Union Budget 2021-22: The Finance Minister announced Budget 2021, which is projected as an extension of the quite a few mid-term announcements created through Calendar 2020 and at a time when the whole planet is taking methods to address the fall outs of Covid-19 pandemic. The government estimated the fiscal deficit for 2021-2022 at 6.8 per cent of the GDP as against the revised estimates for 2020-21 at 9.5 per cent and has attempted to push the agenda of development with a view to accomplish higher digitalisation and provide the impetus to a variety of sections of the economy. Though the stock markets have reacted positively, history has been testimony as a word of caution, that after the fine print has been analysed, at instances the specifics have led to converse effect of the Budget announcements not only on the markets but on the all round effect on the economy.
With an objective to additional simplify the tax administration, ease compliance and lower litigation, pursuant to introduction of the faceless assessment and faceless appeal schemes, the government proposes to make the Income-tax Appellate Tribunal faceless and establish the National Faceless Income Tax Appellate Tribunal Centre. With the assessment process getting overhauled pursuant to introduction of the faceless assessment scheme, the time limit for completion of assessments has also been lowered to 9 months from the finish of the assessment year in which revenue is initial assessable.
With a view to have higher certainty, the timeframe for re-opening the assessments have been lowered from the current 6 to 3 years with an exception in case of really serious tax evasion situations exactly where the time period is ten years.
The government would also constitute a Dispute Resolution Committee with an objective to additional lower litigation for tiny taxpayers. With a view to provide an option system of giving advance ruling which can give rulings to the taxpayers in a timely manner, the government has proposed to constitute a Board of Advance Ruling and to make amendments in the current provisions of AAR.
With a view to incentivise commence-ups, the government has taken particular measures to provide an impetus to the new ventures by extending the eligibility period to claim tax vacation for the commence-ups by one more year to 31 March 2022 along with extending the eligibility period of claiming capital gains exemption for investment created in the commence-ups also to 31 Match 2022.
In the final Budget, the government abolished the Dividend Distribution Tax to incentivise investments. With a view to provide ease of compliance, the government has taken some more measures viz. withholding tax in case of foreign portfolio investors to be created at decrease of the treaty prices, dividend revenue of REIT and INVIT getting exempt from TDS, advance tax liability on earning dividend revenue has been aligned with the declaration or payment of dividend.
However, in the context of allowability of depreciation on goodwill, the government has proposed that goodwill of a business enterprise or profession shall not be regarded as an asset and therefore resultantly not be eligible for depreciation.
The government has established a planet class monetary centre, ‘International Financial Services Centre’ (IFSC). In order to make place in IFSC more eye-catching, the government has offered further incentives which, inter alia, offers tax vacation for capital gains for aircraft leasing firms, tax exemption for aircraft lease rentals paid to foreign lessors tax incentive for relocating foreign funds in the IFSC and tax exemptions to investment division of the foreign banks situated in IFSC.
The government has offered some relief to senior citizens by exempting them from filing returns in case of pension and interest revenue along with particular other measures viz. pre-filing of information and facts in the revenue-tax returns, and so forth. There had been quite a few measures that had been anticipated more so with a view the address troubles arising post Covid-19 pandemic and its undesirable effects.
As the economy attempts to limp back to the normalcy, with a view to assist migrant labourers and to market reasonably priced rental, the housing sector has been offered the required flip by extending the positive aspects of further deduction of INR 1.5 lakh in case of loans taken upto 31 March 2022 as nicely extension of the dates for availing the tax vacation in case of approval of housing projects till 31 March 2022.
As we see the government across the globe struggling to push their economies out of the subdued circumstances, and although it appears that our government has created efforts to set the economy back on track, one may perhaps have to additional analyse the effect of the amendments announced in higher detail to have the finer nuances deciphered and see if the proposals announced would accomplish the preferred outcomes as contemplated by the government.
(By Sanjiv K.Chaudhary, Chartered Accountant)