The most feared and most awaited event of the year; The Budget. Every person, every industry waited patiently for the announcement from our respected Finance Minister Nirmala Sitharaman.
With COVID-19 pandemic on the backdrop, India was waiting for a “get well soon”.
Let’s see what the Budget 2021 brought forward for us – Decoding Budget 2021:
1. No changes in personal income tax
Budget 2021 did not alter the personal income tax structure which meant that the common man is not burdened with tax levy this time. However, we have tried to summarise a few pointers to understand the changes
2. No ITR filing for senior citizen above the age of 75 years
Budget 2021 dictates that Senior citizens above the age of 75 years need not file Income Tax returns henceforth. However, this exemption is valid only if the senior citizen has income from pension and interest.
Only snitch here is that the bank interest should have been received from the same bank where the pension gets deposited.
3. Prefilled Income Tax Returns
Ease of filing will be achieved as a result of Prefilled Income tax returns with the details of interest, dividend, capital gains etc. This is a welcome change since time will be saved and accuracy will be achieved.
Capital gains especially for trading in shares and mutual funds is a very cumbersome task. Prefilled details of capital gain will be a relief.
4. Dividend not required to be considered for determining the advance tax
The dividend has been made taxable only on the receipt or declaration of the same from the view of Advance Tax calculation.
Earlier the taxpayers would need to pay the interest due to underestimation of dividend income while calculating the advance tax. However, with the change in Budget 2021, the taxpayer need not consider dividend in advance tax calculation unless it is declared or paid. This will reduce the interest and penalty on advance tax payments of the taxpayers.
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5. Taxability of Interest on Employees Provident Fund (EPF) contribution
Interest on EPF contribution in excess of Rs. 2.5 lakhs, however, will be taxed only if withdrawn in such year.
This move is expected to divert the investors away from EPF, so that the investors would prefer to move in the funds to more lucrative options.
6. Double TDS rate where the taxpayer does not file Income Tax Return (ITR)
Budget 2021 has prescribed TDS at double rates where the taxpayer does not file Income Tax return.
This will encourage and push the non filers to file their ITR, which will increase the coverage of Income Tax.
7. Deduction for interest exemption of Affordable Housing remains unchanged this year too
The deduction will be allowed till the year-end i.e. March 2022, on the Affordable Housing Scheme for Rs. 1.5 lakhs.
This was a specific benefit given by Budget 2019, however, FM has reconsidered extending the same to the year 2021 is a positive sign for especially migrant workers and the lower working class.
Related article : How to select a suitable Tax regime for Yourself?
8. ULIPs brought into the tax net
Budget 2021 has brought in ULIPs under taxability net, prescribing that the capital gains on ULIPs will be taxable if the yearly premium is more than Rs. 2.5 lakhs.
ULIPs were having a specific advantage over regular ELSS (Equity Linked Saving Schemes) Funds due to no restriction on premium payments. However, with this amendment, ULIPs are pretty much at par with Mutual Funds.
9. Revision of return preponed by 3 months
Henceforth the taxpayers would be required to file the revised / belated returns by December 31st of every assessment year.
10. Rush start to Startups
Budget 2021 has boosted up the way ahead for the startups by prescribing some booster doses for revival and growth.
11. Removal of condition of waiting period for conversion of One Person Company (OPC)
Budget 2021 has removed the waiting period of 2 years for converting the OPC into a public limited company or private limited company.
12. No Cap on paid-up capital and turnover
Budget 2021 has eliminated the restrictions with respect to paid-up capital and turnover.
13. Non-Resident Indians (NRI) can incorporate OPC in India
This amendment will bring in the most required capital inflow in India especially in start ups.
14. Emphasis on healthcare
COVID-19 was an alarming state of events in the year 2020, which has reaffirmed the need to improve healthcare and sanitization activity.
15. Increased spending to 137% on Healthcare facilities.
Prime Minister Atmanirbhar Swasth Bharat Yojana will have competitive healthcare facilities with this spending.
16. COVID-19 Vaccine
FM has assured that more vaccines will be available soon and an amount of Rs. 35000 crores would be spent on vaccine efforts.
17. Privatisation, Divestment and Foreign Direct Investment (FDI)
Budget 2021 hs been truly an example of a progressive budget since it has talked in lengths and details about Divestment, privatization and foreign direct investment in government companies and public sector units
18. The monetisation of assets of PSUs
FM has announced that assets of Railways, Airports etc will be monetised through National Asset Monetisation Plan.
19. Disinvestment of PSUs (Public Sector Units)
List of PSUs will be made which are targeted for disinvestment and strategic disinvestment will be carried out to garner the funds
20. Changes in the Insurance Act to attract FDI (Foreign Direct Investment)
Budget 2021 has raised the FDI limit to 74% which was 49% earlier. This will attract more international players into the Insurance field due to allowability f foreign ownership.
21. Acche din for Government schemes
- Free Cooking gas
- Application of Minimum Wages Act to all workers inclusive etc.
Decoding Budget 2021 in all can be looked like more of an ambitious budget which has paved the way for the much sluggish economy bearing the impact of COVID19 hit. However, there is too less for the common man in terms of tax impacts and exemptions, apart from health and wellbeing concerns.
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Budget 2021 May Dent Retirement Savings as PF Interest Above a Certain Limit to Get Taxable
The budget has plugged a major tax leak by placing a cap on the Provident Fund contribution that will earn tax-free income. A lot of people contribute huge sums to the Provident Fund every month to gain tax-free interest. Now that has been capped at Rs 2.5 lakh a year. Interest earned on Provident Fund contributions above Rs 2.5 lakh a year will be taxable. This will apply only to the employee’s contribution and not that of the employer.
Cheaper gold, silver jewellery to add glitter to marriage season
Gold and silver jewellery will become cheaper in the country ahead of the upcoming wedding season with finance minister Nirmala Sitharaman reducing import duty on gold and silver to 7.5% from 12.5% in the Union budget. Besides bringing relief to the consumers, the move would make Indian jewellery more competitive in global markets and also help reduce gold smuggling into the country, industry insiders said. India imports around 800 -850 tonnes of gold annually. It is estimated that another 100-120 tonnes of gold enter the country through the grey market route. The duty cut may also help jewellery exports.
Why is the military taking control in Myanmar?
The announcement on military-owned Myawaddy TV cited Article 417 of the country’s constitution, which allows the military to take over in times of emergency. The announcer said the coronavirus crisis and the government’s failure to postpone the November elections were reasons for the emergency.
Indigo Paints shares debut at Rs. 2,607.50, a stellar 75% premium over IPO price
Indigo Paints shares kick-started trading with a bumper premium of 75 percent over its issue price on February 2, given the strong IPO subscription and Budget-driven bullish market sentiment. The stock opened at Rs 2607.50 on the BSE, against the public issue price of Rs 1,490, while the opening price on the National Stock Exchange was at Rs 2607.50, a 75 percent premium. At 10:07 hours IST, Indigo Paints shares were trading at Rs 2,533.45, up 70 percent, with volumes of 364,745shares on the BSE. On the NSE, it was quoting 70 percent higher at Rs 2,532.45, with volumes of 4,186,376 shares. The fifth-largest company in the Indian decorative paint industry in terms of revenue from operations has raised Rs 1,170 crore through the maiden public issue which was subscribed 117 times during January 20-22.
COVID-19 Vaccine Tracker News: Over 37.5 lakh beneficiaries receive the jab in India
The government has proposed a budget outlay of Rs 2,23,846 crore for health and wellbeing in 2021-2022, an increase of 137 percent from the previous year, with Rs 35,000 crore earmarked for COVID-19 vaccine in the upcoming fiscal. At least 37,58,843 beneficiaries have, so far, been vaccinated for COVID-19 through 69,215 sessions, the health ministry has said in a provisional report. The government proposed a budget outlay of Rs 2,23,846 crore for health and wellbeing in 2021-2022 on February 1, an increase of 137 percent from the previous year, with Rs 35,000 crore earmarked for COVID-19 vaccine in the upcoming fiscal.
Budget 2021: Here’s how retail investors and taxpayers will be affected
ULIPs to get taxed as well
ULIPs with very high premiums will also move into the tax net. Insurance policies are often hawked as tax-free investment havens. But now, policies with an annualized premium of Rs 2.5 lakh or more will be treated as mutual funds for tax purposes. This new change will apply to all new policies.
To read more about these changes here is an article : ULIPs with an annual premium above ₹2.5 lakh to be taxed.
Boost to affordable housing
The budget has extended the eligibility window for the additional deduction of Rs 1.5 lakh for home loans taken for affordable housing under Sec 80EEA by another year. The earlier deduction given last year is expiring on March 31 this year. This benefit is only for first-time homebuyers with loans of up to Rs 35 lakh for houses worth up to Rs 45 lakh. There are also restrictions on the house size (60 sq m in metros and 90 sq m in other towns and cities).
Easier compliance for the elderly
The budget has also made tax compliance easier for those above 75. They don’t need to file returns if they have income only from pension and interest. It is important to note that this exemption is only for filing tax returns, not for paying tax. Also, if they have income from rent and capital gains, they are not eligible for the exemption from filing tax returns.
Reopening of ITRs
In a significant step to improve the taxpayer sentiment, the budget has changed the time frame within which the tax department can re-open old ITRs. The time window has been reduced from six years to three years now. This will ensure that taxpayers are not harassed by the tax department for returns filed several years earlier.
Easier filing of capital gains tax and dividend
The budget has also made it easy to file capital gains tax. The capital gains and dividend income will now come pre-filled in the ITR forms. This will certainly help in improving tax compliance among taxpayers who used to ignore capital gains and interest because of the problems associated with calculating them. All in all, the budget is taking the nation in the right direction – investments in infrastructure, health, agriculture are excellent long-term bets.
Here are some of the unheard facts about budget 2021