Key Highlights of the Union Budget 2021-22: Simplifying Tax for the Middle Class and Boosting Infrastructure

MUMBAI: Finance minister Nirmala Sitharaman presented the Union Budget 2021-22 on February 1, 2021. The budget speech was 17,031 words long, marking a slight reduction from the previous year’s 20,931 words. The budget introduces several measures aimed at reviving the economy while maintaining stability in tax policies. This article provides insights into the most significant aspects of the budget, focusing on tax simplification and infrastructure investments.

Stability in Tax Slabs and Rates

A significant highlight of the budget is the stability in tax slabs and rates. The news was warmly received as it maintained the existing tax brackets and rates. Additionally, senior citizens who only earn a pension or interest income will now be exempted from filing income tax returns. This exemption, particularly beneficial for retired public sector and government employees, removes a significant administrative burden for this demographic. The budget also refrained from introducing wealth tax or altering capital gains tax on stocks, leading to a positive stock market reaction. The BSE Sensex increased by 2,315 points, or 5%, reflecting investor confidence.

Investment in infrastructure and health

The budget allocated significant funds towards infrastructure improvements and health care initiatives. Notably, 64,180 crores were allocated for new health schemes, while 35,000 crores were set aside for the rollout of a large-scale vaccination program against COVID-19. Moreover, the announced five-year plan includes the launch of 7 mega textile investment parks, illustrating the government’s commitment to the textile industry. In terms of capital expenditure, an impressive 5.54 lakh crores were provided, with substantial allocations to the Ministry of Roads (1.18 lakh crores) and Railways (1.10 lakh crores).

Reforms and Schemes

Several reforms and schemes were introduced to improve ease of doing business and enhance public welfare. The proposal to amend the Insurance Act to increase Foreign Direct Investment (FDI) from 49% to 74% is aimed at boosting the insurance sector. The amendment to the Deposit Insurance and Credit Guarantee Corporation Act (DICGC) ensures easier and expedited access to deposits for customers of distressed banks. The definition of 'Small Companies' under the Companies Act 2013 was also revised, now including companies with capital less than 2 crore and a turnover less than 20 crore.

Promoting Digitalization and Ease of Compliance

The Union Budget also included several measures to promote digitalization and ease compliance. The budget announced the IPO of LIC, marking a step towards disinvestment. For taxpayers, the proposal to reduce the time for income tax proceedings from 6 years to 3 years (except in cases of serious tax evasion) is a significant relief. A proposal to establish a 'Dispute Resolution Committee' for cases involving taxable income up to 50 lakh and disputed income up to 10 lakh aims to streamline the resolution process. Additionally, provisions were made to increase the limit for tax audits from 5 crore to 10 crore, limited to only 95-digitized payment businesses. Pre-filing of returns is another innovative move that will simplify the process for salary tax payments, TDS, and details related to capital gains from listed securities and dividend income.

Import Duties and Costly Imports/Exports

The budget also addressed the cost of various imported goods and services. It highlighted that electronic items, mobile phone parts, chargers, synthetic gemstones, imported leather items, solar inverters, and lanterns are among the more expensive imports. Conversely, more affordable items include gold, silver, iron, steel, nylon clothes, copper items, insurance, and shoes. However, it is advised not to rely solely on advice from social media posts and to conduct independent research from reliable news portals to gain a deep understanding of such economic content.

Conclusion

The Union Budget 2021-22 represents a significant move towards economic revival and simplification of tax policies. By maintaining stability in tax slabs and rates and introducing new health and infrastructure schemes, the government has taken important steps towards economic growth. The focus on digitalization and ease of compliance aims to enhance ease of doing business and reduce administrative burdens.