Union Budget 2021 : Major Updates and Highlights

Published On: Feb 1, 2021Last Updated: Oct 14, 20235.2 min read

The Union Budget 2021-22 has been presented today at the Parliament by our honorable Finance Minister Nirmala Sitharaman. The budget was based on 6 pillars which covered the following sectors:

  1. Health and Well Being
  2. Physical and Financial Capital Infrastructure
  3. Inclusive Development for Aspirational India
  4. Reinvigorating Human Capital
  5. Innovation and Research and Development
  6. Minimum Government and Maximum Governance

Here are the major updates from the Budget 2021:

AatmaNirbhar Swastha Bharat

A new scheme called “PM Aatmanirbhar Swastha Bharat” is to be launched with an outlay of Rs.64,180 crore over 6 years. This shall give impetus to health workers.

Vehicle Scrappage Policy

It has proposed to phase out old and unfit vehicles via a vehicle scrappage policy. Vehicles shall undergo fitness tests after 20 years in the case of private vehicles and 15 years in the case of commercial vehicles.

Fund Allocation towards Healthcare

  • Funds of Rs.35000 crores have been allocated for CoVID Vaccine.
  • Government to launch Mission Poshan 2.0; Jal Jeevan Mission Urban will be launched. The Urban Swachh Bharat Scheme will be implemented with an outlay of Rs. 1.4 lakh crore.
  • Rs.2217 crore for 42 Urban Centres has been allocated to tackle the problem of Air Pollution.
  • Budget 2021 says the pneumococcal vaccine, limited to only 5 states at present, will be rolled out across the country. It will avert more than 50,000 child deaths annually, says Finance Minister Nirmala Sitharaman.

Capital Expenditure

Sharp Increase in Capital Expenditure for the next fiscal has been proposed at Rs.5.54 lakh crore, up from Rs.4.39 Lakh crore last year.

Fund Allocation for Infrastructure Development

  • Rs. 1.1 lakh crore has been allocated for Indian Railways.
  • Rs 25,000 crore has been allocated for road projects in West Bengal, Rs 65,000 crore for road and highway projects in Kerala, and Rs.3,400 crore for Assam. All these three states will have Assembly elections in the coming months.

Banking and Insurance

  • Foreign Direct Investment (FDI) in the insurance sector will be increased from 49 per cent to 74 per cent.
  • A further infusion of Rs 20,000 crore for public sector banks has been announced.
  • IPO for LIC shall be brought out in Financial Year 2021-22 for which the requisite amendments are being made.
  • The FM announced that the government plans to privatise 2 PSU banks and one general insurance company in FY22.

Minimum Wages

Minimum Wages shall now apply to all categories of workers and women will be allowed to work in all categories with adequate protection.

Cell Phone Parts

The government has raised basic customs duty on the import of sub-parts of mobile phones and battery chargers from nil to 2.5% in FY21-22. The price impact will be known once the details are clear.

Farmers’ Welfare

The Government of India is committed to the welfare of farmers. The MSP regime has undergone a change to assure a price that is at least 1.5 times the cost of production across all commodities.

Fiscal Deficit

Union Finance Minister Nirmala Sitharaman in her Budget 2021 speech has said that the fiscal deficit for Financial Year 2021-22 is estimated at 6.8 per cent and for 2020-21 at 9.5 per cent.

Textile Parks

A scheme of mega investment textile parks will be launched in addition to the PLI scheme,” Sitharaman said. She informed that 7 mega textile parks will be launched in three years as part of the scheme. The mega textile parks will have integrated facilities and a quick turnaround time for minimizing transportation losses, eyeing big-ticket investments in the sector.

MSME Allocation

The FM proposed doubling of MSME allocation, setting aside Rs 15,700 crore for medium and small enterprises in FY22.

One Person Companies

The govt plans to allow incorporation of one-person companies with no restriction on paid-up capital and turnover. Non-resident Indians will also be allowed to incorporate one-person companies in India

Exemptions to Senior Citizens

Senior Citizens with the age of 75 years and above have been exempted from filing Income Tax Return provided they have income from Pension and Interest only.

Easier Income Tax Process

  • A faceless dispute resolution mechanism shall be set up for small taxpayers.
  • The Central Government proposes to reduce the time allowed to re-open tax investigation to 3 years vs 6 years. In serious tax evasion cases, only where there is evidence of concealment of income of Rs 50 lakh or more in a year, can reassessment be opened for 10 years. For others, assessment reopening only for 3 years.

Benefit for NRI

NRIs shall be spared from Double Taxation. New Rules shall be announced shortly.

Increased Tax Audit Limit

The limit for Tax Audit has been increased from Rs.5 crores to Rs.10 crores for businesses having 95% of its payments from Digital Platforms.

No Deduction for Late Deposit of Provident Fund

Late Deposit of Employee’s Contribution of Provident Fund shall not be allowed as a deduction to the Employers.

Amendments for Benefits under Affordable Housing

  • The deduction available on payment of Interest for affordable housing loans has been extended by 1 year.
  • Additional Interest Deduction under Section 80EEA of Rs.1.5 lakh for affordable housing to be extended for loans taken till March 31,2022. This shall help homebuyers and will also to the government’s housing for all mission.

Benefits for Startups and Airline Companies

  • The Government announces tax exemption on aircraft lease rentals paid by air careers to foreign lessors.
  • Budget 2021 proposes to amend the definition of Small Companies under section 2(85) of the Companies Act, by increasing the thresholds of paid-up capital from Rs 50 lakhs to Rs 2 crore and turnover from Rs 2 crore to Rs 20 Crore.
  • Finance Minister Nirmala Sitharaman today proposed an extension of the eligibility for claiming tax holiday and capital gains exemption for investment in startups till March 31, 2022.

Other Significant Amendments

  • In ITR, details of capital gains, income from list securities, dividend income, income from interest on bank deposits to come pre-filled.
  • It has been proposed to provide relief on Advance Tax Liability on Dividend Income.
  • Custom Duty has been increased on cottons, silk and alcohol.
  • Government to take steps to reduce inverted duty structures in GST.

With the significant updates as covered above, it seems that Budget 2021 by Finance Minister Nirmala Sitharaman is pragmatic, positive, and committed to the healthcare sector, which needed a deliberate boost post unprecedented virus outbreak last year. The amendments as announced in Direct Tax Laws and Indirect Tax Laws shall have a great impact in providing ease to the taxpayers. 

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Shreeda Shah
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Shreeda Shah

Shreeda Shah is a Chartered Accountant associated with Legalwiz.in as a Business Advisor. She has a good expertise over Direct Taxation and Indirect Taxation compliances.