2020 was the most exceptional year for every person and economy. That is why everyone is expecting revolutionary schemes and policies in the Union Budget 2021. For the first time, paperless budget will be presented and the Union Finance Ministry has introduced “Union Budget Mobile App” for trouble free access of Union Budget 2021 by the general public.
We can expect the “Growth and Recovery” to be the theme of Union Budget 2021.
For Direct Taxpayers
1. Standard Work from Home Deduction for salaried employees to get reimbursement of the expenses incurred for working from home.
2. Hike in Standard Deduction of Rs. 50,000.
3. Raise in the Deduction Limit of Rs. 1.5 Lakhs under Section 80C, 80CCC, 80CCD (1) of the Income Tax Act, 1961.
4. Raise in the Medical insurance deduction caped at Rs.25,000 or Rs.30,000 under Section 80D of the IT Act,1961.
5. To include the COVID-19 Hospitalization Expenditure under Section 80DDB of the IT Act covering serious illness like AIDS, malignant cancer etc.
6. To simplify the Capital Gains Compliances and to lessen the tax rates chargeable on Capital gains.
7. Provide Special Deduction For COVID Medical Treatment.
For Indirect Taxpayers
1. Petroleum Products should be taxed under the Goods and Services Tax. Currently, petroleum products are taxed by heavy VAT and Excise Duty which make them costlier. Thus, if petroleum products will even be charged at the maximum GST Rate that is 28% then also their prices will be lesser than current prices. Thus, it will make the petroleum products affordable for common man.
2. GST Tax Slabs should be simplified.
3. GST compliances are indeed tough in nature. Thus, GST compliances should be relaxed like there should be an option of revision of GST returns to correct the clerical and arithmetical errors.
4. The provisions of seizure and arrest seem harsh for offences made by Taxpayer’s, as GST is an economic legislation, i.e., a tax law and not a criminal legislation. The Commissioner or other Officers’ have the power to arrest on the basis of reasons to believe. The wording is subjective (i.e., depending on the opinion).
An honest taxpayer who, did not pay GST because he genuinely believed that GST was not applicable to him, might get his goods seized and get arrested. It could be a case of wrong interpretation of the law against which penalty may apply but arrest seems too harsh. GST law should have more clarity on the instances, considering that it is a new law and there are bound to be genuine errors. Thus, the government shall make a bold move by proposing a simplified GST mechanism for individuals.
Since India is expecting to double the farm income by the year 2022 therefore 2021 budget must introduce new schemes and strategies for Agricultural development.
1. Agricultural Infrastructure should be enhanced.
- Funds should be allocated for the Technological Improvement of agricultural activities for example irrigation facilities, warehouse facilities etc.
- More promotion of natural and organic farming as after the COVID-19 pandemic everyone demands for the Safe and Nutritious Food.
- Better execution of Agricultural Infrastructure Schemes such as Atma Nirbhar Bharat, PM Kisan Yojana etc. so that the benefits of these schemes can be availed by the actual end users.
- Every Economic sector grows with the technology upgradation. Thus, a good amount of investment should be made on the Agricultural Research and Innovation Eco-system.
2. Agri-Credit availability should be raised to meet the financial needs of the farmers. Moreover, these credit facilities should be easy to avail with low interest rates.
Education enriches people’s understanding of themselves and world. Pandemic has devastated the Education system and it brought the whole world to a virtual standstill.
1. Government brought the National Education Policy in 2020 and now everyone is waiting for the government to bring the Central Government Guidelines on the NEP Implementation plan to improve the current education system.
2. Since the Physical Education system was under the huge pressure due to Covid-19, thus everyone is expecting a robust and responsible digital infrastructure in education. Thus, we can expect the Open Digital Ecosystem in Education. It will not only improve the education quality but it will also ensure the transparency, interoperability and spurring innovation in education.
3. Adequate Funds should be allocated to deliver qualitative education in remote areas.
4. Education is the fundamental investment and thus, we can expect the tax-free education and skill development for all without any discrimination.
5. Ensure the availability of smartphones, tablets, laptops, internet connectivity to make the digital education accessible to all.
6. More online courses should be introduced for overall growth and development at economical rates.
Expectations to resolve the Unemployment Problem
India’s employment situation is worst. The present unemployment rate is the highest in the last 45 years. The unemployment among the youth (age 15-29 years) is critically high at 22.5%. A large number of the employed workers get low wages and are stuck in ‘employed poverty’ trap.
Therefore, to resolve the Unemployment problem, the budget should focus on reviving demand such as-
1. Small and marginal farmers & the landless labours spend most of its income on a wide range of Goods and Services. So, an increase in expenditures through PM-KISAN and MGNREGA can provide much needed boost to demand.
2. Rural unemployment can be reduced through increase in government spending on irrigation, rural roads, cold storage, and procedural chains crucial for integrating farms with mandis. These facilities along with extensive crop insurance can exceptionally raise agricultural productivity and income.
3. Another major reason behind the unemployment situation is GST. It causes compliance burden on small and medium enterprises (SMEs) that employs more than 11 crore GST has generated inverted duty structure (IDS) for many products & also the tax on raw materials is higher than the finished products. Such contrast reduces competitiveness of SMEs and increases cost of capital for them. This inconsistency in GST needs to be addressed without delay.
4. The budget can incentivize companies and industrial units to provide internship and on site vocational training to unemployed youth. This experience can be integrated with distance education to teach the trainees relevant theories and concepts.
For MSMEs & Start-Ups
1. According to survey, MSMEs contribute more than 40% to the Indian export basket. Due to COVID-19, this rate has excessively fallen down. Thus, government is required to bring sustainable methods to enhance the MSME’s contribution to the global trade. For this, Government can include more sectors to the Production-Linked Incentive scheme.
2. MSME is the backbone of Indian Economy. Many MSMEs failed due to funding crisis, tax burden, rigid compliances, and poor technological development. To cope with this, we expect from budget 2021 to focus on empowering the development of MSMEs by providing them access to easy credit or loan on the competitive rate of interest, reducing income tax rate & GST tax rate, and offering rebates to MSMEs willing to adopt new technologies.
3. The pandemic has brought forward opportunity for immense innovation by start-ups and new-age technology companies and it is quite evident that the trend will only pick up in the year 2021. In the spirit of entrepreneurship, we hope, through this union budget 21 that the government should simplify the MSMEs compliances and to simplify tax standard operating procedures to MSMEs and the start-up ecosystem.
1. Extending the CLSS scheme– Considering that the pandemic has emphasize the value of home ownership, the industry could benefit from incentives that the government will provide to the new buyers in upcoming union budget. In particular, extending the deadline for the Pradhan Mantri Awas Yojana’s Credit Linked Subsidy Scheme (CLSS) for the Middle-Income Group (MIG) from March 2021 to March 2022 would be a good step forward.
2. Providing tax concessions on home loans– The government shall consider raising the tax rebate on housing loan interest for home buyers and investors from the 2 lakh to Rs 5 lakh. These benefits could be especially productive when the housing prices, at present, are considerably low.
3. Smoothening the GST– Currently, GST on various goods and services while constructing a project is paid by developers. They cannot set-off the GST paid against the GST collected on rentals as of now. Therefore, allowing Input Tax Credit (ITC) to developers can boost the Real Estate industry. The government can take steps to avoid Cascading Effect on rental incomes.
4. Stamp duty Reduction– Maharashtra has reduced the stamp duty, which has produced good results. If this can be reflect in other states too, fence-sitters would be quick to take the dive and this would further boost real estate.
For Digital Sector
The forthcoming UNION budget 2021 is expected to add value to the economic relief by means of tax reliefs, incentives and new policies. IT industry has a broad set of expectations such as-
1. This Budget is expected to make more provisions for maximizing data center infrastructure. “India’s data center capacity remains disastrously low, needing a huge infrastructural boost.
2. There shall be a separate, favorable tax policy for homegrown Cloud Service Providers (CSPs) to promote ‘Make in India Cloud’.
3. The government shall provide fiscal incentives on certain performance parameters linked to adoption of standards and highest performance.
4. The government incentivizing R&D with a keen focus on the deep-tech domain.
5. The government shall support kirana stores i.e. Retailers in their digitalization attempts.