AatmaNirbhar Bharat ka Budget that Finance Minister Nirmala Sitharaman presented on 1 February 2021 set the stock markets on fire and has been hailed as a revolutionary budget that sets India on the path to achieve double-digit growth.
These praises heaped upon the budget have been for good reason. In an earlier article, we had shown how the budget has come out with provisions to boost job creation, dramatically increased health expenditure, prioritized infrastructure growth and agricultural growth. Now we shall look at the structural and financial reforms that have been announced in the budget that ease the lives of taxpayers and enhance ease of doing business in India.
Ensuring Maximum Protection to Depositor
In last year’s budget, government had approved increasing Deposit Insurance cover from ₹1 lakh to ₹5 lakh for bank customers. Now these provisions shall be further extended to ensure that if a bank is even temporarily unable to fulfil its obligations, the depositors can get easy and time-bound access to their deposits to the extent of ₹5 lakh, helping to alleviate even short-term financial stress.
Tax Payer ki Jai Ho
Significantly easing the lives of senior citizens who are 75 years of age and above and earning only through pension and interest income, the government has proposed to exempt them from filing their income tax returns. The paying bank will deduct the necessary tax on their income.
Providing significant relief to small taxpayers and reducing litigation for them, a dispute resolution committee will be set up which will facelessly adjudicate the dispute in transparent and hassle-free manner. This facility is available for anyone with a taxable income up to ₹50 lakh and disputed income up to ₹10 lakh.
After faceless appeals and faceless assessments launched last year, government has now decided to take income tax appeal to the net level through the Income Tax Appellate Tribunal, which will have faceless systems, contributing greatly to transparency and efficiency of tax collection process.
In a big boost to digital economy, the limit for tax audit has been increased from ₹5 crore to ₹10 crore for those firms which carry out 95% of their transactions digitally.
Other significant measure announced include the removal of double taxation provisions for Non-Resident Indians returning to India, which will remove hardships they face with mismatching taxation periods and accrued incomes in foreign retirement accounts.
Helping Small Business and MSMEs
Budget 2021 also announced incentives for entrepreneurs to grow. People wishing to incorporate One Person Company (OPC) are now allowed to grow such companies without any restrictions, and NRIs wanting to do the same now face relaxed residency limits. This will provide broader investment opportunities for venture funds, while providing leverage to incorporate firms.
In a move benefitting more than 2 lakh firms, definitions for small companies under the Companies Act has been increased. The paid capital threshold has been raised from ₹50 lakh to ₹2 crore, thereby significantly decreasing their compliance burden.
With decriminalization of many minor offences under the Companies Act done, the Narendra Modi government has now proposed to take up decriminalization of the Limited Liability Partnership (LLP) Act, 2008.
As a further help to alleviate MSME distress, alternate methods of debt resolution and special framework for them is set to be introduced. NCLT framework is also set to be strengthened and e-court system to be implemented for faster resolution of cases.
Financial Sector Reforms
In a major move to clean up the bank books, especially those of Public sector banks, Budget 2021 has proposed to form an Asset Reconstruction Company Limited and Asset Management Company which would consolidate and take over the existing stressed debt and then manage and dispose of the assets productively.
Unified Single Market Securities Code will also be brought in to consolidate SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007. This will provide regulatory clarity and transparency in the market.
Corporate bond market is also being deepened with the introduction of institutional framework which will buy up investment grade debt securities. This will provide crucial liquidity for firms in both stressed and normal times.
FDI limit for the insurance sector has been enhanced to 74% with safeguards has already made global headlines and will enable huge flow of capital into India.
Enhancing the Value of Public Assets
Last year’s Economic Survey had highlighted the benefits the nation would accrue with disinvestment of public sector units and how their value unlocks on disinvestment. Putting this into action, Government has now proposed to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22 and complete disinvestment of PSUs like BPCL, Air India, and Shipping Corporation of India among others in 2021-22. This would enable the government to plug in fiscal deficit as well as unlock huge value of these units.
Also, to enhance new infrastructure construction and optimal utilization of idle assets of the Government of India, a “National Monetization Pipeline” is being launched to monetize brownfield infrastructure assets. An Asset Monetization Dashboard will also be created for tracking the progress and to provide visibility to investors. Monetization of assets belonging to National Highways authority of India, Railways, oil and gas pipelines, warehouses and sports stadiums will be done.
By carrying out these crucial structural reforms, Modi government has set India on path to double digit growth.