While presenting the Union Budget 2021, the Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman stated that India’s fight against COVID-19 continues into 2021. The budget proposal for this year stands on 6 pillars. These are:

1. Health and Wellbeing
2. Physical & Financial Capital and Infrastructure
3. Inclusive Development for Aspirational India
4. Reinvigorating Human Capital
5. Innovation and R&D
6. Minimum Government and Maximum Governance

The key highlights of the Union Budget 2021-22 are as follows:

The overall capital expenditure for FY 2021-22 is Rs.5.54 lakh crore. Since the healthcare sector’s improvement is the need-of-the-hour, the Finance Minister proposed a new scheme, PM Aatma Nirbhar Swasth Bharat Yojana, with an outlay of about Rs.64,180 crore over six years.

Further, the Budget outlay for Health and Wellbeing is estimated to be Rs.2,23,846 crore for FY 2021-22.The increased allocation is expected to expand and strengthen existing national health institutions, Health Emergency Operation Centres. Another major highlight is the increase in the Foreign Direct Investment (FDI) limits in the insurance sector from 49% to 74%.

We understand that Union Budget 2021-2022 proposal raises quite a few new questions and doubts which need to be resolved. Thus, Webtel has organized India's first live session on Union Budget 2021 Analysis that explains the expert's perspective in a thorough and succinct manner. Watch this video to see the recorded session.

Direct Tax Proposals - Budget Key Highlights 2021-22

There are some direct tax proposals introduced, providing relaxation to individual taxpayers and startups to some extent. The individual and corporate tax rates for FY 2021-22 (AY 2022-23) remain unchanged. The major change is, the limit for Tax Audits under section 44AB has been increased from Rs 5 crores to Rs 10 crores (only where 95% of payments are received in electronic mode of payment), providing relief to many corporates. The following are other proposed amendments:-

• Relaxation for Senior Citizen of 75 years age and above-

The proposal has been made to exempt the senior citizens from filing income tax returns if they have pension income and interest income as their only annual source of income. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens above 75 years of age who have a pension and interest income from the bank.

• Reduction in time limit for Assessment Proceedings-

The limit of assessment proceedings (reopening of the cases) has been reduced up to 3 years from the earlier limit of 6 years except in cases of serious tax evasion.

• Constitution of “Dispute Resolution Committee”

Those taxpayers having the taxable income of up to Rs.50 lakhs and any disputed income of Rs.10 lakh can approach this committee under section 245MA of Income Tax Act, 1961. This committee will settle new disputes and issues at the initial stage.

• National Faceless Income Tax Appellate Tribunal Centre

The provision is made for faceless proceedings before the Income Tax Appellate Tribunal (ITAT).It will reduce the cost of compliance for taxpayers, and on the other hand, increase transparency in the disposal of appeals.

• Tax incentives to start up

The tax holiday for startups has been extended by one more year up to 31st March 2022.

• Relaxations to NRI

There is a proposal to notify rules for removing hardship for double taxation of income.

• Ease in filing of returns by Pre-filing of returns option

Pre-filling will be allowed for salary, tax payments, TDS, etc. Further, details of capital gains from listed securities, dividend income, etc. will be prefilled in the returns.

• Advance Tax on dividend income

Advance tax will be applicable on dividend income only after its declaration or payment. Tax holidays are proposed for aircraft leasing and rental companies.

• Disallowance of late PF contribution

In case the employee’s PF contribution was deducted but not deposited to the government by the employer, it will not be allowed as a deduction for the employer.

• Section 43CA stands amended

The stamp duty value can be up to 120% (earlier 110%) of the consideration if the transfer of “residential unit”, which means an independent housing unit is made between 12th November 2020 and 30th June 2021.

• Amendment to Section 44ADA

Earlier, the provisions of Section 44ADA applied to All the assessees being residents in India. But from now onwards, it applies only to the resident individual, Hindu Undivided Family (HUF) or a partnership firm, other than LLP.

• Section 80EEA deduction extended

The affordable housing additional deduction was extended till 31st March 2022. The tax exemption has been granted for affordable rental projects.

Indirect Tax Proposals - Budget key highlights 2021

• 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. Increased duty on solar inverters from 5% to 20%

3. Raised duty on solar lanterns from 5% to 15%

4. The basic customs duty on gold and silver reduced

5. The department will rationalize duty on textile, chemicals and other products

6. The revised rates will be applicable from 2nd February 2021 onwards

• 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.

• Agriculture Infrastructure and Development Cess (AIDC) has been newly imposed on petrol and diesel at Rs2.5 and Rs.4 per liter respectively.

• Regarding agricultural products, the customs duty is increased on cotton, silk, alcohol, etc.

• Exemption of Social Welfare Surcharge on the value of Agriculture Infrastructure and Development Cess (AIDC) imposed on gold and silver. Therefore, these items would attract surcharge at the normal rate, only on value plus basic customs duty.

• A new initiative called ‘Turant Customs’ will be introduced for faceless, paperless, and contactless customs measures.

• CGST Act was amended for several provisions as follows:

1. Section 16 (Availment of ITC) is amended to allow taxpayers claim of the input tax credit based on GSTR-2A and GSTR-2B.

2. 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.

3. Sec. 7(1)(aa) is proposed to be inserted so as to ensure levy of GST on the activities or transactions involving the supply of goods or services by any person, other than an individual, to its members or vice-versa, for cash, deferred payment or other valuable consideration.(Club supplying goods or services to its members or vice-versa). Consequent to the proposed amendment in section 7 of the CGST Act, paragraph 7 of Schedule II to the CGST Act is proposed to be omitted retrospectively, with effect from the 1st July, 2017.This shall however be subject to the exemption (upto Rs. 7,500/month/member) in respect of housing societies.

4. Sub-section (5) of section 35 of the CGST Act is proposed to be omitted so as to remove the mandatory requirement of getting annual accounts audited and reconciliation statements(GSTR-9C) certified by specified professionals. Section 44 of the CGST Act is also sought to be substituted so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional and to provide for filing of the annual return on self-certification basis.

5. Section 74 of the CGST Act is proposed to be amended so as to make seizure and confiscation of goods and conveyances in transit, a separate proceeding, from recovery of tax.

6. An explanation to sub-section (12) of section 75 of the CGST Act is proposed to be inserted to specify that “Self-Assessed Tax” shall include the tax payable in respect of outward supplies, the details of which have been furnished under section 37, but not included in the return furnished under section 39. In other words, the details of liability on outward supplies furnished in GSTR-1 but not included in the GSTR-3B, considered as “Self-Assessed Tax’’, consequently, the recovery proceedings will be initiated without following adjudication process.

7. Section 83 of the CGST Act is proposed to be amended so as to provide that provisional attachment shall remain valid for the entire period starting from the initiation of any proceeding under Chapter XII, Chapter XIV or Chapter XV till the expiry of a period of one year from the date of order made thereunder.

8. Section 107 of CGST Act,2017 is proposed to be amended to provide that the pre-deposit amount for filing the appeal before the first appellate authority in cases of detention and seizure of goods and conveyance during transit shall be 25% of the penalty amount imposed.

9. It has been proposed to separate the proceedings relating to detention, seizure and release of goods and conveyances in transit from the proceedings relating to confiscation of goods or conveyances. Further the quantum of penalty u/s 129 has been doubled to 200% of the tax payable where the owner of the goods comes forward for payment of such penalty.

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