Union Budget 2021 Tax and Policy Highlights - EY
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Union Budget 2021 Tax and Policy Highlights
Macro-fiscal
Highlights
► Fiscal deficit relative to GDP at 9.5% in ► Government’s gross tax revenues contracted
FY21 and 6.8% in FY22 shows a sharp by (-)5.5% in FY21 RE after having declined by
deviation from the Fiscal Responsibility and (-)3.4% in FY20
Budget Management (FRBM) target of 3%. ► Using a nominal growth of 14.4% and a
The focus will be on sectors with high buoyancy of 1.2, centre’s gross tax revenues 26%
Union Budget 2021
employment and output multipliers like are projected to show a growth of 16.7% in Growth in center’s
construction and health capex in FY22 (BE)
FY22 (BE)
► Capital expenditure is estimated to increase ► Both Personal Income Tax (PIT) and Corporate
from 1.6% of GDP in FY20 to 2.3% of GDP
in FY21 Revised Estimates (RE) and further
Income Tax (CIT) are projected to grow by 14.4%
more than 22% in FY22 BE over FY21 RE. This Nominal GDP
to 2.5% of GDP in FY22 Budget Estimates is largely due to base effects growth rate for FY22
(BE) ► A reinvigorated disinvestment plan has been
► The Fifteenth Finance Commission has planned for FY22 with receipts from
recommended amendment of the FRBM disinvestment budgeted to increase to INR1.75 6.8%
Act, based on recommendations of an high- lakh crores from INR32,000 crores in FY21 Fiscal deficit
powered inter-governmental group target for
► The Finance Commission has permitted a FY22
higher fiscal deficit for the states in 2021-
22 at 4% of GDP for states considered
together. Additionally, a flexibility of 0.5%
of GDP has been allowed subject to certain
conditions. The deficit-GDP ratio is to be
brought down in line with the FRBM
requirement of 3% of GDP by 2023-24Policy
Highlights
► INR 35,000 crores allocated for COVID-19 ► A revamped reforms-based result-linked power
vaccine distribution sector scheme to be launched with an
► PM Atma Nirbhar Swasth Bharat Yojana to be outlay of INR 3,05,984 crores over 5 years
launched with an outlay of INR 64,180 crores ► To consolidate financial capacity of PSBs,
over 6 years recapitalization of INR 20,000 crores is proposed INR2.23
Union Budget 2021
► A conciliation mechanism to be set for quick ► Asset reconstruction and management companies lakh crore for
resolution of contractual disputes to be set up to handle stressed assets of PSBs healthcare
► Decriminalization of the LLP Act, 2008 in FY22 ► A sum of INR 20,000 crores allocated to set up the
► The FDI in insurance increased to 74% from 49% Debt Financing Institution PM Atma Nirbhar
Swasth Bharat Yojana
► IPO of LIC to be undertaken in FY22 ► An independent Gas Transport System Operator to
PPP in ports
7 projects worth more than INR 2,000 crores be set up
► Vehicle Scrappage
will be offered by the major ports on PPP mode ► Voluntary vehicle scrapping policy, to phase out old Policy
in FY22 and unfit vehicles Decriminalization of
► 7 mega textiles parks to be set up over 3 years ► A Hydrogen Energy Mission for generating hydrogen LLP Act
under the proposed MITRA Scheme from green power sources to be launched in FY22 Privatization of PSB
and Insurance
► A Dispute Resolution Committee is proposed to ► Development proposed of a Fin-Tech hub at the GIFT- companies
be constituted to enable efficient dispute IFSC
resolution ► National Monetization Pipeline of potential
► New tax exemption for the notified Affordable brownfield infrastructure assets to be launched 49% 74%
Rental Housing Projects ► Consolidation of the provisions of 4 key securities FDI in
► Privatization of 2 PSBs and 1 General Insurance acts into a rationalized single Securities Markets insurance
company in FY22 Code
Note: MITRA- Mega Investment Textiles Parks, OPC- One Person Company, PSB- Public Sector Bank, LLP- Limited Liability Partnership, PPP- Public Private PartnershipCorporate Tax
Highlights
► Relief for dividend income : ► Rate of TDS/ TCS shall be double of the
Tax Payment
► Advance tax liability in respect of dividend specified rate or 5% whichever is higher in case
relaxation
income to be computed after declaration or of non-filing of income tax return for last two for dividend
payment of dividend whichever is earlier years and where TDS /TCS is INR 50,000 or income
► Withholding Tax exemption granted to dividends more for last two years
Union Budget 2021
paid to Real Estate Investment Trust (REIT) and
► Salary income, payment to NR, lottery etc. excluded
Investment Trust (InviT) Tax audit
► Tax treaty benefits to be available to Foreign ► Late deposit of employees’ contribution to threshold
Portfolio Investors (FPI) labour welfare funds by the employer shall not from INR 50m
be allowed as deduction to the employer to INR 100m
► Minimum Alternate Tax (MAT) exemption to
foreign companies in respect of dividend income ► Relaxation in conditions (viz. prohibition on
if applicable tax rate is less than MAT rate loans or borrowings, restriction on commercial No deduction
► Rationalization of provisions relation to activities, direct investment in entity owning for late deposit
relating to taxation of the assets or amount infrastructure) for exemption to Sovereign of employee’s
received by partners from the partnership contribution
Wealth Fund & Pension Fund
to PF
firm in excess of their capital contribution ► Tax holiday for affordable housing extended up
► Tax audit exemption limit is increased from to 31 March 2022
INR50 million to INR100 million for persons ► New Tax exemption introduced for affordable
Extension in
who are undertaking 95% of their Tax holiday
rental housing project for migrant workers for affordable
transactions digitally
► Relaxation in conditions for loss carry forward of housing
divested Public Sector Undertaking (PSU) in
amalgamationKey Highlights - Corporate Tax Highlights
► Transfer of assets by PSU to resulting ► Further, re-opening of assessment up to 10 years LLP not eligible
company to be deemed as tax neutral only if - when there is a serious tax evasion and for presumptive
demerger concealment on income is INR 5m or more in a tax for
year professionals
► TDS of 0.1% levied on purchase of goods
above INR5 million in a year ► Reduction in time limits for general
Union Budget 2021
Quick processing
► where turnover of buyer exceeds INR 100 million
assessment and processing of Income tax of return and
return by three months closure of
► Substitution of Authority for Advance revenue audit
► Faceless dispute resolution committee will be
Rulings (AAR) with Board for Advance
Rulings constituted for small taxpayer having taxable
Faceless dispute
income up to INR5 million and disputed
► where turnover of buyer exceeds INR 100 million resolution for
income up to INR1 million small taxpayers
► Limited Liability Partnership (LLP) not
► Settlement Commission shall be discontinued from
eligible for presumptive tax for professionals 1 February 2021 Provisional
► The term “liable to tax” to be defined to ► A National Faceless Income-tax Appellate attachment of
assets in case of
provide certainty Tribunal Centre to be established to eliminate fake / sham
► Provisional attachment assets if penalty human interface during Income Tax Appellate invoicing
proceedings initiated for fake invoice/sham Tribunal (ITAT) proceedings
transactions of more than INR 20M Faceless appellate
► Personal hearings will be conducted through video proceedings
► Reduction in time limit for re-opening of conferencing Scheme extended
to appellate
assessment reduced from six years to three tribunal
yearsIndirect Tax | Customs
Highlights
► Sunset clause provided for all conditional ► Common customs electronic portal is notified
exemptions currently in force. The same for facilitating registration, service of orders, Sunset clause
shall end on 31 March 2023 (unless filing bill of entry. 2 years
withdrawn earlier). ► Countervailing and anti-dumping duty can be conditional
► New conditional exemptions shall be valid for levied retrospectively from the date of initiation exemption
Union Budget 2021
two years from the end of financial year of investigation in anti-circumvention cases.
during which it was enacted. ► More anti-avoidance measures have been
► Bill of entry to be filed before end of the introduced. Anti-
preceding day of arrival of goods. avoidance
► Duty has been reduced – gold and silver, goods measures
► Any goods entered for exportation under of iron and steel, copper scrap and others. introduced
wrongful claim of refund or remission of ► Duty has been increased – leather, textile goods,
duty can be confiscated. compressors, auto-components, tunnel boring
► Penalty to be levied in cases where ITC is machine, parts of mobile phones and others.
claimed basis fraudulent invoice and the
same is utilized for payment of tax on
export.
► Two year time limit (further extendable by
one more year) has been laid down for
completion of enquiry and investigation
culminating into issuance of notice.Indirect Tax | Goods and Services Tax
Highlights
► Zero-rated benefit for supplies to SEZ shall ► GST audit has been replaced by self-certified
be available only for authorized operations. reconciliation statement.
► Option of paying tax and claiming refund in ► On recommendations of GST Council, NO GST
case of zero-rated supplies will be available Commissioner may waive the requirement of Audit
only in case of notified supplies and class of filing GST annual return for notified class of
Union Budget 2021
taxpayers. taxpayers.
► Mutuality concept has been done away with ► Law has been amended to allow input tax credit
Pre-deposit
through specific provisions to levy tax on only in cases where the supplier filed the return
such transaction – this has been done to and details are communicated to the recipient. 25%
overrule the recent Supreme Court ruling. Appeal against
► Mandatory pre-deposit (25% of penalty) required detention
► Law has been amended to give effect to for filing appeal against detention or seizure
interest liability on net tax payment order.
retrospectively from 1 July 2017.Other Indirect Taxes
Highlights
► Agriculture Infrastructure and Development ► Central sales tax (CST)
Cess (AIDC) ► Form “C” can be issued where the registered person
► For the purpose of financing the agriculture either resell or uses the goods in the manufacture or Levy of
processing for sale of goods currently covered under
infrastructure and other development new cess
expenditure. CST (like petrol and diesel).
Union Budget 2021
► On import of notified goods.
► Also on manufacture of petrol and high speed
diesel.People Advisory Services
Highlights
► Exemption for LTC Cash Scheme: Legislative ► Reduction in time limit for filing belated/
amendments introduced to give effect to the revised return by three months. Accordingly,
recently introduced LTC Cash Scheme belated return or revised return can now be filed
► To further incentivize affordable housing, up to three months before the end of the
LTC Cash Scheme
the time limit for loan sanctioned from a relevant assessment year or before the legislated
Union Budget 2021
financial institution, has been extended to completion of the assessment, whichever is
31 March 2022 earlier
► Relaxation for certain category of resident ► Higher rates of TDS under certain provisions on
senior citizens of the age of 75 or more, non filers of tax returns for two consecutive tax Timeline
from filing return of Income tax years. It is not applicable for TDS on salary Due date to file
income revised/ belated
► New Section has been introduced to address return reduced by 3
mismatch in taxation of income from notified ► Interest accruing on employee’s contribution to
months and complete
overseas retirement fund. It is applicable for specified provident funds, on contributions in assessments
individuals who are resident in India and excess of INR 2,50,000 per annum, will be
have opened specified retirement fund taxable
accounts outside India, while being non- ► Focus on concluding the process of the
resident in India and resident in that country implementation of four new labor codes.
► Interest for delay in payment of advance tax Specific mention in the budget speech for social
not to be levied on dividend income (not security benefits to be extended to GIG and
applicable on deemed dividend) for platform workers, reduction in compliance
instalments prior to receipt/ declaration of burden on employers, with single registration
dividend income and online returnsKey highlights - People Advisory Services Highlights
► Taxation of proceeds received on maturity of ► Dispute resolution committee to be set up to
high premium unit linked insurance policies reduce litigations for small and medium
(ULIPs) issued on or after 01 February 2021,
where the aggregate premium exceeds INR
2,50,000 per annum
taxpayers for preventing new disputes and
settling the issue at the initial stage
► Time limit for completion of assessment
3 years
Union Budget 2021
Reduction in time
Assessment proceedings reduced by three months. period to issue
► Time period to issue Notice for reopening of Accordingly, the assessment is proposed to be income escaping
assessment of cases: completed within nine months from the end of assessment
► Income escaping assessment (normal cases): the the assessment year notice
time limit has been reduced to three years from
six years
► In specified cases, can be reopened till 10 yearsTransfer Pricing
Highlights
► Rationalization of provisions of Minimum ► Reduction of time limit for completing
Alternate Tax (MAT) assessment
Rationalizing
► Amendment to address certain ambiguities: ► The time limit for completion of assessment MAT provision
► It has been proposed that MAT shall not be proceedings has been proposed to be reduced by
applicable on the past year’s income which is three months. For FY 2020-21 onwards, time limit
Union Budget 2021
included in the current year’s books of account to complete transfer pricing assessments will be
3
on account of an Advance Pricing Agreement 33 months from the end of the financial year.
(APA) or a secondary adjustment. ► Faceless proceedings before the Income Tax
► The Assessing Officer shall, based on an Appellate Tribunal (ITAT) months
application made to him in this behalf by the ► Faceless scheme has been launched for ITAT reduction of
tax payer, recompute the book profit of the proceedings in line with the faceless appeal scheme. completing
past year(s) and tax payable, if any, during the assessment
► Likely to apply to appeals involving transfer pricing
previous year, in the prescribed manner.
grounds as well.
► Re-computation of past years book profits will
► The faceless scheme for ITAT proceedings shall be
be done through rectification proceedings.
effective from 1 April 2021. Faceless ITAT
► This amendment shall be applicable from AY
2021-22 onwards.International Tax
Highlights
► Rationalization of equalization levy ► Changes to the advance ruling process
provisions ► The existing Authority for Advance Ruling (AAR) will
► Taxation as royalty/ fee for technical services cease to operate with effect from date to be notified
under the income-tax law would have priority by the central government Rationalization of
over equalization levy ► Constitution of one or more Boards for Advance provisions related to
Union Budget 2021
► In order to be regarded as “online sale of goods” Ruling will be notified equalization levy
and “online provision of services” for e-commerce ► Central government will introduce a new scheme to
supply or service, certain activities are now impart great efficiency, transparency and
defined accountability and also to introduce dynamic Constitution
jurisdiction of Board for
► Sale of goods and provision of services will be
Advance
covered regardless of whether the e-commerce ► Advance rulings issued by the Board will be
Ruling
operator owns the goods or provides the service appealable before the high court
► Applicability of Income-tax exemption for ► The cases pending before the Authority for Advance
consideration covered by equalization levy Ruling on the notified date will be transferred to the
aligned with 1 April 2020 along with date of Board
applicability of equalization levy ► Corresponding amendments will be made to the
► The amendments will take effect retrospectively relevant provisions with effect from 1 April 2021
from financial year starting from 1 April 2020 ► Definition for “liable to tax” introduced
► No change in applicability of “significant ► The Income-tax Act, 1961 did not provide any
economic presence” criteria for business specific definition of the term “liable to tax”
connection ► The amendment will define this as a liability of tax on
► Accordingly, as provided for by the Finance Act, that person under the law of any country and will
2020, the provision would be applicable from include a case where subsequent to imposition of
1 April 2021 such tax liability, an exemption has been providedTransaction Tax
Highlights
► Goodwill of a business or profession will not
be eligible for tax depreciation going forward
Depreciation
► The scope of slump sale transactions on Goodwill
amended to specifically include all types
transfers —primarily intended to cover slump
Union Budget 2021
exchange transactions
Substance
over form for
slum saleUnion Budget 2021 Sector Highlights
Agriculture
Highlights
► Increase in the target for agricultural credit ► Agriculture Infrastructure Fund to be made
Agriculture credit
► Ensure availability of higher credit to farmers available to APMCs target increased
and for animal husbandry, dairy and fisheries ► Augmenting availability of funds with APMCs for
sector their infrastructure facilities 15 16.5
► Enhanced allocation to Rural Infrastructure ► Development of 5 major fishing harbours into Lakh crores Lakh crores
Union Budget 2021
Development Fund hubs of economic activity
► Facilitating availability of additional funds for ► Economic and social boost to fisheries sector Allocation to Rural
agricultural and allied activities Infrastructure
► Set-up of Multipurpose Sea-weed Park in Tamil Development Fund
► Enhanced allocation to Micro Irrigation Nadu
Fund ► Filip to employment and additional income
30,000 40,000
► Mobilization of additional resources for crores crores
► Implementation of a special scheme for the
expanding coverage under micro-irrigation 2020-21 2021-22
welfare of tea workers, especially women and
► ‘Operation Green Scheme’ expanded to
children in Assam and West Bengal Allocation to Micro
include additional 22 perishable products Irrigation Fund
► Boost to diversity, inclusiveness and welfare
► Boost in integrated development of agriculture
value chain and exports
5,000 10,000
► Integration of 1000 more mandis with
crores crores
e-National Agriculture Market 2021-22
2020-21
► Increase in transparency and competitiveness in
agricultural marketsKey Highlights – Agriculture Highlights
Key direct tax and corporate law proposals ► Incentivising set-up of one-person company
► No change in income-tax rates applicable to (‘OPC’) by allowing them to grow without any
individuals and co-operative societies restrictions on paid up capital and turnover,
► Start-ups incorporated on or after 1 April
reducing the residency limit for an Indian
2016 and before 1 April 2022 will be citizen to set up an OPC from 182 days to 120 Extension of sunset
Union Budget 2021
eligible for 100% deduction of profits and days and also allow Non Resident Indians clause for deduction of
profits of start-ups and
gains from business for 3 consecutive years (NRIs) to incorporate OPCs in India capital gains exemption
out of 10 years at the option of the ► Conversion of OPC into any other type of by 1 more year i.e. 1
company to be allowed at any time April 2022
taxpayer provided the turnover of business
does not exceed INR 100 crores
► Capital gains arising on transfer of Incentivization
residential property on or before 31 March of set-up of
OPCs
2022 will be exempt where the following
conditions are satisfied within the specified
timelines
► The net consideration received is
utilized for subscription of equity shares
of eligible start-up
► The start-up utilizes the amount for
purchase of new assetKey Highlights – Agriculture Highlights
Key indirect tax proposals
► No change in Goods and Service Tax rates
Levy of AIDC
► Imposition of Agriculture Infrastructure and Development Cess (‘AIDC’) has been proposed on on import of
import of certain specified goods including identified fertilizers under HSN 31 effective from 2 specified
February 2021. BCD rates for such products have been reduced. AIDC for such identified products goods
Union Budget 2021
under HSN 31 is 5%
► While computing the customs duty, Social Welfare Surcharge would be computed on value
Changes in
including AIDC
BCD rates for
► Changes in BCD rates for certain Agricultural products and by products wef 2 February 2021: certain
agricultural
Chapter Nature of goods Earlier BCD Rate New BCD Rate products
2207 20 00 Denatured Ethyl Alcohol (ethanol) for use in 2.5% 5%
manufacture of excisable goods
23 All goods in the nature of residues and waste Nil / 5% / 10% / 15%
from food industries except dog and cat food 15% / 20%/ 30%
and shrimp larvae feed
5002 Raw Silk (not thrown) 10% 15%
5004, 5005, Silk yarn, yarn spun from silk waste (whether 10% 15%
5006 or not put up for retail sale)
5201 Raw Cotton Nil 5% + 5% AIDC
5202 Cotton waste (including yarn waste or Nil 10%
garneted stock)
5402 to 5404, 5405 00 Nylon Fibre and Yarn 7.5% 5%
00, 5406, 5501 to 5510Automotive
Highlights
► Increase in basic customs duty rate of auto ► Proposed TDS @0.1% on purchase of goods
components falling under chapters 70, 73, exceeding INR 50 lakh during a year
85, 87 and 91 from 10 % to 15% ► Sale of motor vehicles covered under section Increase in BCD rate of
206C(1F) will continue to be governed by TCS certain auto components
► Increase in basic customs duty rate for from 7.5% /10% to 15%
provisions
compressors falling under chapter 84 and
Union Budget 2021
► However, recently introduced provision under section
instruments under chapter 90 from 7.5% to Announcement
206C(1H) for TCS on sale of goods shall not apply in
15% case new TDS provision is applicable
of Voluntary
Vehicle
► Reduction in basic customs duty for ferrous ► Equalisation levy provisions amended and scope Scrappage
and non-ferrous metal products falling under seems to cover a wider set of transactions Policy
chapter 72 & 74 used by domestic
► Introduction of Voluntary Vehicle Scrappage
manufacturers for reducing cost of inputs by
Policy to replace old vehicles likely to boost
2.5% Equalisation
demand for newer and less polluting vehicles levy provisions
► Agriculture Infrastructure and Development ► Announcement of significant allocation for clarified
Cess imposed on petrol and diesel with a construction of highways and roads. New scheme to
consequent reduction in other duties and augment public bus transport service likely to aid
cess to ensure no additional burden on the increase in demand for automobile industry and
Reduction in BCD rate
consumer create job opportunities of certain metals by
► Temporary withdrawal of anti-dumping duty
and countervailing duty on import of metals
2.5%
from certain countries including China,
Germany, Vietnam, Korea and IndonesiaChemicals
Highlights
► PM AtmaNirbhar Swasth Bharat Yojana ► Continued focus on infrastructure projects such INR350 INR
announced with an outlay of INR642 billion as road, highways, railways, urban billion
over 6 years, for creating new healthcare infrastructure through expansion of metro allocated for
institutions and for detecting and curing new projects and city bus service and affordable COVID-19 vaccine
and emerging diseases and INR350 billion housing
Union Budget 2021
allocated for COVID19 vaccine ► Positive impact on varied speciality chemicals
► Positive impact on intermediaries or raw including construction chemicals
materials used for producing active Capital expenditure
► Hydrogen Energy Mission to be launched for
pharmaceutical ingredients increased to INR5450
generating hydrogen from green power sources billion, with focus on
► Allocation of INR2870 billion under “Jal ► Positive impact for hydrogen producing companies creation of infrastructure
Jeevan Mission (Urban)” to be implemented Voluntary vehicle scrapping policy announced to
► Jal Jeevan Mission to be
over a period of five years – aiming at scrap old and unfit vehicles and encourage fuel implemented
universal water supply in 4,378 urban local efficient and environmental friendly vehicles Scheme of Mega
bodies with 28.6 million household tap Investment Textile Parks
► Positive impact for emission control catalyst, proposed
connections polyurethane and TPU
► Positive impact on PVC, water treatment Hydrogen Energy Mission to
be launched
chemicals, etc.
Scheme to encourage
► A scheme of Mega Investment Textiles Parks environment friendly
(MITRA) is proposed to boost manufacturing vehicles
of technical textiles in India and its exports.
Seven textile parks will be established over POSITIVE IMPACT
three years on chemical
sub-segments
► Positive impact on dye and intermediaries,
colourants and paints, speciality chemicals, etcKey Highlights – Chemicals Highlights
Key indirect tax proposals
► Following changes made in the Basic Customs Duty (BCD) rates with effect from 2 February 2021 BCD increased to
7.5% for Carbon
Chapter Nature of goods Existing BCD rate Proposed BCD rate Black, Bis-phenol A
28030010 Carbon Black 5% 7.5% and Epichlorohydrin
Union Budget 2021
2710 Naphtha 4% 2.5%
2907 23 00 Bis-phenol A Nil 7.5% BCD reduced on
2910 30 00 Epichlorohydrin 2.5% 7.5% Naphtha from 4% to
2933 71 00 Caprolactam 7.5% 5% 2.5% and on
Caprolactam from
► Agriculture Infrastructure and Development Cess (AIDC) is proposed to be levied on following chemical sector goods 7.5% to 5%
with effect from 2 February 2021
Chapter Nature of goods AIDC Existing BCD rate Proposed BCD rate To earmark resources
for improving
2701 Various types of coal 1.5% 2.5% 1%
agricultural
2702 Lignite, whether or not Agglomerated 1.5% 2.5% 1% infrastructure,
2703 Peat, whether or not agglomerated 1.5% 2.5% 1% Agricultural
31021000 Urea 5% 5% Nil Infrastructure and
31023000 Ammonium nitrate 5% 7.5% 2.5% Development Cess
31 Muriate of potash, for use as manure or for 5% 5% Nil payable on chemical
the production of complex fertilisers sector goods. An
31053000 Diammonium phosphate, for use as manure 5% 5% Nil equivalent reduction
or for the production of complex fertilisers has been made to BCDDefence
Highlights
► Defence budget allocation of INR 1350.60 ► Tax incentives introduced to promote domestic
bn for capital expenditure and INR 2120.27 aircraft leasing market
bn for revenue expenditure ► Defence Acquisition Program (DAP) 2020 introduced
► Increase in budget allocation for capital “Leasing” as an acquisition category in addition to
“buy” and “make” category
defence expenditure by 18.75% over 2020-
19%
Union Budget 2021
► In Oct 2020, aircraft leasing was notified as an
21 (BE)
eligible financial product to be transacted in Increase in Defence
► Policy for Strategic Disinvestment in Defence International Financial Services Centre (IFSC) capital expenditure,
► To increase investment space for private sector ► Proposal for income-tax exemption on royalty income highest in 15 years
and minimize presence of Central Public Sector received on aircraft lease by non-resident lessors
Enterprises (CPSEs), defence is one of the from eligible IFSC units engaged in Aircraft leasing
identified strategic sector for disinvestment Custom Duty on
► Reduction in custom duty rate for domestic components/
► Policy to result in minimal presence of CPSEs in
manufacturing of aircrafts or its parts by public parts of aircrafts
the defence sector and remaining CPSEs to be
sector units reduced from
privatized or merged or subsidiarized with other
CPSEs or closed ► To reduce the cost of raw materials and inputs, basic 2.5% to 0%
custom duty has been reduced from 2.5% to 0% for
components or parts, including engines, for
manufacture of aircrafts by public sector units of
Ministry of Defence
Tax exemption for
aircraft lease rentals
paid to foreign lessorsFinancial Services
Highlights
Policy Proposals ► Increase in FDI limit in the insurance sector from
Increase in FDI limit in
► Allowing Debt financing of Infrastructure 49% to 74% with additional controls and the insurance sector
Investment Trust (InvITs) and Real Estate safeguards
Investment Trusts (REITs) by Foreign ► Recapitalization of INR20,000 crores to
Portfolio Investors (FPIs) consolidate the financial capacity of PSBs
Union Budget 2021
► Consolidation of several securities market ► Set up of an Asset Reconstruction Company and 49% 74%
laws into a rationalized single Securities Asset Management Company to take over,
Markets Code manage and dispose existing stressed debts of
► Development of world class Fin-Tech hub at public sector banks to Alternate Investment
International Financial Services Centre Funds and other potential investors Development of
(IFSC) ► Minimum loan size for debt recovery reduced
world class Fin-Tech
hub at IFSC
► Creation of a permanent institutional from INR50 lakhs to INR20 lakhs for NBFCs with
framework for developing the bond market minimum asset size of INR100 crores
► Introduction of an investor charter as a right ► Privatization of two PSBs and one General
Permanent
of all financial investors towards investor Insurance company institutional
protection ► Divestment of Government’s stake in LIC framework for bond
through the IPO route this year marketKey Highlights – Financial Services Highlights
Tax Proposals ► Tax incentive proposals for IFSC units:
Conditions for tax
► Dividend payment to REITs and InvITs shall ► Relaxation of certain conditions for offshore exemption rationalized
be exempt from withholding tax fund manager located in IFSC in case of foreign SWF
► Conversion of urban co-operative banks into ► Exemption on the following: and PF
banking company to be tax neutral
Union Budget 2021
► Income earned by the investment division
► Withholding tax on dividend income paid to of banking unit in IFSC
FPIs to be restricted to DTAA rates, where ► Transfer of non-deliverable forward Tax incentives for
applicable contracts entered by non-resident with an eligible funds
► Rationalization of conditions of tax offshore banking unit in IFSC located in IFSC
exemption for foreign sovereign wealth ► Royalty income earned by non-resident
funds (SWF) and pension funds (PF) from aircraft leasing to IFSC unit
► Tax neutrality on relocation of funds into
IFSC, subject to certain conditionsInfrastructure
Highlights
► Infrastructure has emerged as a top priority ► National Monetisation Pipeline to be set-up for
to fuel Growth, Development and brownfield infrastructure investment and
Employment generation; its “never like monetizing public infrastructure investments.
before”. Certainly, the voice of stakeholders ► Several measures rolled out in direction of
finds an ear in this Budget. monetisation:
Union Budget 2021
► Interestingly, Infrastructure to garner ► Augmentation of funds to be carried out through Set up of Development
revenues under asset monetization program; revised framework of InVITs/ REITs – NHAI and PGCIL Financial Institution
one of the rationales for no increase in to have sponsored InVIT to attract foreign and
domestic investors
taxes.
► Dedicated Freight Corridor and other infrastructure
► Unprecedented increase in capital assets of Railways
expenditure for FY 2021-22 by 34.5% to Rs ► Continue with Airport privatization
5.5 lakh crore to push growth via ► Oil and gas pipelines, Warehousing assets under CPSE
infrastructure creation. etc.
► Much on expectations – Development ► Setup of SPV to monetize land assets of various PSUs Focus on Asset
Monetisation
Financial Institution (‘DFI’) to be set-up and and CPSEs
professionally managed with budgetary ► Commissioning of Western Dedicated Freight
allocation of INR 20,000 crores for funding Corridor (DFC) and Eastern DFC Indian Railways
infrastructure projects – Lending Portfolio to to be completed by June 2022.
be INR 5 lakh crores in 3 years.Key Highlights – Infrastructure Highlights
► A new scheme to be launched to support ► Scheme to be launched for Power Distribution
augmentation of public bus transport Companies with an outlay of INR 3.05 lakh
services under innovative PPP model to crores over 5 years for Infrastructure creation
enable private sector players to finance, including pre-paid smart metering and feeder
acquire, operate and maintain over 20,000 separation, upgradation systems, etc.
Union Budget 2021
buses Seven Port Projects
► Framework to be established for providing
in PPP Mode
► Strategic divestments in case of core option to choose power distribution company
infrastructure companies such as Shipping ► 7 projects worth more than INR 2,000 crores to
Corporation of India, Air India, Container be offered by the Major Ports on PPP mode in
Corporation of India amongst others to be FY21-22.
completed by FY 2021-22 ► Scheme to promote flagging of merchant ships
► New technologies i.e., ‘MetroLite’ and in India to be launched by providing subsidy
‘MetroNeo’ to be deployed in metro rail support to Indian shipping companies in global Introduction of
Conciliation
systems to enhance experience, convenience tenders floated by Ministries and CPSEs mechanism for
and safety in Tier-2 cities and peripheral ► Announcement of set-up of a Conciliation
disputes
areas of Tier-1 cities. Mechanism for resolution of contractual
disputes for private players carrying out
contracts for Government and CPSEs.Key Highlights – Infrastructure Highlights
► Dividend payment to REITs/ InVIT exempted
from withholding tax
► Relaxation in conditions to claim 100% tax
exemptions by Sovereign Wealth Funds /
Pension Funds
Union Budget 2021
Introduction of
► Notified Infrastructure debt funds to be able Tax exemption
to raise funds through issuance of zero and Tax holiday
coupon bonds
► Announcement of Tax exemption for aircraft
lease rentals paid to foreign lessors by unit
of IFSCMedia & Entertainment
Highlights
► Certain aspects of e-commerce equalization ► Effective date of applicability of Significant
levy clarified on a retrospective basis from Economic Presence remains unchanged – to Equalization
1 April 2020. M&E players impacted by the apply from 1 April 2021 onwards levy: Scope
levy should analyze the impact: clarified
► Exemption of income chargeable to equalization
Union Budget 2021
levy to apply from 1 April 2020 onwards, instead
of previously 1 April 2021
Significant
► Income taxable as “royalty” and “fees for Economic
technical services” excluded from the scope of Presence:
the levy, thus removing the previous ambiguity Effective date
around potential double taxation remains
► Scope of “online sale of goods” and “online unchanged
provision of services” to include one or more of
the following activities:
► Acceptance of offer for sale
► Placing of purchase order
► Acceptance of purchase order
► Payment of consideration
► Supply of goods or provision of services
► “Consideration received or receivable” on which
levy is chargeable to include consideration
irrespective of whether the e-commerce operator
owns the goods or provides the servicesOil & Gas
Highlights
100
► Petroleum has been classified as a “Strategic ► Ujjwala scheme extended to cover 10 million
Sector” by the government, where central additional beneficiaries
public sector enterprises would have ► Agricultural infrastructure and development
minimum presence. Balance to be privatized/ cess introduced on certain petroleum products, more districts in
merged/ subsidiarized however, other duties calibrated to ensure no CGD network
Union Budget 2021
► Government continues its focus on building a additional burden on consumer
gas-based economy and moving towards a ► No announcement for inclusion of natural gas
10
regime where the natural gas sector will be and aviation turban fuel into the GST regime
deregulated and gas pricing would be market
million
determined. This is meant to be achieved
through: more beneficiaries
► Adding 100 districts to city gas networks over a of Ujjwala scheme
period of 3 years
► Setting up an Independent Gas Transport System
Operator for booking common carrier capacity on
natural gas pipelines on a non-discriminatory
open access basis
► Monetization of certain gas pipelines owned by
PSUs
► Gas pipeline project to be taken up in Jammu and
KashmirPharma & Life Sciences
Highlights
► The total budget outlay for healthcare is ► Launch of Jal Jeevan Mission (Urban) Increase of
INR2.23 lakh crore vs. INR94,452 crores in announced to aim universal water supply in all 137% in
FY 20-21 resulting in an increase of 137% 4,378 Urban Local Bodies with 2.86 crores budget
household tap connections, as well as liquid outlay on
► Provision of INR35,000 crores for Covid-19 healthcare
vaccine in FY 2021-22 waste management in 500 AMRUT cities, with sector
Union Budget 2021
► Pradhan Mantri AtmaNirbhar Swasth Bharat an outlay of INR2.87 lakh crores over 5 years
Yojana proposed to be launched with outlay ► The Urban Swachh Bharat Mission 2.0 will be
of about INR64,180 crore over 6 years to implemented with a total financial allocation of Provision for
INR35,000
develop capabilities of primary, secondary INR1.42 lakh crore over a period of 5 years crore for
and tertiary care health systems, strengthen from 2021-2026 COVID-19
vaccine
existing national institutions, and create new ► Pneumococcal vaccine a Made in India product
institutions including set up of integrated to be rolled across country
public health labs, critical care hospital ► With a view to ensure transparent and efficient Health cess on Medical
blocks, expansion of Integrated Health regulation of the 56 allied healthcare Devices imported by
Information Portal, etc. International
professions, National Commission for Allied Organization and
► Launch of Mission Poshan 2.0 in order to Healthcare Professionals Bill has been Diplomatic Missions
strengthen nutritional content, delivery, introduced in Parliament
outreach, and outcome by merger of ► The National Nursing and Midwifery Commission 5% Nil
Supplementary Nutrition Programme and Bill will be introduced with the intention of
the Poshan Abhiyan bringing about transparency, efficiency and
► Health cess on medical devices imported by governance reforms in the nursing profession
international organization and diplomatic
missions reduced from 5% to nilReal Estate
Highlights
► Tax holiday for notified affordable rental ► Time limit for claiming exemption on long term
housing projects introduced. capital gains derived by individual/HUF from Affordable housing
approval of project, loan
► Affordable housing projects approved up to sale of residential property by way of sanction approval and
31 March 2022 (‘erstwhile 31 March 2021’) investment in eligible start-up extended by one investment in start up
to be eligible for tax holiday. year. Eligible start-up to mean company/ LLPs for LTCG exemption
Union Budget 2021
incorporated before 1 April 2022 increased by
1
► Additional interest deduction of INR 1.5
lakhs for acquisition of specified residential ► Foreign Portfolio Investors to be permitted to
house property by individuals for loan provide debt funding to REITs. year
obtained till 31 March 2022 (‘erstwhile 31 ► Establishment of Special Purpose Vehicle to
March 2021’). monetise land owned by Government/ Relaxation of variance in
► Deviation up to 120% (‘erstwhile 110%’) Ministries/ PSE case of residential units
where sales consideration is less than stamp between SDV and SC
increased from
duty value for sale of residential units
subject to specified conditions. 10% 20%
► Exemption from withholding tax on dividend
credited or distributed to REITs. TDS on dividend
credited/
distributed to
REITs NilRetail and Consumer Products
Highlights
► Increasein purchasing power of rural ► Mega Investment Textiles Parks (‘MITRA’)
and urban consumers likely because of Scheme to create world class infrastructure
focus on capital expenditure, for global champions in the textile sector
leading to creation of 7 textile parks over 3
infrastructure, affordable housing, years. Increase in capital outlay
resulting in increased
health care etc.
Union Budget 2021
► Rationalization of customs duty structure by purchasing power
► Capital expenditure – INR 5.54 lakh crores eliminating outdated exemptions.
(FY 2021-22 BE) as against INR 4.12 lakh
► Rationalization of duties on raw material
crores (FY 2020-21 BE)
inputs to man made textiles/ gold and silver.
► Health outlay INR 2.23 lakh crores (FY
2021-22 BE) as against INR 0.94 lakh
crores (FY 2020-21 BE) Custom duty
rationalization
► Renewed focus on ‘Make in India’/
Indian manufacturing – sourcing
strategies may be impacted.
► PLI launched to create manufacturing
global champions across 13 sectors with
amount committed nearly INR 1.97 lakh 1.97
Lakh Crores
crore in the next 5 years starting FY for PLI scheme
2021-22Start-up
Highlights
► In order to boost the start-up ecosystem in ► Indirect tax
India, the eligibility period for incorporating ► Requirement of furnishing GST Audit report in Form
the eligible start-up has been extended by 9C has been removed
one more year (i.e., subject to other ► Requirement of furnishing annual return in Form 9 to
conditions, start-up incorporated on or be replaced with a self-certified reconciliation
Extension of date
Union Budget 2021
before 1 April 2022 can now claim income- statement. Due dates to be notified
of incorporation to
tax holiday). ► Requirement of Input Tax Credit reconciliation with
the invoice statement uploaded by supplier inserted claim tax holiday
► Existing provisions of section 54GB provide in CGST Act
exemption from capital gains (from transfer ► One Person Company (OPC) Promoting
of residential property on or before 31st
► The restriction on paid up share capital and annual digital
March, 2021) utilised for subscription in the turnover on an OPC to convert itself into private
equity shares of an eligible start-up. The company or public has been removed
Finance Bill, 2021, has extended the period ► Also, it is proposed to reduce the residency limit for
of transfer of residential property up to 31
12
an Indian citizen to set up an OPC from 182 days to
March 2022 120 days and has also allowed Non Resident Indians months
(NRIs) to incorporate OPCs in India to act as a
► In order to incentivize tax payers to use member and nominee of OPC
digital mode of transactions, the turnover
threshold for tax audit of accounts has been Threshold for tax audit
increased from INR 5 crores to INR 10
crores, where 95% of receipts and payments
5
crores
10
crores
are executed through digital modesTechnology
Highlights
► To give impetus to digital payments, INR ► Social security benefits extended to gig and
1,500 Crores earmarked to promote digital platform workers. Women will be allowed to Promoting
payments work in night shifts with adequate protection Digital
► Internet services to be utilized for National ► Retrospective amendments introduced with
Language Translation Mission for effect from 1 April 2020 to provide clarification
Union Budget 2021
dissemination of governance-and-policy on the applicability of Equalisation Levy
Boost for
related knowledge ► Consideration which is taxable as royalty and fees for
Fin-tech hub
Government to support development of a technical service not to be included
► in Gift City
world class Fin-tech hub at the GIFT-IFSC by ► Nature of activities that would constitute online sale
of goods or provision of services specifically listed
providing additional tax incentives
► Consideration from e-commerce supply shall include:
► National Digital Educational Architecture
► Value of goods irrespective of whether the
(NDEAR) to be set up to support educational Equalisation
operator owns the goods
planning, governance and administrative Levy
► Value of services irrespective of whether the
activities. This will support education eco- services are provided or facilitated by the operator
system architecture for development of ► Zero-rating benefit in case of supplies made to
digital infrastructure SEZ units and developers to be curtailed only in
Zero-rating
benefit available
► Government to launch data analytics, cases where supplies used for authorized for SEZ’s
artificial intelligence, machine learning operations. authorised
driven MCA21 Version 3.0. to have ► Basic Custom Duty rates on certain IT sector operations only
additional modules for e-scrutiny, e- specific products like inputs related to machines
Adjudication, e-Consultation and Compliance capable of connecting to automatic data
Management processing machines, ink cartridges etc. has
been increased from NIL to 2.5%.Telecom
Highlights
► To promote value addition in the mobile ► In line with industry demand, benefit of
phone industry, Customs Duty on inputs, concessional duty of customs extended to third
parts or sub-parts for manufacture of party manufacturers
specified parts of mobile phones increased ► The government has approved the policy of
► Custom Duty exemptions on inputs and raw disinvestment of Central Public Sector
Union Budget 2021
material used to manufacture certain Enterprises (CPSEs), which provides a clear Promoting domestic
telecom equipment withdrawn to give thrust roadmap for disinvestment in non-strategic and manufacturing
to domestic manufacturing strategic sectors. In strategic sectors, including
telecommunications, there will be a minimal
presence of CPSEs
Value addition in
the mobile phone
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