Vijay Kumar Gaba

 “Progress lies not in enhancing what is, but in advancing toward what will be.”

—Khalil Gibran (Lebanese Thinker Poet, 1883-1931)

Allaying all fears, the finance minister presented a brave budget. She took all Covid-19 blows on (fiscal) body and refused to yield to fiscal pressures. She prudently refused to indulge in allurements of raising resources through additional taxation. The Budget for FY22 is continuation of various measures announced during 2020 to support the economy. The recognition of the need of new economy (ecommerce workers, startups, e-learning, new education techniques etc.) and willingness to let go the control over even strategic CPSEs are signs of pragmatism. This is perhaps the only budget in independent India that does not propose to make any change in income tax rate structure.

It is now upon the administrative ministries, departments and state governments responsible for executing the proposals. Like Rishabh Pant, who went to Australia with a poor record of recent execution, the performance of these executing organs of the government in recent past has not been encouraging. It is to be hoped that the execution will improve materially in next 15 months and Indian economy shall emerge winner.

The stock market celebrated the budget ebulliently. This is despite the warnings by RBI Governor and CEA (Economic Survey) that stock market appear disconnected from the real economy.

Six core ideas of the budget

1.    Health and Wellbeing of citizens - Preventive healthcare, better sanitization and clean water

2.    Physical & Financial Capital, and Infrastructure – investment in building physical and financial infrastructure.

3.    Inclusive Development for Aspirational India – Recognition of the needs of new economy

4.    Reinvigorating Human Capital – Modern education policy

5.    Innovation and R&D – National Research Foundation to research ecosystem in country

6.    Minimum Government and Maximum Governance – Aggressive disinvestment; administrative reforms; easier and transparent tax administration

Key development proposals

·         Rs 64180cr to develop capacities of primary, secondary, and tertiary care Health Systems, strengthen existing national institutions, and create new institutions, to cater to detection and cure of new and emerging diseases.

·         Universal water supply in all Urban Local Bodies; and liquid waste management in 500 AMRUT cities. (Rs. 2,87,000cr in 5yrs)

·         The Urban Swachh Bharat Mission 2.0 (Rs. 1,41,678cr over 5years).

·         Voluntary vehicle scrapping policy Commercial vehicles 15yrs age and personal vehicles 20yrs age would need a fitness test.

·         Rs. 35000 allocated for Covid-19 vaccination. More to be allocated if needed.

·         Mega Investment Textiles Parks (MITRA) Scheme to be announced in addition to PLI.

·         A Development Financial Institution (DFI) with Rs20000cr initial capital to be set up. The institution to have Rs5trn loan book in 3yrs.

·         Proposal to set up National Monetization Pipeline. DFC to be monetized after commissioning in June 2022.

·         Award of 8500kms of road under Bharatmala project in FY22.

·         Private sector may be allowed to own and operate 20000 city busses under PPP mode.

·         Portability to be allowed between power distribution companies. Rs3.05trn for upgrade of power distribution infrastructure.

·         Proposal to launch a Hydrogen Energy Mission in 2021-22 for generating hydrogen from green power sources.

·         Private players to be allowed to manage and operate major Ports.

·         Proposal to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code.

·         Proposal to introduce an investor charter as a right of all financial investors across all financial products.

·         FDI limit in insurance sector increased to 74% from present 49%.

·         Asset Reconstruction Company and Asset Management Company to be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization.

·         Rs. 20000 cr allocated for recapitalization of public sector banks.

·         The limit of Rs50lac outstanding for action under SARFASI Act reduced to Rs20lac for large NBFCs.

·         Proposal to launch data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0 with modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.

·         Clear roadmap for privatization of CPSE. Proposal to take up the privatization of two Public Sector Banks and one General Insurance company and IPO of LIC in FY22. Rs1.75trn to be raised from disinvestment in FY22.

·         Social security benefits will extend to gig and platform workers. Minimum wages will apply to all categories of workers, and they will all be covered by the ESIC.

·         15,000 schools to be qualitatively strengthened to include all components of the National Education Policy.

·         Higher Education Commission to be set up for standard-setting, accreditation, regulation, and funding of higher education institution.

·         National Research Foundation to be set up to develop research ecosystem in the country. (Rs50000 over 5years)

Direct proposals

Personal taxation

·         No change in tax rates and slabs.

·         Assesses above 75yr of age having only pension and interest income need not file return, if TDS covers their full tax liability.

·         Dividend income to be considered for advance tax only when announced. For FPI, TDS on dividend to be at lower treaty rate.

·         ULIPs Premium over Rs2.5lac in a year to be treated at par with Mutual Fund Investment.

·         Interest on contribution to Provident Funds on contribution exceeding Rs2.5/year to be taxable. (Wef 1-04-2021)

·         The additional deduction of `1.5 lakh shall therefore be available for loans taken up till 31st March 2022, for the purchase of an affordable house.

·         IT Returns to come pre filled with salary, interest, dividend and capital gain of listed securities.

·         Person in whose case TDS/TCS of Rs50,000 or more has been made for the past two years and who has not filed return of income, the rate of TDS/TCS shall be at the double of the specified rate or 5%, whichever is higher.

·         Proposal to increase safe harbor limit from 10% to 20% for the specified primary sale of residential units.

Business taxation

·         Further affordable housing projects can avail a tax holiday for one more year – till 31st March, 2022. Tax exemption to be notified for Affordable Rental Housing Projects.

·         For assesses carrying 95% or more transactions digitally, Tax Audit would be needed only if turnover exceeds, Rs10cr.

·         Eligibility for claiming tax holiday for start-ups extended by one more year - till 31st March, 2022.

·         TDS of 0.1% required on purchase transaction exceeding ` 50 lakh in a year, provided the supplier’s turnover exceeds rs10cr.

·         TDS requirement on dividend paid to Trusts (REITs/InVits) in whose hand dividend is not taxable.

·         Provisions for Equalization Levy on ecommerce players rationalized.

Assessment Procedures

·         Time limit for reopening of assessment reduced to 3yrs from present 6yrs. Re-opening for serious tax evasion to be made more objective and system driven.

·         Dispute Resolution Committee to be set up for small assesses and Settlement Commission to be wound up. ITAT to also go faceless.

·         Time limit for completing assessment reduced to 9months from the end of relevant assessment year.

Budget at a glance

Fiscal Trends

 

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