Ali Hasan
The Indian Budget 2021 is finally here. Today we will talk about what it holds for you, what’s now more expensive, what’s now more affordable and how it might affect your life. This budget is a bit different than the last ones as this wasn’t presented in a “Briefcase” or “Bahikhata“.
This time the government decided to ditch pen and paper and made a transition to completely digital. This budget was presented in a tablet by the finance ministry and this was the first time in Indian history that the budget took the digital route.
Finance Minister Nirmala Sitharaman
The challenges faced by the government are unprecedented as it has to deal with not only covid-19 pandemic but also revive the economy and bring back demand which is needed in a healthy economy. People were expecting that the government might decrease the taxes in order to put more money in the hands of people but this is not the case.
The tax slabs have been unchanged and the taxes are same as last year. The next change is that the senior citizens don’t need to file taxes that are above the age of 75. This doesn’t mean that they don’t have to pay taxes. This means that the banks will automatically deduct the taxes and file the taxes for the senior citizens. This is only valid for senior citizens whose earnings are from Pension or Interest Income.
There’s a new cess named “Agriculture and Infrastructure Development Cess”. This cess will be imposed on Petrol and Diesel as well as Apples (35%), Peas (30%), Kabuli Chana (30%), Lentils (20%), Chickpeas (50%). The cess will also be imposed on specific fertilizers such as Urea (5%), Crude Soybean (20%), Sunflower Oil (20%) and Cotton (5%).
There is an increase in custom duty of 2.5% on smartphones and other electronics so expect your next smartphone to be a little more expensive. The custom duty has been raise to 15% on automobile parts so even your bikes, scooters and cars will be a little more expensive.
There has been an increase of custom duty on solar products in order to curb imports from foreign countries and promote Atmanirbhar Bharat.
On the other hand, many of the products will be more affordable such as:-
- Nylon
- Iron
- Copper
- Platinum
- Gold
- Silver
- Shoes
The government has doubled their spending to 2.2 lakh crores for the healthcare sector. It wants to spend 35,000 crores for covid-19 vaccines. A new scheme has also been launched named PM Atmanirbhar Swasth Bharat Yojana and it has an allocated budget of Rs 64,180 crores. But, here’s a catch. This amount will be spent in the next 6 years which means it’s just Rs 10,000 crores per year.
Now comes the main part and it’s for our beloved farmers. They have been promised that the government will give them MSP at 1.5 times of the cost incurred to them to cultivate crops. Government will also be launching a portal for unorganized/Gig workers. These people include cab drivers or delivery boys. Since they don’t have permanent salaries or pension benefits, they are often neglected by various companies.
But this may change as the government is trying to give them recognition and support them with schemes like:-
- Credit Schemes
- Housing Schemes
- Food Schemes
- Health Insurance
This is really good news for all the gig workers as they will also be getting the benefit of “One Nation One Ration Card” along with the proposed benefits.
Privatization of PSUs
The government has clearly convinced their intentions to privatize a lot of Public Sector Undertakings (PSUs) and is really to sell a healthy portion of stake in various PSUs. As of now, there is news that 2 PSU banks and 1 insurance firm will be privatized. LIC can have an IPO this year.
Privatization has been a matter of debate and discussion as many argue with the pros and cons of it. Many believe that this will help government companies to work with better efficiency and have more productivity. But many argue that this will put power into the hands of a few wealthy elite people and a majority of the public who seek employment in government sector will be at the mercy of these few elite capitalists.
For Startups and Businesses
Now companies aren’t needed to have a tax audit by a chartered accountant whose annual turnover is less than Rs 10 crores. Earlier this amount was Rs 5 crores. This will definitely reduce the burden on many companies. The definition of small businesses has also been changed. Earlier those companies whose annual turnover was less than Rs 2 crores were called small businesses but now the limit has been increased to Rs 20 crores. This move will benefit many small companies.
Startups can now claim their tax holiday for 1 more year as the exemption has been increased by 1 more year. If a school and hospital is run by a charitable trust, then they don’t need to pay tax if their annual receipts don’t increase Rs 5 crores. This limit was just Rs 1 crore. So this is also a good relief for the schools and hospitals run by charitable organizations and trusts.
We have been highlighting to the government and at various industry bodies and forums that the key fillip the government can give today for the startup ecosystem is to significantly improve the Ease of Doing business for our founders. This remains the single biggest hurdle in making India a truly global leader in giving birth to startups and helping hundreds of them to become unicorns in the next few years. This budget has addressed a few of those items long standing on the industry’s wishlist.
One Person Companies:- This is a good move and a long standing ask from the startup ecosystem.
This will enable single founders to incorporate companies without necessarily requiring more people either as shareholders or on the board. These one person companies will be able to retain their status without restriction on paid up capital and turnover. They will also be allowed to convert into any other type of company at any time.
Restrictions on NRIs setting up OPCs have been eased and presence in India of 120 days in a year enough to set up an OPC. Details of the scheme to be scrutinized more carefully on the exact compliance burden. Decriminalization of compliance in LLP entities is also a welcome step. This will help the smaller entities think through their business and financing models without worrying about criminal liabilities in case there is a gap in compliance.
Merging of SEBI Act, depository Act and a few other acts will have a long standing impact on the angel investing framework towards creating a robust and supportive regulatory framework.
Since startups and businesses have been given some unique benefits and grants, the stock market rallied in a bullish way and broke records. Before the opening Sensex was close to 46,000 points but it went up by a huge margin and is trading at more than 50,000 points. There were many other things in this budget but we will keep it short, concise, to the point and end here. Hope there’s something good for you in the budget.
