New Delhi: The Narendra Modi government on Monday announced a sweeping Union Budget that promises higher spending on key areas such as healthcare and infrastructure, without bringing any proposals that would seek to expand the direct tax revenue base.
In her budget speech, finance minister Nirmala Sitharaman announced the creation of a new centrally sponsored scheme, the ‘PM Atmanirbhar Swasth Bharat Yojana’, which will have an outlay of Rs 64,180 crore over the next six years and will be dedicated to developing capacities of “primary, secondary and tertiary care health systems”.
Sitharaman also announced a sum of Rs 20,000 crore to capitalise the newly announced Development Financial Institution and noted that the ambition would be to have a lending portfolio of “at least Rs 5 lakh crore” in the next three years
.While no major changes were announced on the direct tax front – apart from relief for senior citizens over the age of 75, who no longer have to file income tax returns – what is likely to raise political eyebrows is the announcement of an ‘agriculture infrastructure and development’ cess.
“I propose an Agriculture Infrastructure and Development Cess (AIDC) on a small number of items. However, while applying this cess, we have taken care not to put additional burden on consumers on most items,” she said.
Spending and fiscal deficit
In the speech, Sitharaman also noted the Modi government’s total expenditure for FY’21 was Rs 34.50 lakh crore, higher than the originally estimated Rs 30.42 lakh crore. This increased spending was largely due to COVID-19, with the Centre trying to make sure the quality of expenditure didn’t get affected.
“The capital expenditure, estimated in RE is Rs 4.39 lakh crore in 2020-2021 as against Rs4.12 lakh crores in BE 2020-21. 141. The fiscal deficit in RE 2020-21 is pegged at 9.5% of GDP,” the finance minister noted.
“For 2021-22, I propose a sharp increase in capital expenditure and thus have provided Rs 5.54 lakh crores which is 34.5% more than the BE of 2020-21. Of this, I have kept a sum of more than Rs 44,000 crore in the Budget head of the Department of Economic Affairs to be provided for projects/programmes/departments that show good progress on Capital Expenditure and are in need of further funds. Over and above this expenditure, we would also be providing more than Rs 2 lakh crore to states and autonomous bodies for their capital expenditure.”
The fiscal deficit target for FY’22, is consequently pegged at 6.8% of GDP.
The below list are the key highlights of the budget, divided into sections:
Fiscal position and health outlay:
* Spending on healthcare hiked by 137% to over Rs 2.23 lakh crore.
* Rs 35,000 crore outlay for COVID vaccine in fiscal beginning April 1.
* Sharp increase in capital expenditure for next fiscal to Rs 5.54 lakh crore, up from Rs 4.39 lakh crore of last fiscal.
* Fiscal deficit for current fiscal at 9.5%, as against 3.5% budgeted.
* Fiscal deficit for next fiscal pegged at 6.8%, government to borrow Rs 12 lakh crore.
* Committed to bring down fiscal deficit below 4.5% of GDP by 2025-26.
* Income tax return filing not mandatory for senior citizens above 75 years, banks to deduct TDS
* The outer time limit for reopening I-T assessment cases halved to 3 years from 6 years.
* Income tax return filers increased to 6.48 crore in 2020 from 3.31 crore in 2014.
* Agri infra cess of 2.5% on gold, silver and dore bars; 35 pc on apples.
* Agri infra cess of 30% on Kabuli chana, 10% on peas, 50 pc on Bengal gram/chickpeas, 20 pc on lentil (mosur); 5 pc on cotton
* Rs 2.5 per litre agri infra cess on petrol, Rs 4 on diesel.
* New Agri Infra Development Cess to be applicable from February 2, but constructed in a way not to impact end consumer.
* Tax dept to notify rules to remove hardships of double taxation faced by NRIs.
* Tax holiday for startups, capital gains exemption extended by 1 yr.
* Tax exemption for aircraft leasing cos; tax exemption for notified affordable housing for migrant workers.
* Rs 1.5 lakh tax deduction on payment of interest for affordable housing extended by 1 yr
* Exemption from tax audit limit doubled to Rs 10 cr turnover for companies doing most of their business through digital modes
* Proposes review of over 400 customs duty exemptions; to begin extensive consultation from October 2021
* Customs duty on certain auto parts, solar equipment raised
Privatization and FDI:
* FDI in insurance increased to 74% from 49%, but with safeguards.
* Disinvestment target pegged at Rs 1.75 lakh crore, down from the previous year’s target of over Rs 2 lakh crore.
* Two more PSU banks, one insurance company to be privatised among others which are still undergoing the disinvestment process like Air India.
* PSU Bank recapitalisation pegged at Rs 20,000 crore next fiscal.
* Aatmanirbhar health programme, with an outlay of Rs 64,180 crore to be introduced
* Budget proposals rest on 6 pillars: health and well-being, physical and financial capital and infra, inclusive development for aspirational India, human capital, innovation and R&D, minimum governance and maximum governance.
* Govt to introduce a bill to set up development financial institution with an outlay of Rs 20,000 crore.
* Voluntary vehicle scrapping policy to phase out old vehicles; fitness tests after 20 yrs for personal vehicles.
* National monetisation pipeline for potential brownfield infrastructure assets.
* Rs 3,726 crore for forthcoming Census which will be the first digital census.