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Union Budget Proposals, 2021

When Hon’ble Finance Minister rose to present the Union Budget for the fiscal year 2021-22 (“Budget”), she had a humungous task at hand. An economy which was already crippled by a global slowdown, got further pushed into an unprecedented crisis due to COVID-19 and the lockdowns.

The Budget rests on six pillars, namely, health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and R&D and minimum government and maximum governance. Tax proposals contained in the Budget are in line with these objectives and give fillip to domestic manufacturing to meet the vision of ‘Aaatmnirbhar Bharat’ and ‘Make in India’.  

For a snapshot of the key tax proposals under the Budget, please click here.

This Budget Update has been prepared by the JSA Tax Team (Direct and Indirect Tax). For further details, please contact [email protected]

Direct Tax Proposals – Budget, 2021

While the Finance Minister briefly touched upon the direct tax proposals, fine print reveals many proposals that may have far reaching impact. Taxation of gains on ULIPs has been brought at par with Mutual Funds, Interest on PF contributions beyond 2.5 lacs has been made taxable, Slump Sale provisions shall cover other modes of transfer of business as well and anomaly leading to double taxation of income that was subjected to Equalisation Levy in FY 2020-21 has been rectified. Further, Budget proposals that seek to promote reduction in time limit for reopening assessment, increasing turnover threshold for tax audits, and providing pre-filled tax returns are aimed at bringing in certainty and making tax compliances easier. These measures coupled with use of Artificial Intelligence and Analytics shall boost the Direct Tax to GDP ratio in ensuing years.

Quote by Kumarmanglam Vijay published in India Tech Online.

Reducing compliances and uncertainty while providing some boost for investments

A step towards easing compliance and reducing uncertainty is that the time limit for reopening income tax assessments will be restricted to 3 years from the six years currently applicable. Only serious offences beyond a non-compliance threshold of 50 lakhs in a year will be subject to a 10-year window for reopening of assessment. Payment of advance tax to meet tax liability for dividend income can be after the declaration of dividend. Dividends to InVITs and REITs will be exempted from TDS. As an incentive for startups, tax holiday and capital gains exemption has been extended by one more year up to 31 March 2022. 

Quote by Raj Ramachandran.