HIGHLIGHTS OF THE BUDGET 2021-22
- Relief to Senior Citizens: In order to ease compliance burden on senior citizen pensioners who are of 75 years of age or above, it is proposed to exempt them from the requirement of filing of income tax if the full amount of tax payable has been deducted by the paying bank. This exemption is proposed to be made available to such senior citizens who have only interest income apart from the pension income.
- Reduction in Time Limits: In order to reduce compliance burden, the time-limit for re-opening of assessment is being reduced to 3 years from the current 6 years from the end of the relevant assessment year. Re-opening up to 10 years is proposed to be allowed only if there is evidence of undisclosed income of INR 50 lakh or more for a year. Further, it is proposed to completely remove discretion in re-opening and henceforth re- opening shall be made only in cases flagged by system on the basis of data analytics, objection of C&AG and in search/survey cases. Further, in order to bring certainty in income tax proceedings at the earliest, it is also proposed to reduce the time limits for general assessment or processing of income tax return by three months and also for filing of returns.
- Relief for Dividend: In order to provide relief to taxpayers, advance-tax liability on dividend income shall arise only after the declaration/payment of dividend. The dividend paid to Real Estate Infrastructure Trusts or Infrastructure Investment Trusts (REIT/InvIT) shall be exempt from TDS. It is also proposed to clarify that deduction of tax on incomes including dividend income of Foreign Portfolio Investors may be made at treaty rate. It is also proposed to exempt dividend payment from levy of Minimum Alternate Tax (MAT) for foreign company if the applicable tax rate is less than the rate of MAT
- Setting up of Dispute Resolution Committee (DRC): For reducing litigation and to give an impetus to the dispute resolution for small taxpayers, a Dispute Resolution Committee is proposed to be constituted. A taxpayer having taxable income upto Rs 50 lakh and disputed income upto Rs 10 lakh shall be eligible to approach the Committee. For ensuring efficiency, transparency and accountability, the procedure of the Committee will be conducted in a faceless manner. Consequently, the Settlement Commission shall be discontinued from 01.02.2021. However, the pending cases shall be decided by an Interim Board if opted by the applicant.
- Faceless Income Tax Appellate Tribunal (ITAT): In order to provide transparent tax appellate mechanism, it is proposed to the make the Income Tax Appellate Tribunal faceless and jurisdiction-less. A National Faceless Income Tax Appellate Tribunal Centre shall be established and all the communication between the Tribunal and the appellant shall be made electronically. Wherever personal hearing is needed, it shall be done through video-conferencing.
- Tax Neutrality of conversion of Urban Cooperative Bank (UCB) into Small Finance Bank (SFB): In order to facilitate the transition of UCBs to SFBs, it is proposed to provide tax neutrality for the transition of UCBs to SFBs. Hence, the UCB shall not be required to pay capital gains for the assets transferred to the SFBs
- Tax incentives for Affordable Housing and Affordable Rental Housing Project: In order to incentivize purchase of affordable house, It is proposed to extend the eligibility period for claim of additional deduction for interest of INR 1.5 lakh paid for loan taken for purchase of an affordable house to 31st March 2022. In order to increase the supply of affordable house, it is proposed to extend eligibility period for claiming tax holiday for affordable housing project by one more year to 31st March, 2022. In order to promote supply of Affordable Rental Housing for the migrant workers, it is also proposed to allow a new tax exemption for the notified Affordable Rental Housing Projects
- Tax benefit for Start-ups: In order to incentivize setting-up of more start-ups in the country, it is proposed to extend the eligibility period to claim tax holiday for the start-ups by one more year to 31st March, 2022. In order to incentivize investment in start-up, it is proposed to extend the eligibility period of claiming capital gains exemption for investment made in the start-ups by one more year to 31st March, 2022.
- Relaxation to NRI for Income of Retirement Benefit Account: In order to remove the genuine hardship faced by the NRIs in respect of their income accrued on foreign retirement benefit account due to mismatch in taxation, it is proposed to notify rules for aligning the taxation of income arising on foreign retirement benefit account.
- Exemption from Audit: To incentivize digital transactions and to reduce the compliance burden of the person who is carrying almost all of their transactions digitally, it is proposed to increase the limit for tax audit for persons who are undertaking 95% of their transactions digitally from INR 5 crore to INR 10 crore.
- Relaxation of Condition for carry forward of loss for Disinvestment: In order to promote strategic disinvestment of PSU, it is proposed to relax the condition regarding carry forward of loss for disinvested PSU in amalgamation
- Relaxation of Condition for tax neutral Demerger for disinvestment: In order to promote strategic disinvestment, it is proposed to deem the transfer of assets by the PSU to the resulting company as tax neutral demerger
- Zero Coupon Bonds by Infrastructure Debt Fund (IDF): In order to allow funding of infrastructure, it is proposed to make Zero Coupon Bonds issued by notified IDF eligible for tax benefit
- Rationalization of taxation of Unit Linked Insurance Plan (ULIP): In order to rationalize taxation of ULIP, it is proposed to allow tax exemption for maturity proceeds of the ULIP having annual premium up to INR 2.5 lakh. However, the amount received on death shall continue to remain exempt without any limit on the annual premium. The cap of INR 2.5 lakh on the annual premium of ULIP shall be applicable only for the policies taken on or after 01.02.2021. Further, in order to provide parity, the nonexempt ULIP shall be provided same concessional capital gains taxation
- Rationalization of Tax free Income on Provident Funds: In order to rationalize tax exemption for the income earned by high income employees, it is proposed to restrict tax exemption for the interest income earned on the employees’ contribution to various provident funds to the annual contribution of ` 2.5 lakh. This restriction shall be applicable only for the contribution made on or after 01.04.2021.
- Taxability of Surplus amount received by Partners: In order to provide certainty, it is proposed to rationalize the provisions relating to taxation of the assets or amount received by partners from the partnership firm in excess of their capital contribution.
- Clarification on Depreciation on Goodwill: In order to provide certainty, it is proposed to clarify that no depreciation on Goodwill shall be allowed. However, the deduction for the amount paid for acquiring Goodwill shall be allowed on sale of Goodwill.
- Clarification for the Slump Sale: In order to provide certainty, it is proposed to clarify that slump sale shall include all types of transfer.
- Fake Invoice/ Sham Transaction: In order to protect the revenue, it is proposed to provide that the penalty proceedings initiated for fake invoice/sham transactions of more than INR 2 Crores shall also be eligible for provisional attachment of assets.
- Exemption for Small Trusts: In order to reduce compliance burden on the small charitable trusts running educational institutions and hospitals, it is proposed to increase the limit on annual receipts for these trusts from present “INR 1 Crore” to “INR 5 Crores” for non-applicability of various compliances like approval etc.
- Carry Forward of loss by Charitable Organisations: In order to provide certainty, it is proposed to clarify that charitable trusts shall not be permitted to claim carry forward of loss. However, the loan repayment and replenishment of corpus shall be allowed as application.
- Clarification for Equalisation Levy: In order to provide certainty, it is being expressly clarified that transaction taxable under income-tax are not liable for equalisation levy. Further, it is also proposed to clarify regarding applicability of equalisation levy on physical/offline supply of goods and services.
- Timely deposit of Employees’ contribution to labour welfare funds by Due Date: Delay in deposit of the contribution of employees towards various welfare funds by employers result in permanent loss of interest/ income for the employees. In order to ensure timely deposit of employees’ contribution to these funds by the employers, it is proposed to reiterate that that the late deposit of employees’ contribution by the employer shall never be allowed as deduction to the employer.
- Relaxation in conditions for exemption to Sovereign Wealth Fund & Pension Fund (SWF/PF): In order to incentivise more number of SWF/PF to invest in Indian Infrastructure, it is proposed to relax some of conditions for availing 100% tax exemption introduced in the last budget. The conditions which are proposed to be relaxed include prohibition on loans or borrowings, restriction on commercial activities, direct investment in entity owning infrastructure, etc.
- Tax incentives for IFSC: In order to promote IFSC, It is proposed to provide more tax incentives which includes tax holiday for capital gains on income of aircraft leasing company, tax exemptions for aircraft lease rental paid to foreign lessor, tax incentive for re-location of foreign funds in IFSC and tax exemptions to investment division of the foreign banks located in IFSC.
- Non-filing of Return by Deductee/Collectee: In order to discourage the practice of not filing returns by the persons in whose case substantial amount of tax has been deducted/collected, it is proposed to provide that a person in whose case TDS/TCS of `50,000 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. This provision shall not be applicable for the transactions where full amount of tax is required to be deducted e.g. salary income, payment to non-resident, lottery, etc.
- Levy of TDS on Purchase of Goods: In order to widen the scope of TDS, it is proposed to levy a TDS of 0.1% on a purchase transaction exceeding ` 50 lakh in a year. In order to reduce the compliance burden, it is also proposed to provide that the responsibility of deduction shall lie only on the persons whose turnover exceeds 10 crore.
- Substitution of Authority for Advance Rulings with Board for Advance Rulings: To ensure faster disposal of cases, it is proposed to replace the Authority for Advance Rulings with a Board for Advance Rulings. It is also proposed to provide appeal against the order of such Board to the High Court.
- Further, to ensure faster disposal of cases, it is proposed to replace the Authority for Advance Rulings with a Board for Advance Rulings. Also proposed to provide appeal against order of such Board to the High Court
- In order to provide relief to the taxpayers in whose case MAT liability has arisen in the year of repatriation on account APA or secondary adjustment, it is proposed to provide relief by aligning the MAT provisions with the year of taxability of such income.
- Exemption for Leave Travel Concession (LTC) cash scheme. In order to provide relief to employees, it is proposed to provide tax exemption to the amount given to an employee in lieu of LTC subject to incurring of specified expenditure.
- Increase in safe harbor limit for primary sale of residential units. In order to incentivise home buyers and real estate developers, it is proposed to increase safe harbour limit from 10% to 20% for the specified primary sale of residential units.
- Direct Taxation
- It is proposed to make consequential amendment in the provisions relating to processing of returns for allowing certain deductions and to provide clarification for adjustment of income reported in Audit Report.
- It is also proposed to enable issuance of notice for calling for returns by the prescribed authority.
- It is proposed to empower the Board to relax the rule relating to defective return for a class of taxpayers and to align due dates of return for certain taxpayers.
- It is proposed to clarify that Limited Liability Partnership shall not be eligible for presumptive tax for professionals.
- It is proposed to define the term “liable to tax” to provide certainty.
- Single Securities Markets Code: Central Government propose to introduce a Single Securities Markets Code to consolidate the provisions of Securities and Exchange Board of India Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007.
- Proposed to create a permanent institutional framework for Corporate Bond Markets and enhance the Secondary Market Liquidity.
- Securities and Exchange Board of India will be notified as Warehousing Development and Regulatory Authority for Regulated Gold Exchanges.
- Vehicle Scrappage Policy. A voluntary vehicle scrapping policy, will be implemented to phase out old and unfit vehicles. Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles.
- The policy has been in discussion for some time now, and while further details are awaited, it’s been made clear that the government intends to test-drive the policy by making it a voluntary endeavour before making it mandatory.
- Foreign Direct Investment (FDI) hike in Insurance to 74% from 49% with foreign control under safeguards.
- Under the proposed structure, the majority of Directors on the Board and Key Managerial Persons (KMP) would be Indian residents with at least 50% of directors being Independent Directors and specified %age of profits being retained as General Reserve” said the Finance Minister
- Asset Reconstruction Company Limited and Asset Management Company would 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.
- Taking up decriminalisation of the Limited Liability Partnership (LLP) Act, 2008
- Propose to revise the definition of “Small Companies” under the Companies Act, 2013.
- Propose to incentivize the incorporation of One Person Companies (OPCs) by allowing One Person Companies (OPCs) to grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an One Person Companies (OPCs) from 182 days to 120 days and also allow Non Resident Indians (NRIs) to incorporate One Person Companies (OPCs) in India
- E-Court System, Alternate methods of debt resolution and Special framework for MSMEs shall be introduced.
- A new centrally sponsored scheme, PM AtmaNirbhar Swasth Bharat Yojana, will be launched with an outlay of about INR 64,180 crores over 6 years. Aim to merge the “Supplementary Nutrition Programme” and the “Poshan Abhiyan” and launch “Mission Poshan 2.0.
- Finance Minister said that “The government is expected to spend ₹2,23,846 Crore in the coming year on “Health and Well being, a 137% increase (from last year).
- This includes a ₹60,030 crore outlay on drinking water and sanitation, a ₹2,700 crore outlay on nutrition — both of these are handled by separate ministries — nearly ₹49,000 crore as Finance Commission grants and ₹35,000 crore toward vaccination.
- Urban Swachh Bharat Mission 2.0 will be implemented with a total financial allocation of INR 1,41,678 crores over a period of 5 years from 2021-2026.
- INR 1.97 lakh crores for Production Linked Incentive scheme (PLI) in 13 sectors to create and nurture global champions and provide jobs to our youth.
- 7 Textile Parks will be established over 3 years
- The parks to be setup over 1,000 acres of land with world class infrastructure, and plug-and-play facilities, will be addition to the Rs 10,683-crore production linked incentive (PLI) scheme for technical textiles and manmade fibre.
- It is proposed to launch a Hydrogen Energy Mission in 2021-22 for generating hydrogen from green power sources.
- Propose to introduce an “Investor Charter” as a right of all financial investors across all financial products.
- Minimum loan size eligible for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is proposed to be reduced from the existing level of INR 50 lakhs to INR 20 lakhs to improve credit discipline while continuing to protect the interest of small borrowers, for NBFCs with minimum asset size of INR
- The agricultural credit target to INR 16.5 lakh crores in FY22.
- To review more than 400 old exemptions in customs this year. To put into place new customs duty structure by Oct-1, 2021.
- Revoking Anti-dumping duty (ADD) and Countervailing duty (CVD) on certain steel products
- “MSMEs and other user industries have been severely hit by a recent sharp rise in iron and steel prices. Therefore, we are reducing customs duty uniformly to 7.5 per cent on semis, flat, and long products of non- alloy, alloy, and stainless steels.
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