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Union Budget- 2021-22- Key Highlights

February 1, 2021

The Union Finance Minister, Nirmala Sitharaman on February 01, 2021 (Monday), presented the Budget 2021-22 which aims to bolster an economy badly-hit by the novel coronavirus pandemic resting on six pillars, namely, health and well-being, physical, financial capital and infrastructure inclusive development for aspirational India, reinvigorating human capital, innovation and R&D and minimum government and maximum governance.[1]

Following are the highlights of the 2021 Budget:

  • The capital expenditure for FY-2021-22 is Rs. 5.54 lakh crore.
  • Fiscal deficit stands at 9.5% of GDP[2] which is estimated to be 6.8% in the current Financial Year.
  • State borrowings have been increased up-to 4% of Gross State Domestic Product (GDSP).[3]
  • The FDI limit in the insurance sector has been increased from 49% to 74% under the automatic route.[4]
  • The budget has proposed and outlay of Rs. 3, 05,984 Crore over five years for a of revamped reforms- based result linked power distribution sector scheme. Further, it is proposed to put in place a framework giving consumers an alternative to choose among more than one distribution companies.[5]
  • The government has proposed to sell stake of at least 2 public sector banks as a part of its privatization plan. Further, the government expects to raise Rs. 1 lakh crore from dis-investment in public sector banks and financial institutions.[6]
  • Startups will get capital gains exemption by 1 year to 31st March 2022. Further, startups also have 1 more year to claim tax holidays.[7]
  • Budget for MSMEs has been doubled from the previous year to Rs.15, 700 crore.[8]
  • Budget for Education sector of Rs. 99,300 Crore has been allocated and further steps will be taken to attract external commercial borrowings and FDI in the same.[9]
  • There has been no change in the Income Tax Slabs, Income Tax exemptions and Covid cess. Further, the limit for re-opening window for IT assessment cases is reduced from 6 years to 3 years.[10]However, in the cases of serious tax evasion cases, i.e., Rs. 50 lakh or more, it can go up-to 10 years.
  • Affordable housing projects are proposed to get a tax holiday for a period of 1 year.
  • Dividend Income has now been made taxable in the hands of recipient. Earlier, the companies were paying a tax of 15% on dividends distributed by it to shareholders.
  • Compliance burden on senior citizens is now reduced as citizens of 75 years and above are proposed to not file Income Tax Return (ITR) on pension income and interest income.
  • Budget of Rs. 2,23,846 Crore has been allocated to the Health care sector which ups 137% compared to Rs. 94,452 Crore in previous year.[11]
  • Vehicle scrapping policy has been announced to phase out old and unfit vehicles. Further, all vehicles have to undergo a fitness test in automated fitness centres every 20 years in case of personal vehicles, and every 15 years in case of commercial vehicles.[12]

[1] https://www.business-standard.com/budget/article/budget-2021-live-updates-nirmala-sitharaman-budget-speech-highlights-stock-market-income-tax-farmers-121020100065_1.html

[2] https://economictimes.indiatimes.com/news/newsblogs/union-budget-2021-live-news-updates-nirmala-sitharaman-announcements/liveblog/msid-80618644,curpg-2.cms

[3] https://www.thehindu.com/business/budget/highlights-of-union-budget-2021-22/article33713457.ece

[4] https://www.business-standard.com/budget/article/industry-cheers-as-budget-2021-increases-fdi-limit-in-insurance-to-74-121020100570_1.html

[5] https://pib.gov.in/PressReleasePage.aspx?PRID=1693898

[6] https://www.bloombergquint.com/business/budget-2021-india-plans-to-privatise-two-banks#:~:text=much%20it%20…,The%20government%20will%20sell%20stake%20in%20at%20least%20two%20public,in%20the%20next%20financial%20year.&text=The%20government%20expects%20to%20raise,revised%20estimates%20of%202020%2D21

[7] https://m.economictimes.com/tech/startups/startups-get-tax-breaks-for-one-more-year-in-budget-2021/articleshow/80627922.cms

[8] https://timesofindia.indiatimes.com/business/india-business/budget-2021-rs-15700-crore-provided-formsmesector/articleshow/80627598.cms#:~:text=New%20Delhi%3A%20Union%20Finance%20Minister,the%20Union%20Budget%202021%2D22.-

[9] https://www.business-standard.com/budget/article/budget-2020-new-education-policy-proposed-rs-99-300-cr-for-sector-in-fy21-120020100453_1.html

[10] https://m.economictimes.com/wealth/tax/no-changes-in-income-tax-slabs-rates-deductions-exemptions-in-budget-2021/articleshow/80628697.cms

[11] https://www.theweek.in/news/health/2021/02/01/budget-2021-healthcare-sector-gets-much-needed-boost.html

[12] https://www.thehindu.com/business/budget/highlights-of-union-budget-2021-22/article33713457.ece

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