Kaam Ki Baat Karona

Kaam Ki Baat: What are the key takeaways from Budget 2021- A small analysis

How the new budget impacts the common people and what is going to change now onwards


 

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2021-22 in Parliament on February 1 and proposed doubling of healthcare spending, raising the cap on foreign investment in insurance and a sharp increase in expenditure on infrastructure. Budget 2021-22 is a bid to pull the economy that plunged into deepest recorded fall due to the COVID-19 pandemic.

While people were expecting tax exemption so that they would have more money in their hand to spend it and increase the domestic consumption, but the government did not give any exemption due to a large difference in its income and expense. This means that the government has not made any change in the rate of Income Tax. The focus of the government was to increase its own expenditure and its income (from tax) would not get deducted. Also, there is no change in corporate tax rates.

Customs duties have been raised on auto parts, solar panels and mobile phone components to provide a boost to domestic manufacturing. The Modi government also imposed Agriculture Infrastructure and Development Cess (AIDC) on the import of certain items like alcohol, chemicals, cotton, silver, peas, lentils and apples to prove financial assistance to agricultural infrastructure and other developmental works in the agriculture sector.

Senior citizens aged 75 years or above, whose income is only from pension and its interest, will no longer need to file the income tax return. This will reduce the hassle of Senior Citizens of filing ITR as their contribution will be automatically debited. The country is still fighting the war against the COVID-19 pandemic and senior citizens are the most vulnerable to the disease. So, this could be considered a good decision.

 

 

Read more: Budget 2021: No relief to salaried person, full highlights of Nirmala Sitharaman’s budget speech

 

 

FDI limit increased from 49 to 74 per cent in the insurance sector

The FM Sitharaman announced during her budget speech that the government has decided to increase the limit of FDI (Foreign Direct Investment) from 49 per cent to 74 per cent in the insurance sector, hence allowing foreign investors to own the company. This is going to change things in the insurance sector and people might get more protection of insurance at a lower price. The move is also touted as a masterstroke to increase the contribution of the insurance sector in India’s total GDP. Currently, the insurance sector accounts for a mere 3.7 per cent while the global average is 6.31 per cent. Crores of people are still not associated with the insurance sector but now that foreign investment limit has been increased 25 per cent, it might bring more competition. Hence, companies might offer better insurance deals to people.

The guarantee amount received by the customers of the bank which was increased from 1 lakh to 5 lakhs in a condition of bank-collapse (when banks run out of money), has been further strengthened in the new budget, This will give more confidence to depositors as their fear will reduce about depositing the money in the banks.

A new vehicle scrap policy has been introduced by the government deciding the age of your vehicles in the budget. Now, private vehicles will be able to run for 20 years and commercial vehicles will be able to run for 15 years. According to an HDFC Bank report, around 2 crore vehicles won’t be able to run on road by 2025 as they will be scrapped. It is further expected to give a boost to the auto sector as people would look to buy new vehicles. A business worth Rs 43,000 is going to be created along with new job opportunities.

 

Other big announcements which makes an impact on us

Presently, we do not have an option to choose a company from which we want electricity supply. But the recent budget has provision for this. Often, we see people getting angry over electricity companies, but now it seems that electricity consumers will be greatly benefitted.

The tax exemption for startups has been increased for a year. Several startups faced a tough time due to pandemic, but this decision will come to them as a relief. The government is hoping that it gives a boost to the startup industry in India.

Budget-friendly metro service will start in cities with a population of fewer than 10 lakhs. One can say that budget-friendly metro services will explore new possibilities of development in these cities and improve the public transport service in the city.

In cases of income tax evasion, action could be taken for only 3 years. Earlier the time limit was 6 years. The government aims to reduce the pressure of pending cases on the court and the challenge will be to take action against the accused in time.

100 new Sainik Schools will be opened across the country with the help of Non-Government Organizations. The main purpose of this initiative is to make public school education more accessible to the common man. If these schools are opened in 2nd tier or 3rd tier cities, people are going to benefit a lot from it.

 

Social security benefit extended to many more workers

Several tax-payers who lost their jobs during the lockdown and had to take up freelancing assignments will get some relief in Budget 2021. Social security benefits will be extended to platform and gig workers. E-commerce workers will also come under minimum wages, Employees’ State Insurance Scheme (ESI) and Employees’ Provident Fund (EPF) rule now. Women are now allowed to work in all categories in night shifts too.

A faceless dispute resolution committee will be set up for anyone with a taxable income of up to Rs 50 lakh and dispute income up to Rs 10 lakh. This will further give a boost to faceless assessment and aims to make it more robust.

An investment charter will be set up to reduce the miss-selling of financial products. This charter would be related to investors of all products in the financial sector. Although details are not available, it is expected to lay down the rights of investors, grievance mechanism, if there is any complain. It is also expected to make all current financial products’ grievance mechanism more vigorous.

 

The rich cannot find a tax escape by investing in Provident Fund and ULIPs

Budget 2021 has indicated that contributions made in PF more than Rs 2.5 lakh a year, will now attract tax on the interest it earns for you. However, the interest will only be calculated on the excess amount. Also, ULIP (Unit-Linked Insurance Plans) will now attract long-term capital gains tax during redemption or at the maturity, if your premium exceeds Rs 2.5 lakh. These measures are taken to tax the rich who are said to invest large amounts in these investments to escape tax.

 

Here are some reactions on Twitter after the Budget was announced

https://twitter.com/ShamikaRavi/status/1356467907329331200

 

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