New Budget offers hopes for revival of Indian economy

New Budget offers hopes for revival of Indian economy

Prime Minister Narendra Modi is confident that the budget 2021 will boost the country's growth and help in job creation

India's Finance Minister Nirmala Sitharaman presented the Union Budget for fiscal 2021-2022 in Lok Sabha, the lower house of India's bicameral parliament, on 1 February 2021 while asserting that the mission revival is on the track.

Sitharaman listed out six pillars of the budget that include: (i) Health and well-being; (ii) Physical and capital & infrastructure; (iii) Reinvigorating human capital; (iv) Inclusive development; (v) Innovation and research & development; (vi) Minimum government and maximum governance.

While the government will borrow Rs 80,000 crore to in the remaining two months to meet FY21 expenditure, Sitharaman painted a rosy picture for the next fiscal saying the GST collection has broken all records and the stimulus offered to various sectors would help the Indian economy recover from the pangs of Covid-19 induced slow down and put it on the fast-track of recovery.

Prime Minister Narendra Modi lauded his government's budget saying the budget has farmers and rural India at its heart and added that the budget was meant for ease of doing business, health and the wealth.

"Union Budget 2021-22 has been presented amid unprecedented circumstances. The budget speaks of all-round development. Today's Budget shows India's confidence and will instil self-confidence in the world. The budget has the vision of self-reliance and features every section of the society," Modi said, adding the budget 2021 will boost the country's growth and job creation.

The government's confidence and assertion met with instant approval from the financial sector with the Sensex zooming up at both BSE and NSE to new levels. Post budget presentation Sensex activities are generally seen as a barometer to read the mood of the nation.

The new budget of the Modi government has not seen any new burden on the taxpayers. The income tax slabs remain unchanged. Only relief has gone in favour of senior citizens above the age of 75 years who are no longer required to file their income tax returns if their earnings are confined to pension and interest from investments.

The Finance Minister announced to make Income Tax Appellate Tribunal (ITAT) faceless and said Dispute Resolution Committees would be constituted for small taxpayers. All those with a taxable income of Rs 50 lakh with the disputed income of up to Rs 10 lakh would be eligible to approach the Dispute Resolution Committee.

In a bid to give a boost to the economy, tax holidays for startups has been extended by a year till March 2022. Modi government is pinning up its hopes of creation of new jobs by giving a further boost to the startups. The economic survey had said that till December 2020, a total of 41,061 government recognized startups exited in the country; 39,000 of them provided 4.7 lakh jobs.

An honest taxpayer may not have to fear the income tax officers knocking on their doors as the government has reduced the limit of reopening of any income tax assessment filed from the existing six years to three years only. This means the taxpayers would have to maintain tax-related documents only for four years, including the current assessment year. However, for serious tax evasion of Rs 50 lakh or more, the reopening period can go up to 10 years. Even in that case, it can be done only with prior approval of the chief commissioner of the income tax department.

The Finance Minister also announced extending the time limit to avail Rs 15 lakh benefit on purchase of a new affordable house by a year till March 2022. This is expected to give a major relief to real estate developers who are into construction of budget homes and help them overcome problems the real estate sector faced following the demonetization, GST and RERA Act.

The new budget has also tried to focus on the areas related to insolvency mechanism by specifying that an asset reconstruction company and/or an asset management company can take over stressed assets. However, the asset reconstruction company would have to be professionally managed, device formulae for pricing the loans, lay down the criterion for provisioning, write-downs and upside on the resolution if any for the selling banks, deploy restructuring experts, and institute turnaround teams for the underlying assets; in effect having more say into the day-to-day management of the companies, trooping in a chief restructuring officer as a manager and incentives tied to turnaround and successful monetisation.

The government has further said that it would go ahead with disinvestment of two public sector banks and one insurance company in the fiscal 21-22 without specifying names of the two banks and the insurance company. The FDI in insurance companies has been raised from the existing 49 per cent to 74 per cent while the public sector Life Insurance Corporation will come out with an IPO during the next financial year starting 1 April 2021.