow. The move will also force innovation within dominant players in the industry.
Improved Healthcare Infrastructure
To address the fragile health care system, a new scheme, Pradhan Mantri AtmaNirbhar Swasth Bharat Yojana is proposed with an outlay of about 64,180 crores over 6 years to develop capabilities of primary, secondary, and tertiary health care systems. This allocation is an 137% increase in the budget outlay for the healthcare sector. For businesses in the healthcare sector, this is a major confidence boost for the upcoming 5-6 years.
To improve accessibility to the latest medical treatment and technology, the health cess on medical devices imported by international organizations and diplomatic missions is reduced from 5% to nil.
Raising the bar for education
The National Education Policy (NEP) recently announced is well received. The Budget 2021 has confirmed strengthening more than 15000 schools qualitatively to include all the components of the National Education Policy. These 15000 schools are also expected to train the remaining schools in the nearby regions. NEP will ease setting up of educational establishments that meet global standards.
Emphasis on boosting physical infrastructure
Infrastructure has emerged as the top priority in Budget 2021 to ensure economic growth and development. To meet the long-term financing requirements, Finance Minister has announced that a Development Financial Institution will be set up with the budgetary allocation of INR 20000 crores for funding infrastructure projects. This move will catalyse growth and lead to rapid infrastructure development.
Additional Read: Key Things to Know about the Union Budget 2021
Budget 2021 clearly focuses on boosting capital spending to promote robust growth and revival of the economy. The Budget was presented in two parts. Part A deals with budget allocation in the field of Healthcare, Infrastructure, Agriculture, Education, Defence. Part B states the changes and relief provided under the Direct and Indirect Tax Regimes.
Budget 2021 has created a positive buzz in the market with tactical outlay to realize the Government’s vision of an Atmanirbhar Bharat. It remains to be seen if the measures introduced can help the economy to bounce back.
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