Key Highlights From Budget 2021 : Decoding The Budget

Budget 2021 was a remarkable financial budget. It focused on the industries and their future perspectives. The main focus of the budget was COVID crisis, economic growth and recovery. The government also focused on increasing employment levels and industrial development.

Best Decision in Budget 2021

• Tax

No tax increase in budget 2021. No wealth tax or COVID cess have been introduced. Also the FinMin announced that the tax imposed on the senior citizens would be removed. Hence the citizens over 75 years of age are no longer liable to pay any taxes. The double taxation applied on the NRI investments before has been removed as well. The time frame for tax assessments has been shortened as well. The tax incentives for startups are granted an extension of one year. Advance tax is only applicable on dividend income.

Also the tax audit requirements for companies have gone down. The companies who have a turnover of more than 10 crore Rs. are now required to present the tax audit. Under the same section, the threshold was set at 5 crore Rs previously. Hence this would provide relief to many corporate houses now on. This change is subject to one condition. 95% of the payments need to be digitized for the same.

• Deficit

The deficit in the government expenditure is to be filled up through disinvestments. Now if the government does not earn from the tax slabs then how would it recover the deficit amount. The way that the government suggested is purely strategic and very impressive. Government brought in the extra income through the disinvestment process. The government said that it will undergo disinvestment of various PSUs and banks and hence the money raised would be used in compensating the economic loss.

• Recapitalizing The PSU Banks

20000 crore Rs to be given to PSU banks for recapitalizing their business. This will help their earnings by having more exposure. By gaining more exposure the bank will be able to gain more business. This will end up in having more employment opportunities for the common people. Hence recapitalizing the debt ridden or under working PSUs is a very major decision in fueling the banks working. This will not only fill their pockets with cash but would speed up the process of banking within them.

• CAPEX And Infrastructure Budget

The budget allocated for Infrastructure and CAPEX (capital expenditure) has been increased. The budget set is 1,75,000 crore Rs. This will provide the segments with extra cash to increase the business reach. The CAPEX budget would boost up the technological requirements for the companies. With the increase in expenditure on infrastructure the facilities available to the companies will increase. This will reduce the costing for the companies and bring more business for the economy at the end.

• FDI Limits

Government has increased the FDI limits in insurance companies. The limit was 49% before and now it has increased to 74%. This means the government is looking to bring in fresh funds in the insurance sector. This can be a movie related to the investment into LIC IPO which is planned to get launched in 2022. The funds coming offshore would be diverted into insurance companies. This means that the future prospect of such a change us to target funding for LIC IPO. Also the insurance companies would get more funding which would let them have more exposure. The outcome of this change was noticed in Bajaj Finserv. The stock price has rocketed almost 1000 Rs today.

• Fiscal Deficit

The fiscal deficit for 2022 is expected at 6.9% which is not favourable for the economy. The deficit around 5% is considered to be an average. Such a deficit rate is good for developing economies. Also the deficit for 2021 is expected at 9.6%. Hence having a 6.9% deficit is still manageable. Also the government is planning to raise the income streams through new disinvestments and mergers of Government companies. Along with this the tax structure is unchanged. So the additional income generation is planned through disinvestment and more employment generation plans.

• Real Estate

Government has helped the real estate sector a lot and has continued the benefits given further. The home loan takers get a deduction of 1.5 lakh Rs from their tax threshold. The affordable housing projects don’t need to pay the taxes for another year. This law was enforced previously and the returns have been extended further. Hence the real estate sector is set to grow on a huge scale. The benefit of such a change is noticed in Ultratech cements. The share price increased by 600 Rs approximately.

• Health And Sanitation Incentives

The health benefits rendered by the government have seen a drastic rise this year. The government proposed to give almost 139% rise in the amount of incentives. It said that the disbursement for health incentives is set at approximately 2,20,000 crore Rs. also the government is ready to give a rise if required. The government is also planning to expand the national healthcare institutes across India.

Also the cost of vaccination is 35000 crore Rs. The government on its behalf gave an incentive base of almost 4300 crore Rs. which means that it is disbursing more capital than required to make sure that the vaccination programme becomes a success.

The government is launching a new scheme named Atma Nirbhar Swasthya Bharat Yojna for development of healthcare institutes. It also plans in strengthening the Swachh Bharat Yojna.

• Agriculture

The farmers’ protest are the main reasons and key features for setting up a budget in the agro sector. The government is planning to disburse infrastructure incentives to build new facilities and modernize the APMCs. More than 1000 Mandis are set to be integrated into the E-NAM programme. Also a seaweed park is to be established in Tamil Nadu.

The reason why Mandis are the centre of this agriculture budget is the farmer’s protest, the farmers were afraid that with abolition of Mandis and direct contact with corporates they would be exploited and this would cause land snatching and other problems to them. Also the major reason for abolishing the Mandi system was lack in number and poor infrastructure. Hence this government is trying to console the farmers and give them reasons to trust the system.

For self- reliant India the government is targeting to make the farmer’s richer and dubling their income. The Mandi system is strengthened and farmer’s urge for MSP is also taken into consideration. Also the FinMin is ready to have a talk with farmers and solve their issues if any. The government is planning to launch AIDC (agriculture infrastructure development cess) to increase the credit availability with NABARD so that farmers can be funded.

• Other Decisions

The decisions involve the changes in the custom duties pof cotton and raw silk. The duties of both these products have been hiked up. The custom duties applied are 10% which were 0% before. This will cause a price decrease in the textile industry. Hence the wholesalers would face an increased demand in selling the finished products. Also the price hike is caused in petrol and diesel. Hence petroleum products would get costlier now. For migrant workers the government has launched a One Nation One Card scheme. Hereby this scheme every worker would be able to get his share in rations easily.

Hence the market increased almost 5% today due to all the favorable decisions taken in the budget 2021. This is also a result of the drastic Increase in DEMAT account holders. The number has gone up by almost 25% this year. Hence more investors and better budget is a perfect combination which was awaited.