Union Budget 2021 – All The Changes Announced!
In her fourth consecutive budget speech, Nirmala Sitharaman, the Union Finance Minister of India has announced some major proposals. The following is the summary of the speech,
Key highlights of the Union Budget 2021:
- Atmanirbhar Bharat:
The FM outlined six pillars of proposals to strengthen the vision of Atmanirbharta, namely health and well-being, capital and infrastructure, inclusive development, reinvigorating human capital, innovation and R&D and minimum government and maximum governance.
- Shot in the arm for Healthcare:
The allocation to healthcare in this budget has been increased substantially. The areas of focus will be preventive and curative healthcare as well as well being, she said. The allocation is likely to be around Rs 2,23,846 crore, a 137% percentage rise from the previous budget. Rs 35,000 cr has been budgeted for COVID-19 vaccination expenditure in FY22.
- A Bank for Roads:
The Govt is set to introduce a Development Financial Institution (DFI). Rs 20,000 crore will be provided to capitalise the new DFI, with an aim to have a lending portfolio of Rs 5 lakh crore in 3 years. National Monetisation Pipeline for brownfield projects will be launched, the FM announced with NHAI and PGCIL having sponsored one InvIT each. She also added that vehicles will undergo fitness tests after 20 years for PVs, 15 years for CVs, announcing a voluntary vehicle scrapping policy
- Projects Galore:
FM says projects for building 8,500 km of highways will be awarded by March 2022. While presenting the Union Budget 2021-22 in Parliament, the finance minister also said poll-bound West Bengal will see highway projects worth Rs 25,000 crore.
- Capital Expenditure:
FY22 capital expenditure provided is up 34.5% (vs FY21 BE) at Rs 5.54 lakh crore, said the Finance Minister. Rs 44,000 crore under capital expenditure will be given to Department of Economic Affairs in FY22, she added. FY21 capital expenditure is seen at Rs 4.39 lakh crore.
- Textile Parks:
India will set up seven textile parks over three years under the scheme of mega investment textile parks which was announced in Budget FY22. The parks to be setup over 1,000 acres of land with world class infrastructure, and plug-and-play facilities, will be addition to the Rs 10,683-crore production linked incentive (PLI) scheme for technical textiles and man-made fibres.
- Agricultural Credit:
The Budget set agriculture credit target of Rs 16.5 lakh crore for FY22, and will further increase provision to rural infra development fund to Rs 40,000 crore from earlier Rs 30,000 crore. Sitharaman said the govt is committed to welfare of farmers, pointing at how 1.54 crore farmers benefited from MSP in paddy and wheat in FY21. Furthermore, underlined that Rs 75,060 crore was paid to farmers for wheat in FY21 versus Rs 62,802 crore in FY20.
- Fiscal Deficit and Divestment Target:
The Govt sees FY22 fiscal deficit at 6.8%, according to the FM, while she had pegged deficit at 3.5% for FY21 in the last Budget. Govt aims to get Rs 1.75 lakh crore through divestments in 2021-22, according to Budget documents. In FY21, it planned to raise Rs 2.1 lakh crore through divestments, falling short.
FM Sitharaman proposed to consolidate provisions of the Sebi Act, Depositories Act, Securities Contracts Regulation Act, and the Government Securities Act. Government aims to amend Insurance Act to allow higher FDI, increasing FDI limit in insurance to 74% from 49% and allowing foreign ownership.
An allocation of Rs 1,10,055 crore to be made. Of this, Rs 1.07 lakh crore is for capital expenditure for FY22. The eastern and western dedicated freight corridors will be commissioned by June 2022, it was announced. The FM also announced plans for east coast corridor, east-west corridor, north-south corridors. 100% electrification of broad-gauge routes will be completed by December 2023, she said.
- Power Distribution:
The government will enable electricity connections portability to consumers by introducing competition in the power distribution space and kickstart a Rs 3 lakh crore reforms scheme for state power distribution companies, finance minister Nirmala Sitharaman announced.
- Ujjwala Boost:
The government on Monday said the free cooking gas LPG scheme, Ujjwala will be extended to one crore more beneficiaries. She further said city gas distribution network of providing CNG to automobiles and piped cooking gas to households will be expanded to 100 more districts.
- Banking and Companies:
The Govt plans to allot Rs 20,000 crore for bank recapitalisation of PSBs. The FM also proposed to revise definition under Companies Act, 2013 for small companies by increasing their threshold for capitalisation.
- One-Nation, One-Ration Card:
69 crore beneficiaries (86% beneficiaries) were covered under the One-Nation, One-Ration card implemented by 32 states and union territories.
- LIC IPO:
The FM announced plans to privatise 2 PSU banks and one general insurance company in FY22. The Govt will bring the long-awaited LIC IPO in FY22, adding that it plans to complete the divestments of BPCL, CONCOR and SCI in 2021-22
- MSME Allocation:
The FM proposed doubling of MSME allocation, setting aside Rs 15,700 crore for medium and small enterprises in FY22.
- Minimum Wages:
Minimum wages will now apply to all categories of workers and women will be allowed to work in all categories with adequate protection.
- 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, the FM added.
- Deep Ocean Mission:
India to launch Deep Ocean Mission, with allocation of Rs 4,000 crore over next four years.
- Fiscal Deficit:
Sitharaman pegged FY21 fiscal deficit at 9.5% of GDP, with FY22 fiscal deficit target at 6.8% of GDP. Hope to get to back to fiscal consolidation path by FY26. Fiscal deficit will reach below 4.5% by FY26. FY22 gross expenditure seen at Rs 34.83 lakh crore.
- Tax Relief for Seniors, Small Taxpayers:
No tax filing for seniors above 75 with only pension, interest income. A dispute resolution committee for small taxpayers is being planned. Anyone with taxable income of up to Rs 50 lakh, disputed income of up to Rs 10 lakh eligible to approach dispute resolution committee.
- Faceless Resolution:
The Budget proposes setting up faceless dispute resolution committee for individual tax payers, making Income Tax Appellate Tribunal faceless, and constituting the dispute resolution committee for small taxpayers.
- First Digital Census:
Finance Minister Sitharaman allocates Rs 3,726 crore for the forthcoming Census, calling it “the first digital census”.
- NRI Boost:
Government to notify rules to eliminate double tax for NRIs on foreign retirement funds
- Tax Holiday Extended:
Govt to extend eligibility of erstwhile tax sop on home loan up to FY22. The FM also said that affordable housing projects can further avail tax holiday for one more year. The FM proposed extension of tax holiday for start-ups by one more year, a tax exemption for relocating funds to IFSC, and tax holiday for aircraft leasing business in Gift city.
- Tax Return Filers Almost Doubled:
She said that income tax return filers increased to 6.48 crore in 2020 from 3.31 crore in 2014.
- Revised Customs Duty Structure:
Propose to review more than 400 old exemptions to customs duty, and from October 1 will put in place a revised customs duty structure free of any distortion, the FM said. Govt plans on reducing customs duty uniformly to 7.5% on products of non-alloy, alloy and stainless steel, exempting duty on steel scrap till March 2022. The FM added that to provide relief to copper recyclers, the govt will be reducing duty on copper scrap from 5% to 2.5%.
- Big Borrowing:
Sitharaman said govt will borrow Rs 80,000 crore in the remaining two months to meet FY21 expenditure, and is projected to borrow about Rs 12 lakh crore in FY22.