Budget 2021 and its Impact on Investors, NRIs, and Salaried Taxpayers
Finance Minister delivered Union Budget 2021 on February 1, 2021. Health, Industry, Infrastructure, Urban Development, Financial Reforms, Education, Inclusive Development, Human Capital, Fiscal Position, Tax Proposals, and Indirect Tax were the pillars of this budget. The majority of attention was given to the healthcare sector. As per the statistics, India is expecting a V-shaped recovery by 2021 in the GDP growth rate. The budget clearly indicates that the government's economic policy is in the right direction.
Key highlights of the budget 2021:
- Senior citizens (aged 75 years and above), will be exempted from filing Income Tax Returns applicable only when the income is coming from pension and income from interest
- There is an increase in the limit for tax audits for the persons who are doing 95% of the digital transactions out of the total transactions
- All loans availed for the purchase of houses under the affordable housing project up to March 31, 2022, will get an additional discount of Rs. 1.5 lakh
- The duty of solar lanterns and investors will be increased in order to promote domestic production.
- PSUs will be privatized
- State government borrowings limits will get increased
- Collateral free loans will be given to the businesses
- The definition of MSMEs will be changed and will be provided with subordinate debts
- One nation, one card for migrant workers, and PM Garib Kalyan Yojana will be rolled out under Atma Nirbhar Bharat
- Free food grain supply will be given to migrant workers
- Liquidity support will be given to discoms and coal mining will get commercialized
- Rationalization of customs duty on gold and silver
- Rs. 1.97 lakhs has been committed for the PLI and world-class infrastructure to be created for global champions
- Support will be given to healthcare and wellness centers
- Critical care hospitals and integrated public health labs to be set up
- Rs. 35,000 cr sanctioned for Covid-19 vaccine in 2021-22
- Rail infrastructure to be developed by 2030
- 100% of electrification of broad gauge routes by 2023
- Farmers to receive concessional credit boost and provided with emergency working capital
- Marketing reforms for agriculture
- Integration of an additional 1,000 mandis with e-NAM
- Rs. 2,217 cr will be allocated for 42 Urban Centres to tackle the problem of air pollution
- Jal Jeevan Mission to ensure water supply in all ULBs
- 100 new Sainik schools will get open
1. Impact of budget on investors
The impact of the budget can be seen in stock markets. Unit Linked Insurance Plans (ULIPs) brought under tax bracket. Earnings from ULIPs will subject to Capital Gains Tax from April 1 if the premium exceeds Rs. 25000 annually and Securities Transaction Tax (STT) shall be made applicable on the maturity or partial withdrawal of such ULPIs issued after February 1, 2021.
2. Impact of budget on NRIs
When NRIs return to India, they face issues related to accrued incomes in their foreign retirement accounts, which mainly occurs due to a mismatch in taxation periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions, leading to double taxation, Now, there is a relaxation for non-residents Indians (NRIs) for facing double taxation issues. After the amendment, the income of such a specified person’s account will be non-taxable on an accrual basis and will be taxed by a foreign country at the time of withdrawal. This amendment will be effective from April 1, 2022.
3. Impact of budget on salaried taxpayers
Interest on employee’s share of contribution to EPF on or after April 1, 2021, will be taxable during the time of withdrawal if the amount exceeds Rs. 2.5 lakh in any year. Due to this, HNI, who make higher contributions will be supposed to pay the additional tax liability. This will also discourage voluntary EPF contributions. Return on PF would not be completely tax-free so this will have an impact on the retirement corpus. Pre-filled income tax returns will also include details of capital gain from listed securities, dividend income, interests from banks, post office, etc. in addition to salary income, bank accounts, tax payments, and TDS details.