Major changes to the taxation process announced like the scrapping of income tax for senior citizens under certain conditions, new rules for removal of double taxation for NRIs, and a reduction in the time period of tax assessments among other measures. Startups will get an extension in their tax holiday for an additional year. The advance tax liability on dividend income shall arise after declaration of payment of dividend.
India’s fiscal deficit is set to jump to 9.5 per cent of Gross Domestic Product in 2020-21 as per Revised Estimates. This is sharply higher than 3.5 per cent of GDP that was projected in the Budget Estimates. A slump in government revenues amid the Covid-19 pandemic has led to a sharp rise in deficit and market borrowing. In health care spending, a total spend of around Rs 2 lakh crore on healthcare with Rs 35,000 crore on Covid-19 vaccine development and inoculation.
The relief to senior citizens of an age 75 years or more from filing ITR with a pension and interest income only, the period of re-assessment has been reduced to 3 years from six years in some specific cases, this will ease their burden. It will help the department in easing related burdens and will raise confidence within taxpayers allowing future growth rather than worry about past mistakes.
To woo small taxpayers a new committee has been formed known as dispute resolution committee for taxable income up to 50 Lakh and disputed income up to 10 lakh, E-assessment up to ITAT level. For businesses, the turnover limit of Tax Audit has been increased to 10 crores from 5 crores where 95 percent transactions are in digital mode and advance tax liability on dividend income arises after the declaration of dividend. By giving relaxation in Tax Audit (No tax audit up to 10 crores for business having 95 percent digital transactions), the government focuses more on digital payment to curb black money which is an interesting move.
A push to the textile industry, a hike in custom duty on cotton and raw silk, a new cess on agriculture development ? Rs 2.5 per litre on petrol and Rs 4 per litre on diesel ? a central university in Leh, a focus on sea-weed farming with a new facility in Tamil Nadu and a new vehicle scrapping policy that aims to provide the auto sector a boost among other announcements. An additional 1 crore families will now benefit under the Centre’s Ujjwala scheme. Four poll-bound states ? Kerala, Tamil Nadu, Assam and West Bengal ? will see significant spending on highway road expansion.
A 2.5 per cent increase in customs duty on mobile chargers and some sub-parts of phones, a move that will make phones more expensive. Withdrawing exemptions on parts of chargers and mobile phones will boost local manufacturing of smartphones. Domestic electronic manufacturing has grown rapidly.
For the effective implementation of National Education Policy, 15000 schools will be strengthened initially. These schools will mentor and work as a model for the NEP implementation across the country.
Budget 2021 holds out various positives for the startup sector. The move towards providing social security benefits for gig workers will add a much-needed safety net that will help this sector grow in a sustainable way and help the many millions that are a part of it. Reducing residency requirements for founders will allow talent to flow and will boost the start-up ecosystem. Extension of tax holiday for start-ups by 1 year, boost to digital payments, increasing threshold for small businesses to Rs 2 crore are other gains for the startup sector.