Budget 2021: From Income Tax deductions to creating jobs and boosting healthcare – Here’s all that could be in Nirmala Sitharaman’s fiscal plans
- In a year where the country hopes to recover from the coronavirus pandemic, the onus will be on Nirmala Sitharaman to bring much needed relief for sectors, while also ensuring that the economy bounces back.
- From bringing back jobs in the market to tax deductions, there are a lot of expectations from Budget 2021.
- According to reports, India's Defence Budget could also see a hike to hit total allocations of ₹6 lakh crore.
- Here are the major changes that could come with the Union Budget 2021.
AdvertisementIndia’s Finance Minister Nirmala Sitharaman is set to announce the annual budget on February 1, 2021 – paperless for the first time in the history of India.
And in a year where the country hopes to recover from the coronavirus pandemic that ravaged almost every other sector, the onus will be on Sitharaman to bring much needed relief for people as well as sectors that need budgetary support to recover.
Ahead of the Budget session of the Parliament, mandatory RT-PCR tests will be done on all the members and the question hour too is set to make a comeback. The Budget session is set to start on January 29, 2021.
And here are the major changes that could reportedly come up with the Union Budget 2021.
Income tax deductions
With thousands having lost their jobs, and many more having had to undergo a salary cut across the country due to the COVID-19 pandemic, Sitharaman might be looking at possible ways to put more disposable income in the hands of the people.
According to reports, Budget 2021 might take forward the relief announced with the Atma Nirbhar package with the basic tax exemption limit for an individual being raised to ₹5 lakh from the current ₹2.5 lakh.
|Income Tax Slab
|Tax rates - new regime
|Tax rates - old regime
|₹0 - ₹2,50,000
|₹2,50,001 - ₹ 5,00,000
|₹5,00,001 - ₹7,50,000
|₹12500 + 10% of total income exceeding ₹5,00,000
|₹12500 + 20% of total income exceeding ₹5,00,000
|₹7,50,001 - ₹10,00,000
|₹37500 + 15% of total income exceeding ₹7,50,000
|₹62500 + 20% of total income exceeding ₹7,50,000
|₹10,00,001 - ₹12,50,000
|₹75000 + 20% of total income exceeding ₹10,00,000
|₹112500 + 30% of total income exceeding ₹10,00,000
|₹12,50,001 - ₹15,00,000
|₹125000 + 25% of total income exceeding ₹12,50,000
|₹187500 + 30% of total income exceeding ₹12,50,000
|Above ₹ 15,00,000
|₹187500 + 30% of total income exceeding ₹15,00,000
|₹262500 + 30% of total income exceeding ₹15,00,000
Until now, while the Modi government has pushed for a rebate on all payable taxes, the basic tax exemption limit has remained the same.
The report also said that a higher standard deduction (salary that is not subject to income tax) could also be on the way – from the current ₹50,000 to ₹75,000-₹1,00,000.
The government could also be planning a COVID cess on high income earners.
Defence Budget to get a massive hike
Amidst the long standoff between India and China, according to reports, India’s defence budget could see an ‘unprecedented hike’ to meet the urgent requirements of the Indian Army. In Budget 2020, the government had allocated a total of ₹4.71 lakh crore (including defence pensions). Reports now say that with Budget 2021, the total allocation could hit ₹6 lakh crore.
Farmers to get special attention
With the farmers’ protest going on for several months now, and the Republic Day farmers tractor rally also resulting in clashes in the national capital, Budget 2021 could take measures to soothe the pain of farmers. According to reports, the farm credit target could be raised to ₹19 lakh crore with an aim to double farmers’ income.
Massive boost for construction and affordable housing on its way
The government may make way for a massive boost for the construction and affordable housing sector. An Indian Express report claimed that the government is likely to liberalise Foreign Direct Investment (FDI) rules in construction and to give a boost to home buyers, an allocation will be made for a credit-linked subsidy in the Budget 2021.
In Budget 2020, Finance Minister Nirmala Sitharaman had proposed to extend the benefit of additional deduction of ₹1.5 lakh on interest paid on affordable housing loans by a year to March 2021.
Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Fund, who is also a part of the Prime Minister's economic advisory council too said the focus could be on construction and infrastructure with this budget. "My first priority would be to support the needy sector of the economy – tourism, retailing, construction, bottom of the pyramid people MSME who have been hit hard. We must support them so that there’s better financial inclusion and they are also able to participate in growth. This can be done in various formats – you can give concessions, grants, you can create mechanism through which they can grow on their own," he said during a recent conversation with Business Insider.
#BudgetInsider: @Iyer_Sriram in conversation with @KotakMF's @NileshShah68 ahead of #Budget2021, cuz the budget tra… https://t.co/k2YwAuyRPw— Business Insider India (@BiIndia) 1610955127000
According to reports,a Development Finance Institution (DFI) could also be announced with the budget. This new institution would look into infrastructure projects, whether new, stalled or currently in progress, worth ₹100 lakh crore.
Bringing back jobs in the market
Another top priority for the Modi government would be to bring back jobs in the market, after a year where thousands lost jobs across the country as companies tried to cut down costs. The boost in infrastructure and construction could also lead to the growth in jobs.
“The Union Budget 2021- 2022 would likely focus on investments that create jobs and therefore infrastructure, construction and significant incentives for high employment-generating sectors (like textiles, affordable housing, MSME, etc) are key areas, which may get priority focus from the government end,” said a report by Sharekhan.
Smartphones, electronic items could get costlier
Indian government is set to hike import duties on over 50 items including the likes of smartphones, electronic items and others. According to a Reuters report, the hike could be as much as 5-10%.
AdvertisementDuty on finished goods could be raised
Finished goods made rubber, plastic and leather could see a hike in import levies. Meanwhile, according to an ET report, “inputs used in producing chemicals such as methyl alcohol, acetic acid and PVC could see a reduction in tariffs.”
Healthcare could be on the top priority list
With the COVID-19 pandemic having shown the need for better healthcare infrastructure and facilities in the country, it is likely that the sector will see renewed focus from Sitharaman. “Combined with the start of the 15th Finance Commission period, we may see a jump in healthcare spending,” said the Credit Suisse report.
According to analysts at Sharekhan, within the healthcare stimulus we could also see the extension of tax benefits under Section 35AD. Analysts also expect that there could be an increase in deduction under section 80D of mediclaim premium to be increased to ₹50,000 (for self and spouse) and will remain at ₹50,000 (for dependant parents).
Raise the divestment target
As the Modi government looks to recover the economy, it may also increase divestment targets for the year. A news report said that the government is likely to raise its divestment target to ₹2.5-3 lakh crore. The government plans to achieve the same with the long-pending privatization of government-owned entities like Air India, BPCL, Concor and Shipping Corp.
The government could also plan to privatize PSU banks.
In Budget 2020, the government had set a target of ₹2.1 lakh crore, however it has managed a meagre amount of it – ₹13,844.49 crore.
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