Union Budget 2021-22 Highlights

The Union Budget of India is the annual budget of the Republic of India. The Constitution of India mentions it in Article 112 as the Annual Financial Statement. The Government of India usually presents its annual budget on the first day of February so that it could be materialized before the beginning of the new financial year in April. 

India Union Budget 2021 Highlights

On 1st February 2021, Finance Minister Nirmala Sitharaman unveiled the National Budget. She started her long-awaited speech by saying that the budget rests on 6 pillars:

1.  Health and well-being

2. Finance capital and infrastructure

3. Inclusive development for aspirational India

4. Reinvigorating human capital

5. Innovation and R&D

6. Minimum government, Maximum governance

Some of the significant highlights of the speech included the proposal to disinvest two more PSBs and a general insurance company, introducing a series of hikes in customs duty to benefit the Make in India initiative, and the introduction of various infrastructure pledges in the states where polls shall be held. It is also said that the Fiscal deficit stands at 9.5% of GDP, and this is estimated to be 6.8% in 2021-2022. Personal tax income slabs remain unchanged.

Here are the highlights of Budget 2021-2022

 Health and Sanitation

• A new scheme, titled PM Atma Nirbhar Swasthya Bharat Yojana, to be launched to develop primary, secondary and tertiary healthcare 

• Mission POSHAN 2.0 to improve nutritional outcomes across 112 aspirational districts 

• Opening of 17 new public health units at points of entry 

• Modernizing of existing health units at 32 airports, 15 seaports and land ports 

• Introduction of Jal Jeevan Mission Urban aimed at better water supply nationwide 

• Strengthening of Urban Swachh Bharat Mission

Education

• 100 new Sainik Schools to be set up 

• 750 Eklavya schools to be set up in tribal areas 

• A Central University to come up in Ladakh

Infrastructure

• Vehicle scrapping policy to phase out old and unfit vehicles 

• Highway and road works announced in Kerala, Tamil Nadu, West Bengal and Assam 

• National Asset Monetizing Pipeline launched to monitor asset monetization process 

• National Rail Plan created to bring a future ready Railway system by 2030 

• 100% electrification of Railways to be completed by 2023 

• Metro services announced in 27 cities, plus additional allocations for Kochi Metro, Chennai Metro Phase 2, Bengaluru Metro Phase 2A and B, Nashik and Nagpur Metros 

• National Hydrogen Mission to be launched to generate hydrogen from green power sources 

• Recycling capacity of ports to be doubled by 2024 

• Gas pipeline project to be set up in Jammu and Kashmir 

• Pradhan Mantri Ujjwala Yojana (LPG scheme) to be extended to cover 1 crore more beneficiaries  

Tax

• No IT filing for people above 75 years who get pension and earn interest from deposits

• Reopening window for IT assessment cases reduced from 6 to 3 years. However, in case of serious tax evasion cases (Rs. 50 lakh or more), it can go up to 10 years 

• Affordable housing projects to get a tax holiday for one year 

• Compliance burden of small trusts whose annual receipts does not exceed Rs. 5 crore to be eased 

• Duty of copper scrap reduced to 2.5% 

• Custom duty on gold and silver to be rationalized 

• Duty on naphtha reduced to 2.5%. 

• Duty on solar inverters raised from 5% to 20%, and on solar lanterns from 5% to 15% 

• All nylon products charged with 5% customs duty 

• Tunnel boring machines to attract customs duty of 7%

• Customs duty on cotton raised from 0 to 10%

Economy and Finance: 

• Fiscal deficit stands at 9.5% of the GDP; estimated to be 6.8% in 2021-22 

• Proposal to allow States to raise borrowings up to 4% of GSDP this year 

• A Unified Securities Market Code to be created, consolidating provisions of the Sebi Act, Depositories Act, and two other laws 

• Proposal to increase FDI limit from 49% to 74% 

• An asset reconstruction company will be set up to take over stressed loans 

• Deposit insurance increased from Rs 1 lakh to Rs 5 lakh for bank depositors

• Proposal to decriminalise Limited Liability Partnership Act of 2008 

• Two PSU bank and one general insurance firm to be disinvested this year

• An IPO of LIC to debut this fiscal 

• Strategic sale of BPCL, IDBI Bank, Air India to be completed 

Agriculture

• Agriculture infrastructure fund  to be made available for APMCs for augmenting their infrastructure 

• 1,000 more Mandis to be integrated into the E-NAM market place 

• Five major fishing hubs, including Chennai, Kochi and Paradip, to be developed 

• A multipurpose seaweed park to be established in Tamil Nadu 

Employment

• A portal to be launched to maintain information on gig workers and construction workers

• Social security to be extended to gig and platform workers 

• Margin capital required for loans via Stand-up India scheme reduced from 25% to 15% for SCs, STs and women.

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Tax Planning

Tax Planning refers to the analysis of financial situation of an individual/business in order to attain maximum level of efficiency in tax payment. Tax Planning takes into consideration several tax exemptions and deductions which are applicable to a person/company. When an individual or a company files for income tax, special exemptions and deductions play an important role in reducing their tax liabilities.

Objectives of tax planning:

1. Reduction in tax liability

2. Diversion of resources into more productive investments

3. Minimisation in litigation costs

4. Increase in net salary

Types of tax planning:

1. Purposive tax planning- Tax planning done by keeping certain objectives in mind

2. Permissive tax planning- Tax planning valid under the framework of the law

3. Long range and short range tax planning- Long range tax planning is done at the beginning of a fiscal year while short range tax planning is done towards the end of a fiscal year

What is Corporate Tax Planning?

The common ways in which companies reduce their tax liabilities is by claiming tax exemptions for business transport, health insurance of the employees, retirement planning, child care, education expenses of the employees, donation towards charities and non-government organisations etc. Analysing the Income Tax Act carefully could help the companies in reducing their tax liabilities legally. Tax planning is considered to be one of the major tax saving practices. An efficient tax planning could help the companies in reducing the sales costs, marketing costs and maintenance of capital budget. When it is earning higher profits, it is imperative for a company to optimise its costs. Tax planning helps in reducing the direct and indirect tax liabilities, thus optimising the costs to the company.

OLTAS

OLTAS or Online Tax accounting System is a system mainly introduced by the Income Tax Department to acquire information and to maintain record of the taxpayers using the details from the challan that is submitted online.

It was introduced in April 2004, and has the following objectives-

1. Collection and accounting of direct taxes online

2. Reporting of payment of direct taxes online

Benefits of OLTAS

1. Before the introduction of OLTAS, the taxpayers were required to fill four challans, but the new model requires the taxpayer to fill up a single challan

2. The information on tax payment and can be acquired at a minimal cost

3. The taxpayer can use the Challan Identification Number (CIN) to verify their evidence of payment of taxes

OLTAS Challan Status Online Enquiry

One of the main feature of Online Tax Enquiry System is that anyone can check their challan status online using this online portal developed by the Income Tax Department.

Challan Status can be viewed online by using the following search tools-

1. CIN based view
   The taxpayer can get access to the following information by entering the CIN details and the tax amount-

   1. Bank’s BSR code

   2. Date of Deposit

   3. Serial Number of Challan

   4. TAN and PAN details of the taxpayer

   5. Taxpayer’s name

   6. Date in which challan was received by TIN

2. TAN based view
   By entering the TAN details and the date range in which the challan was given out by the bank, the taxpayer can get access to the following information-

   1. Challan Identification Number (CIN)

   2. Major head-code with description

   3. Minor head code

   4. Details regarding the mode of payment

Employee Stock Option Plan (ESOP) Taxation

Employee Stock Option Plan(ESOP) is also known as Employee Stock Ownership Plan. ESOP is a system which allows the employees to buy shares of a company at a rate that is below the prevailing market value. ESOPs are very popular in start-ups since they act as an incentive for the employee and provides him/her with a sense of ownership.

Advantages of ESOPs to the company

1. The company can acquire the shares of adeparting owner

2. Contributions to ESOP are eligible for tax deduction

3. A company can issue treasury shares or new shares or new shares to an ESOP and it is deducible from the taxable income

Disadvantages of ESOPs to the company

1. ESOPs could be riskier than normal stocks

2. The ESOPs can be liquidated only when the exercise on the option is executed

3. Unclear guidelines on valuation and accounting of ESOPs

TIN

TIN is assigned by the Income Tax Department for monitoring transactions of the business entities. The Commercial Tax Department of various states is responsible for registering enterprises and furnishing TIN. TIN details are important to identify business registered under VAT.

Documents required to apply for TIN

1. Identity proof

2. Residential proof

3. Proof of the address of the business enterprise

4. PAN details

5. Reference/Security

How to apply for TIN

TIN is assigned by the state government. Hence the procedure to apply varies from state to state. The steps for applying for TIN are registered under Central Sales Tax Act or CST.

List of state codes for first two digits of TIN

Sl. No.	State Name	TIN number – First two digits	State Code
1	Andaman and Nicobar Islands	35	AN
2	Andhra Pradesh	28	AP
3	Andhra Pradesh (New)	37	AD
4	Arunachal Pradesh	12	AR
5	Assam	18	AS
6	Bihar	10	BH
7	Chandigarh	4	CH
8	Chattisgarh	22	CT
9	Dadra and Nagar Haveli	26	DN
10	Daman and Diu	25	DD
11	Delhi	7	DL
12	Goa	30	GA
13	Gujarat	24	GJ
14	Haryana	6	HR
15	Himachal Pradesh	2	HP
16	Jammu and Kashmir	1	JK
17	Jharkhand	20	JH
18	Karnataka	29	KA
19	Kerala	32	KL
20	Lakshadweep Islands	31	LD
21	Madhya Pradesh	23	MP
22	Maharashtra	27	MH
23	Manipur	14	MN
24	Meghalaya	17	ME
25	Mizoram	15	MI
26	Nagaland	13	NL
27	Odisha	21	OR
28	Pondicherry	34	PY
29	Punjab	3	PB
30	Rajasthan	8	RJ
31	Sikkim	11	SK
32	Tamil Nadu	33	TN
33	Telangana	36	TS
34	Tripura	16	TR
35	Uttar Pradesh	9	UP
36	Uttarakhand	5	UT
37	West Bengal	19	WB

Income Tax Declaration Scheme

The Income Tax Declaration Scheme was introduced by finance minister Arun Jaitley under the Finance Bill, 2016. Under this scheme, any individual who has evaded taxes by not disclosing their income or assets can reveal the details to the government, can declare their real total tax liability and they would be charged with lesser penalties for tax evasion.

An individual who discloses his/her income under the Income Tax Declaration Scheme would be required to pay 45% less amount of tax penalty than before.

The Income Tax Declaration Scheme was valid through the period June 1, 2016- September 30, 2017.

The entities who could file taxes under income tax declaration scheme are

1. Individual belonging to HUF

2. Company

3. Firm

4. Local Authority

5. Any artificial juridical person who doesn’t fall under any of the categories