Hailed as the most crucial Budget of India in recent years, the Union Budget 2021-22 has come in the backdrop of the largest GDP contraction that India has suffered post-Independence due to the COVID-19 pandemic. In a significant departure from the tradition, this year’s Budget was not printed and was only made available in a digital format. This Budget focused on higher spending, healthcare expenditure with Rs. 35,000 crore on Covid-19 vaccine development, infrastructure development and public sector bank privatisation. But ironically, the experts’ speculations seem to have turned true as Nirmala Sitharaman's first budget of the decade didn't have much hype for the common man.
Presenting the Union Budget for 2021-22, FM said that the Budget proposals for this financial year rest on six pillars — health and well-being, physical, financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and R&D and minimum government and maximum governance. Significant announcements included a slew of hikes in Customs duty to benefit ‘Make in India’, proposal to disinvest two more PSBs and a general insurance company, and numerous infrastructure pledges to poll-bound States. FM, in her speech, announced a push to the textile industry, a new cess on agriculture development – Rs 2.5 per litre on petrol and Rs 4 per litre on diesel. Insurance Act amendment is also proposed to increase FDI limit from 49 to 74% with safeguards, while, the LIC IPO will be introduced in 2021.
In significant changes to the taxation process, FM announced the scrapping of income tax return for senior citizens having pension and interest income only, new rules for removal of double taxation for NRIs, and a reduction in the time period of tax assessments among other measures. Start-ups will get an extension in their tax holiday for an additional year. FM also announced that the advance tax liability on dividend income shall arise after declaration or payment of dividend. On GST front, the FM said that record GST collections have been made in the last few months. She said several measures have been taken to further simplify the GST. The capacity of GSTN system has been enahnced. Deep analytics and artificial intelligence have been deployed to identity tax evaders and fake billers, launching special drives against them. The Finance Minister assured the House that every possible measure shall be taken to smoothen the GST further and remove anomalies such as the inverted duty structure.
Benchmark stock indices Nifty and Sensex gave a thumbs up to government's 'expansionary budget' as FM Sitharaman chose the path of additional borrowing instead of taxing the super-rich or raising taxes on high-income individuals. Market response to the budget reflects growth optimism.
But this Budget may not bring cheer to pandemic-hit aam aadmi. The common man was eyeing some income tax benefits from this budget as Covid-19 has burnt their pockets in over a year. While no changes were made to the personal income tax, only senior citizens were offered benefit. Under the proposal, those above the age of 75 will no longer have to file IT returns. Moreover, a Covid-19 cess that was much speculated to be enforced to revive the economy in post-coronavirus world did not find mention in the Union Budget 2021-22.
In nutshell, though this budget may be considered as growth oriented and visionary one amidst the situation when India is slowly emerging from the Covid-19 crisis and the economy is gradually returning to normal, but the present situation of the economy and taxation system was requiring lot more for the aam aadmi. People had been anticipating tax incentives to increase spending and reinvigorate household consumption demand, and other benefits to grapple with the woes of the Covid-19 pandemic. Also, it is time that we strive to maintain stability of provisions and systems under GST, as frequent changes cause disruptions in business operations as well as increasing confusions in trade. Though, Centre and States are quite receptive to resolve GST issues, but certain level of steadiness is also required.