The Union Budget 2021-22 was presented by the Union Finance Minister of India, Nirmala Sitharaman, on 1 Feb, 2021. There is no change in IT Slabs and it mainly focus to boost Indian Economy which was hit by pandemic.
Union Budget 2021-22 Key Highlights in Finance Sector
- Senior citizens who are above the age of 75 years have been provided tax benefits. Senior citizens who receive income via in interest and pension do not have to file income tax returns.
- The time limit for reopening the assessment procedure has been reduced to 3 years. Earlier, the time limit was 6 years.
- Tax holiday Extended to one more year for Affordable housing projects
- Copper scrap Import duty reduced from 5% to 2.5%
- Government cuts import duty on gold and silver from 12.5% to 7.5%
- cotton Customs duty raised from 0 to 10%
- Custom duty on solar inverters and solar lanterns raised.
Key highlights of the budget 2019-20 that have a major impact on the finance sector
The budget proposed various measures to resolve liquidity issues of banks and NBFCS which are suffering from severe loan pressure. New funding avenues will be opened to make the NBFCs financially sound. The government has also promised to take steps for boosting the debt market and promoting IFSC. During the budget session, the Finance Minister announced that the government will implement several measures to deepen the corporate bond market. No changes have been made to the income slabs for personal taxpayers. However, an additional surcharge has been levied for people who earn more than Rs.2 crore and tax measures have also been proposed for start-ups.
Banking, Insurance, and Investment
- Rs.70,000 crore has been provided to the PSU Banks for boosting their capital and improving their condition.
- PSU Banks has been provided with one-time 6-month credit guarantee of Rs.1 lakh crore during 2019-20 for purchasing high-rated pooled assets of the financially-sound NBFCs.
- A Credit Guarantee Enhancement Corporation will be set up in order to expand the infrastructure financing sources.
- An action plan will be devised in order to deepen the credit default swaps, corporate bond repos, etc.
- An arrangement to permit AA-rate bonds as collaterals has been proposed on the tri-party repo market in corporate debt securities.
- Investments made by FIIs/FPIs in debt securities issued by IDF-NBFCs has been proposed to be transferred/sold to any domestic investor within the defined lock-in period.
- The Finance Minister announced to increase the FDI in the insurance sector from 49% to 100% for insurance intermediaries.
- Net-owned fund requirement for re-insurers to join IFSC has been reduced to Rs.10 billion from Rs.50 billion for encouraging insurance companies to start operation in India.
- Tax incentives like enhanced holiday scheme, tax exemption for interest paid on external borrowings, relaxation on certain distribution taxes, etc. have been announced to promote IFSC.
- An aircraft financing and leasing hub will be developed within the IFSC.
- A social stock exchange will be set up to enable easy funding for social enterprises.
- Interoperability of service for account holders across PSU banks in India has also been proposed.
- The government will consider relaxing FDI in aviation, insurance, and single-brand retail.
- The budget proposed to examine steps to hike FDI cap in aviation, media, insurance.
- The finance ministry has proposed to SEBI to increase public-holding in listed companies to 35% from 25%.
- Finance Minister Nirmala Sitharaman proposes to create an electronic fundraising platform for listing social enterprises.
- NRI investment and KYC norms for foreign portfolio investors will be streamlined.
- 100% FDI will be permitted for insurance intermediaries.
- NRI portfolio route will be merged with FPI route in order to increase the number of NRI investment in India.
- Housing finance companies (HFCs) will be regulated by the Reserve Bank of India from now onwards instead of the National Housing Bank (NHB).
- The budget has proposed to cut stake below 51% in non-finance PSUs on a case-by-case basis.
- A new series of coins of denominations Re.1, Rs.2, Rs.5, and Rs.10, and Rs.20 will be introduced.
- The government will take measures to enable the account holders to have control over the entities who make cash deposits in their accounts.
- Rs.4 trillion loan under IBC will be recovered in the next 4 years.
- Corporate tax on companies having an annual turnover of up to Rs.400 crore has been reduced to 25%.
- Increase in surcharge from 15% to 25% for HNIs who earn more than Rs.2 crore but less than Rs.5 crore annually.
- 2% TDS has been proposed on cash withdrawals exceeding Rs.1 crore in a year from a bank account. This step has been taken to discourage cash payments.
- An additional tax deduction of Rs.1.5 lakh on interest paid on housing loans for buyers of affordable homes costing less than Rs.45 lakh. It will be available for home loans sanctioned during the period of April 2019 till March 2020.
- An additional tax deduction benefit of Rs.1.5 lakh on interest paid on loans obtained for purchasing electric vehicles (EVs). It is applicable to loans that are obtained during the period of 1 April 2019 to 31 March 2023.
- Surcharge?for HNIs with income over Rs.2 crore has been hiked to 25% from 15% and surcharge for HNIs earning over Rs.5 crore has been increased to 37% from 15%.
- GST Council has been advised to reduce the tax rate on Electric Vehicles (EVs) from 12% to 5%.?
- 2% interest subvention has been proposed for GST-registered MSME on fresh or incremental loans.?
- The budget has proposed to simplify the GST process and introduce faceless scrutiny of tax assessment.
- Tax return filing has been mandated for persons performing specific high-value transactions such as expenditure of over Rs.2 lakh on foreign travel, Rs.1 lakh towards electricity consumption, etc., even if their expenditure is less than the taxable limit of Rs.2.5 lakh.
- Withholding tax provisions have been extended to cover tax deduction on payments made to resident contractors and professionals in case that exceed Rs.50 lakh in a year.
- The budget proposed interchangeability of Aadhaar Number with PAN for filing of tax return or mandatory quoting in cases of specified transactions.
- According to the budget, start-ups will not be subject to scrutiny on angel tax.
- Customs duty on gold and precious metals has been increased to 12.5% from 10%.
- An additional excise duty of Re.1 on petrol and diesel has been imposed.
- Nil duty on import of defence equipment.
- Nil customs duty on certain capital goods used in electronics.
- Fiscal deficit target of 3.3% has been set for FY20.
- Rs.1.05 lakh crore divestment target has been fixed for FY20.
These measures taken by the government under the Union Budget 2019-20 are expected to ease liquidity in the financial sector significantly and provide the much-required impetus to the economic growth of the country. Overall, the budget presented by Nirmala Sitharaman is a good one which not only responded to the requirements of the financial market but also has taken effective measures to boost up the economy.
Union Budget 2018-19 Highlights - Finance Sector
The Union Budget 2018-19 announced on 1st February 2018 is the first budget by the present government after the introduction of landmark financial initiatives like demonetisation and GST (Goods and Service Tax). Despite the desperate attempts of the government, unfortunately, the outcome of these financial initiatives was not as good as expected leading to a financial crisis in the economy. Hence, at this point, when the country is at a critical juncture, a well-structured budget affecting all the sectors positively was the expectation of the finance market.
Challenges Faced by the Indian Economy
The financial sector has faced stiff challenges mainly due to the two unexpected steps were taken by the current Modi government in the year 2017. Demonetisation and introduction of GST (Goods and Service Tax) had resulted in a huge loss for the Indian economy. As per the estimation, approximately Rs.61, 500 crore of loss is recorded in the current fiscal due to the sudden steps like demonetisation and implementation of GST. So, the budget 2018-19 was expected to be designed to cover all the losses and boost economic growth. Though various economists were having different expectations from the budget, they were expecting a good outcome for the financial sector. After all, it is the time to initiate big changes and take long-term reform measures.
Union Budget 2018-19 Allocations and Reforms
Banking and Insurance
- The government proposed recapitalisation of public sector banks to enable them to lend additional Rs.5 lakh crore.
- Rs.3 lakh crore loan disbursement target set for the next fiscal under the ‘Mudra’ Scheme. Rs.4.6 lakh crore is sanctioned by the government under this scheme.
- Instant farm credit of Rs.11 lakh crore is proposed for the next financial year.
- For allowing open gold deposit accounts in a hassle-free way, the ‘Gold Monetisation’ scheme will be revamped.
- The limit of Rs.7.5 lakh for investment in interest-bearing LIC schemes for senior citizens is doubled to Rs.15 lakh.
- United India Insurance, Oriental insurance, and National insurance are suggested to be merged while listing.
- Proposed 100% tax deduction for farmer-producer companies with Rs.100 crore of turnover.
- Reduction of corporate tax to 25% for companies having Rs.250 crore turnover in the financial year 2016-17.
- 100% deduction on tax is offered to the co-operative societies.
- Long-term capital gains more than Rs.1 lakh will be levied by a tax rate of 10% without indexing. Short-term capital gains tax will continue to be 15% as before.
- 4% increase in the Health and Education cess for collecting Rs.11,000 crore additionally.
- There is no change in the tax rates of personal income. The structure and the income tax slab continues to be same.
- Standard deduction of Rs.40,000 for transport and medical reimbursements for salaried tax-payers.
- 10% tax charged on distributed income.
- Surcharge of 10% on income over Rs.50 lakh but within Rs.1 crore and surcharge of 15% on income over Rs.1 crore will continue for next fiscal.
- 50% exemption of interest income for bank and post office deposits including FDS for senior citizens. The deduction has been increased to Rs.50,000 from Rs.10,000.
- Senior citizens will get Rs.50,000 tax deduction per annum for medical insurance under Section 80D.
- Medical expense deduction for senior citizens for certain critical illnesses is increased to Rs.1 lakh under Section 80DDB.
- The government will help to reduce the adversities faced in realty deals. There will be no adjustments if the circle rate doesn't surpass 5 pc of sale consideration.
- PAN has been mandatory for any organisation or entity conducting a monetary transaction of Rs.2.5 lakh or more.
- Excise on unbranded diesel and branded petrol is cut by 2 rupees to 6.33 rupee per liter and 4.48 rupee per liter.
- Customs duty on mobile phones and television parts is increased by 20%.
- Solar tempered glass for the manufacture of solar cells is excused from customs duty.
- There is a reduction of customs duty on raw cashew from 5% to 2.5%.
- Hike in the customs duty on crude vegetable oils such as groundnut oil, sunflower seed oil from 12.5% to 30% and on refined edible vegetable oil from 20% to 35%.
- Increase in the customs duty on imitation jewellery from 15% to 20%, toys, sunglasses, duty for cigarette lighter, bus and truck tyres and selected furniture is also increased, the duty is doubled on watches to 20%.
- The LCD, LED, OLED panels and TV parts import duty increased to 15% and the duty on footwear and other wearable devices are doubled to 20%.
- 10% social welfare surcharge levied on imported goods.
- The government proposed introduction of new schemes to provide electronic assessment for elimination of person-to-person contact.
- Central Board of Excise and Customs proposed to be renamed as the Central Board of Direct Taxes and Customs.
- Rs.3,794 crore is sanctioned to the MSME sector in the form of interest subsidy and capital support.
- The government has raised MSP (Minimum Support Prices) to 1.5 times of production and also proposed to implement MSP for all crops.
- Agriculture in Union Budget
- Union Budget for Rural Sector
- Budget for Health Care Sector
- Railway Budget
- Union Budget for Energy Sector
- Funding of Political Parties in Budget
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- Budget Appropriation Bill
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- Union Budget Analysis
- Union Budget for Senior Citizen
- Union Budget for Logistics Sector
- Maternity Benefits from Union Budget