Union Budget 2021 & Its Inner Sights With The Economy

By Author: GSPU Management Consultancy
Total Articles: 2
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In the midst of India’s fight against COVID-19 the first ever digital Union Budget was conducted on Monday, February 1st, 2021. This is a historical moment as the world is changing & updating itself to the next phase.
The 6 poles of Union Budget 2021-22:
Health and Wellbeing
Physical & Financial Capital and Infrastructure
Inclusive Development for Aspirational India
Reinvigorating Human Capital
Innovation and R&D
Minimum Government and Maximum Governance
Direct Tax Proposals
Exemptions of citizens aged over 75 years will be from Income Tax Returns.
Exemptions of citizens aged over 75 years will be from Income Tax Returns having income by the source of either pension or interest, with following constraints:
He has pension and/or interest income from the same bank and the bank is specified bank as notified by the Government;
He is resident of India and of the age 75 years or more during the previous year;
He shall be required to furnish a declaration to the specified bank in such form and verified in such manner as prescribed.

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... In certain cases, rationalization of provisions relating to tax audit
Under Finance Act, 2020,earlier the threshold limit for tax audit for a person carrying on business was increased from Rs. 1 crore to Rs. 5 crore in cases where aggregate of all receipts and payments in cash during the previous year is not more than 5% of such receipts/payments.To incentivize non-cash transactions to promote digital economy and to further reduce compliance burden of small and medium enterprises, it is proposed to increase the threshold from five crore rupees to ten crore rupees in above cases.
Extending due date for filing return of income in some cases, reducing time to file belated return and to revise original return and also to remove difficulty in cases of defective returns
If the spouse of a partner of a firm whose accounts are required to be audited under the provisions of IT Act the due date of filing of the original return of income will be extended to October 31 of the assessment year.
If a partner of the firm which is required to furnish report from an accountant for entering into international transaction or specified domestic transaction as per Section 92E of the IT Act (i.e,Report from an accountant to be furnished by persons entering into international transaction) the due date of filing of the original return of income to be extended to November 30 of the assessment year.
Also, the belated or revised returns could now be filed three months before the relevant assessment year or before the completion of assessment, whichever is earlier.
Taxation of proceeds of high premium unit linked insurance policy (“ULIP”)
Limited exemptions on proceeds from ULIP that have so far allowed large investors to receive tax-free returns. Individuals holding multiple ULIPs with an aggregate premium in excess of Rs 2.5 lakh will have to pay tax on the proceeds.
TDS/TCS on non-filer at higher rates
To insert a new Section 206AB in the IT Act as a special provision providing for higher rate for TDS for the non-filers of income-tax return. Similarly, it is proposed to insert a new Section 206CCA in the IT Act as a special provision for providing for higher rate of TCS for non-filers of income-tax return. Further, amended sub-section (1) of Section 206AA of the IT Act (i.e., requirement to furnish Permanent Account Number) and insert second proviso to further provide that where the tax is required to be deducted under Section 194Q of the IT Act and Permanent Account Number is not provided, the TDS shall be at the rate of 5%. These amendments will take effect from July 1, 2021.
Deduction of TAX is exempted at source on payment of dividend
From 1st April,Deduction of TAX is exempted at source on payment of dividend
2020 To business trust by a special purpose vehicle in whose hand dividend is exempt under Section 194 of the IT Act (i.e., dividends).
After declaration of dividend only advance tax liability on dividends will arise.
LTC cash scheme exemption:
For Assessment Year beginning on April 1, 2021 to provide tax exemption to cash allowance in lieu of leave travel concession due to pandemic, the value in lieu of any travel concession or assistance received by an individual shall also be exempt by fulfilment of conditions as may be prescribed.
Raising of prescribed limit for exemption under sub-clause (iiiad) and (iiiae) f clause (23C) of section 10 of the IT Act
From April 1, 2022 increase in exemption limit of income received by any person on behalf of university or educational institution under Section 10(23C)(iiiad) and hospital under Section 10(23C)(iiiae) from Rs. 1 crore to Rs. 5 crore. This amendment will take effect
Payment to a fund on or before due date,by employer of employee contribution
By way of late deposit if employers mis-utilize employee’s contribution it will not be allowed as deduction.
Time limit for completing assessment is reduced
The time limit for completion of assessment proceedings is reduced as 9 months (previously 12 months) from the end of the assessment year in which the income was first assessable.
W.e.f. February 2021,discontinuance of Income-Tax Settlement Commission
The timeline of reopening of tax assessment cases has been reduced to 3 years from 6 years and serious tax offences of concealment of income of over Rs. 50 lakhs can be reopened after 10 years.
Allowing prescribed authority to issue notice under Section 142 of the IT Act (i.e., inquiry before assessment) for conduct of inquiry before assessment.
To reduce the number of disputes, a Constitution of Dispute Resolution Committee for small and medium taxpayers will be set up.
To give rulings to taxpayers in a timely manner, the Constitution of the Board for Advance Ruling will be set up.
In a jurisdiction less manner,Provision for faceless proceedings before the Income Tax Appellate Tribunal will be done.
For affordable residential house property date of sanction of loan is extended:
From April 1, 2022 , it is proposed to extend the time limit given under Section 80EEA ibid by 1 year( i.e., from March 31, 2021 to March 31, 2022).Previously the condition to avail additional tax benefits of Rs 1.5 lakh under Section 80EEA of the Income Tax Act, 1961 (“IT Act”) (i.e., deduction for interest paid on home loan for affordable housing) stated that the loan to buy house should have been sanctioned between April 1, 2019 and March 31, 2021.
Outer time limit for affordable rental housing
From April 1, 2022 the outer time limit for getting the affordable housing project approved has been extended from March 31, 2021 to March 31, 2022 under Section 80-IBA of the IT Act.
The date of incorporation for eligible startup for exemption and for investment in eligible start-up
Extension of date of incorporation for eligible start up for exemption from April 1, 2021 to April 1, 2022 under the provisions of Section 80-IAC of the IT Act (i.e., special provision in respect of specified business). Similarly, extended the time limit under Section 54GB of the IT Act (i.e., capital gain on transfer of residential property not to be charged in certain cases.) from March 31, 2021 to March 31, 2022
Tax neutral conversion of Urban Cooperative Bank into Banking Company
Section 44DB of the IT Act (i.e., special provision for computing deductions in the case of business reorganization of co-operative banks) shall also be made applicable on conversion of primary cooperative banks to the banking company. As a result of conversion shall not be treated as transfer under Section 47 of the IT Act (i.e., transactions not regarded as transfer).
The disinvestment strategy of Public sector company is made easy.
Relaxing the provisions of Section 2(19AA) (i.e., demerger) and Section 72A of the IT Act (i.e., provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.) for the public sector companies in order to facilitate strategic divestment by the Government.
Tax incentives for units located in International Financial Services Centre (“IFSC”)-
Government has established a world class financial services centre(“IFSC”).In this budget units located in IFSC enjoy more incentives.
From April 1, 2022 ,the Infrastructure debt fund can issue Zero Coupon Bonds.
Rationalisation of the provision concerning withholding on payment made to Foreign Institutional Investors (FIIs)-
TDS to be deducted on income of Financial Institution Investors from securities under Section 196D of the IT Act (i.e., Income of Foreign Institutional Investors from securities) :
At the rate of 20% or
at the rate of income tax provided in such agreement,
whichever is lower.
Rationalisation of provisions related to Sovereign Wealth Fund (SWF) and Pension Fund (PF)
To encourage investments of Sovereign Wealth Fund and Pension Fund into infrastructure sector of India, following amendments were proposed:
Allowing Alternate Investment Fund (AIF) to invest up to 50%.
Investment through holding company under some constraints.
Investment in NBFC, IDF/IFC
For the purpose of making investments in India no loan or borrowings are allowed to them .
They shall not participate in day to day operation of investee.

Rationalization of slump sale’s provision:
Amend that all types of ‘transfer’ in the scope of definition of the Slump Sale.
For home buyers and real estate developers selling such residential units safe harbour limit is increased from 10% to 20% .
From the overseas retirement fund which notices the mismatch in taxation of income is addressed.
In order to remove the genuine hardship faced by the NRIs in respect of their income accrued on foreign retirement benefit accounts due to mismatch in taxation from April 1, 2022 new Section 89A is inserted to the IT Act.Under this the income of a specified person from specified account shall be taxed in the manner and in the year as prescribed by the Central Government

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