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- In a year in which the country hopes to recover from the coronavirus pandemic, Nirmala Sitharaman’s job is to bring much-needed aid to sectors while ensuring that the economy recovers.
- From market job reclaim to tax deductions, there are many expectations for the 2021 budget.
- According to reports, the Indian defense budget could also see an increase to reach its total allocations of ₹ 6 lakh crore.
- These are the most important changes that could accompany the Union budget for 2021.
Indian Finance Minister Nirmala Sitharaman will announce the annual budget on February 1, 2021 – paperless for the first time in India’s history.
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And in a year when the country hopes to recover from the coronavirus pandemic that has ravaged nearly every other industry, it will be up to Sitharaman to provide much-needed help to both people and sectors that need budget support to recover.
Mandatory RT-PCR testing will be conducted on all Members ahead of Parliament’s Budget Session and Question Time will also make a comeback. The budget session starts on January 29, 2021.
And here are the main changes that could reportedly occur with the 2021 Union budget.
Income tax deductions
With thousands having lost their jobs and many more having to undergo pay cuts across the country due to the COVID-19 pandemic, Sitharaman may be looking for ways to put more disposable income in the hands of the people.
According to reports, Budget 2021 could continue the exemption announced with the Atma Nirbhar package, raising the basic tax exemption limit for a person to ₹ 5 lakh from the current ₹ 2.5 lakh.
|Income tax plate||Tax rates – new regime||Tax rates – old regime|
|₹ 0 – ₹ 2.50,000||Nil||Nil|
|₹ 2,5001 – ₹ 5,000,000||5%||5%|
|₹ 5.00,001 – ₹ 7.50,000||₹ 12500 + 10% of total income in excess of ₹ 5.00,000||₹ 12500 + 20% of total income in excess of ₹ 5.00,000|
|₹ 7.50,001 – ₹ 10,000||₹ 37500 + 15% of total income in excess of ₹ 7.50,000||₹ 62500 + 20% of total income in excess of ₹ 7.50,000|
|₹ 10,001 – ₹ 12.50,000||₹ 75000 + 20% of total income in excess of ₹ 10.00,000||₹ 112500 + 30% of total income in excess of ₹ 10.00,000|
|₹ 12.50,001 – ₹ 15,000||₹ 125,000 + 25% of total income in excess of ₹ 12.50,000||₹ 187500 + 30% of total income in excess of ₹ 12.50,000|
|Above ₹ 15.00,000||₹ 187500 + 30% of total income in excess of ₹ 15.00,000||₹ 262500 + 30% of total income in excess of ₹ 15.00,000|
So far, while Modi’s government has pushed for a cut on all taxes due, the base tax exemption limit has stayed the same.
The report also said that a higher standard deduction (salary not subject to income tax) could also be underway – from the current ₹ 50,000 to ₹ 75,000 – ₹ 1,00,000.
The government would also have one COVID tax on people with a high income.
Defense budget to get a huge increase
Amid the long distance between India and China, he said reports, The Indian defense budget could see an ‘unprecedented rise’ to meet the urgent needs of the Indian military. In the 2020 budget, the government had allocated a total of ₹ 4.71 lakh crore (including defense pensions). Reports now say that by Budget 2021, the total allotment could reach ₹ 6 lakh crore.
Farmers receive special attention
With the farmers ‘protest going on for several months and the tractor rally for farmers on Republic Day also resulting in clashes in the national capital, Budget 2021 could take measures to ease farmers’ pain. According to reports, the agricultural credit target could be raised to ₹ 19 lakh crore with the aim of doubling farmers’ income.
Huge boost for construction and affordable housing on the go
The government may give way to an enormous boost for the construction sector and affordable housing. An Indian Express report claimed that the government is likely to liberalize foreign direct investment (FDI) rules in construction, and to boost homebuyers, an allocation will be made in the 2021 budget for a credit-related subsidy.
In Budget 2020, Finance Minister Nirmala Sitharaman had proposed extending the benefit of an additional deduction of ₹ 1.5 lakh on interest paid on affordable housing loans by one year until March 2021.
Nilesh Shah, general manager of Kotak Mahindra Asset Management Fund, which is also part of the prime minister’s economic advisory board, said the focus with this budget could be on construction and infrastructure. “My first priority would be to support the needy sector of the economy – tourism, retail, construction, bottom of the pyramid people MSME who have been hit hard. We need to support them so that there is better financial inclusion and they can participate too. can be done in different forms – you can make concessions, give grants, you can create a mechanism for them to grow independently, ”he said during a recent interview with Business Insider.
#BudgetInsider: @Iyer_Sriram in talks with @ KotakMF’s @ NileshShah68 ahead of # Budget2021 as the budget tra… https://t.co/k2YwAuyRPw
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According to reportsA Development Finance Institution (DFI) could also be announced with the budget. This new institution would investigate infrastructure projects, whether new, stalled or currently in progress, worth £ 100 lakh crore.
Bringing jobs back to the market
Another top priority for Modi’s government would be to get jobs back on the market after a year of thousands of jobs lost across the country as companies tried to cut costs. The boost in infrastructure and construction could also lead to job growth.
“ The Union budget for 2021-2022 would likely focus on investments that create jobs and therefore infrastructure, construction and significant incentives for high-employment generation sectors (such as textiles, affordable housing, small and medium-sized enterprises, etc.) Key areas that may be prioritized by the end of the government, ”said a report by Sharekhan.
Smartphones and electronic items can become more expensive
The Indian government is set to increase import duties on more than 50 items including smartphones, electronic items and others. According to a Reuters report, the increase can be as much as 5-10%.
The excise duty on finished products can be increased
Finished products made of rubber, plastic and leather can see an increase in import taxes. Meanwhile, according to an ET report, “the inputs used in the production of chemicals such as methyl alcohol, acetic acid, and PVC can lower rates.”
Healthcare could be at the top of the list
Now that the COVID-19 pandemic has shown a need for better healthcare infrastructure and facilities in the country, it is likely that the industry will see a renewed focus from Sitharaman. “Combined with the start of the Finance Commission ‘s 15th term, we may see a jump in health care spending,” said the Credit Suisse report.
According to Sharekhan analysts, we could also see the expansion of tax breaks under section 35AD within the health care incentives. Analysts also expect that the Section 80D deduction of the medical claims premium could be increased to ₹ 50,000 (for self and spouse) and to remain at ₹ 50,000 (for dependent parents).
Increase the divestment target
As Modi’s government strives to restore the economy, it can also increase divestment targets for the year. A news report said the government is likely to raise its divestment target to ₹ 2.5-3 lakh crore. The government plans to do the same with the long-awaited privatization of government agencies such as Air India, BPCL, Concor and Shipping Corp.
The government could plan that too privatize PSU banks.
In Budget 2020, the government had set a target of ₹ 2.1 lakh crore, but it succeeded one meager amount thereof – ₹ 13,844.49 crore.
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