Source for Expenditure(Estimates):

Sr.

Sources

Amount (in Lakh Crores)

Percentage

1

Corporate-Tax

4.53

13%

2

Income-Tax

4.88

14%

3

Customs Duty

1.05

3%

4

Union Excise Duties

2.79

8%

5

Goods & Service Tax

5.22

15%

6

Non Tax Revenue

2.09

6%

7

Non-Debt Capital Receipts

1.74

5%

8

Borrowings & Other Liabilities

12.54

36%

Budgeted Expenditure

34.83 Lakh Crores

100%

The Fiscal Deficit shot up to a high of 9.5% of GDP for FY20-21 on account of the COVID-19 pandemic

PROPOSED AMENDMENTS UNDER FINANCE BILL, 2021

A. TAX & COMPLIANCE

1.DIRECT TAX

o INCOME TAX

• Senior citizen above the age of 75 years will not have to file the Income Tax Return if Income is in the form Pension and Interest;

• Bank Interest, Capital Gains and Dividend income will be pre-filled in the return of income;

• Additional deduction under Section 80EEE of the Act of Rs. 150,000/- for interest on loan for affordable housing is extended till 31^st March, 2022;

• No TDS will apply in case of dividend from Real Estate Investment Trust and Infrastructure Investment Trust;
• Interest accruing in Employee Provident Fund on employee contributions exceeding Rs. 250,000/- p.a. for any previous year beginning on or after 1^st April, 2021 will be taxable;

• Delays in depositing employees’ contributions to employee welfare funds are proposed to be disallowed permanently;

• Receipts from ULIPs (including bonus) issued on or after 1^st February, 2021 taxable, if the premium paid in any previous year exceeds Rs. 250,000/- over the policy term;

• No interest under section 234C of the Act levied for shortfall in payment of advance tax on under-estimation/ failure to estimate dividend income;

• Distribution of cash/asset on account of dissolution or reconstitution of a partnership firm/AOP to be taxed in the hands of entity and any revaluation to be ignored;

o CORPORATE TAX

• Tax Audit limit has been revised from Rs. 5 Cr to Rs. 10 Cr for cases having more than 95% of total payment and receipts in electronic or digital mode;

• Exemption from tax on Long Term Capital Gains from investment into start-ups is extended till 31st March, 2022;

• Extension of Sunset Clause(100% relaxation from Tax compliance) for date of incorporation of an eligible start-ups from 1^st April 2021 to 1^st April 2022 for claiming tax holiday deduction;

• Presumptive taxation regime for professional with turnover less than 50 Lakhs is not applicable for LLP

• It has been proposed that MAT shall not be applicable on the past year’s income which is included in the current year’s books of account on account of an Advance Pricing Agreement (APA) or a secondary adjustment;

o OTHERS

• Limit for registration of educational trust under Section 10 of the Act, increased from Rs. 1 Cr to Rs. 5 Cr of gross receipts;

• After Faceless Assessment and Faceless Appeals, Faceless Tribunal has been proposed on similar lines (2nd Appeal);

• Reducing the time limit for reopening assessment cases to 3 years from present 6 years. Only, if the tax concealment is of Rs. 50 lakhs or above, the case can be reopened any time up to 10 years from the year in which return of income is filed;

• Scope of Slump Sale enlarged to include transfer of undertaking by any means including an exchange where no cash consideration is involved;

• Information of income having escaped assessment will be available with the AO. The aforesaid information includes transactions flagged by the computer-based system which will work in accordance with risk management strategy formulated by the CBDT;

• Goodwill excluded from definition of Intangible Assets and thus no depreciation to be allowed on goodwill

• TCS now replaced with TDS - Buyer now liable to deduct TDS at 0.1% on payment exceeding Rs. 50 Lakhs for purchase of goods from resident. If no PAN is furnished, TDS rate to be increased to 5%

• Dispute resolution committee to be set up to reduce litigations for small and medium taxpayers for preventing new disputes and settling the issue at the initial stage (Settlement Commission shall be discontinued from 1^st Feb 2021);

• Rate of TDS/ TCS shall be double of the specified rate or 5% whichever is higher in case of non-filing of income tax return for last two years and where TDS /TCS is Rs. 50,000/- or more for last 2 years

• AO empowered to make provisional attachment of property of taxpayer where penalty for false entry in books of account (including cases of fake invoices) is likely to exceed Rs. 2 Crores

• Equalisation Levy (scope clarified) – Scope of “online sale of goods” and “online provision of services” to include one or more of the following activities:
• Acceptance of offer for sale
• Placing of purchase order
• Acceptance of purchase order
• Payment of consideration
• Supply of goods or provision of services

2.INDIRECT TAX

o GST

• Section 16 amended to provide that ITC shall be availed only when the details of invoice or debit note have been furnished by the supplier in GSTR-1;

• Audit under GST is abolished, Annual return to be self-certified;

• Option of Export with payment of Tax and claiming refund will be available only in case of notified supplies and class of taxpayers

o CUSTOMS

• Customs Duty on steel reduced to 7.5% from 12.5% (to reduce input prices for domestic manufacturers);

• Customs Duty on gold and silver reduced to 7.5% from 12.5% (since prices precious metals have risen sharply);

• Increase in Customs duty on solar panels from 5% to 20%; cotton from 0% to 10%; silk yarn from 10% to 15%; mobile parts from 0% to 2.5% (discouraging imports)

3. KEY POLICY ANNOUNCEMENTS

• SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 to be consolidated into a single Securities Markets Code;

• Set-up of One Person Companies (OPC) to be incentivised by:
• eliminating restriction on paid-up capital and turnover
• permitting conversion into any other type of company at any time
• reducing residency criteria for an Indian citizen to set up an OPC from 182 days to 120 days
• permitting NRIs to incorporate an OPC;

• e-Courts system will be implemented to strengthen the functioning of NCLTs;

• FDI limit to be increased from 49% to 74% in Insurance Companies. Majority of Board of Directors and KMPs to be resident Indians.