Minimum Government and Maximum Governance

Minimum Government and Maximum Governance

• Government has introduced the National Commission for Allied Healthcare Professionals Bill in Parliament, with a view to ensure transparent and efficient regulation of the 56 allied healthcare professions.
• She also announced that the forthcoming Census could be the first digital census in the history of India and for this monumental and milestone-marking task, Rs. 3,768 crore allocated in the year 2021-2022.
• The Finance Minister said fiscal deficit in RE 2020-21 is pegged at 9.5% of GDP and it has been funded through Government borrowings, multilateral borrowings, Small Saving Funds and short term borrowings.
• She added that the Government would need another Rs 80,000 crore for which it would be approaching the markets in these 2 months.
• The fiscal deficit in BE 2021-2022 is estimated to be 6.8% of GDP. The gross borrowing from the market for the next year would be around 12 lakh crore.
• SmtSitharaman announced that the Government plan to continue the path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period.
• In accordance with the views of the 15th Finance Commission, Government is allowing a normal ceiling of net borrowing for the states at 4% of GSDP for the year 2021-2022.
• The FRBM Act mandates fiscal deficit of 3% of GDP to be achieved by 31st March 2020-2021.
• The effect of this year’s unforeseen and unprecedented circumstances has necessitated the submission of a deviation statement under Sections 4 (5) and 7 (3) (b) of the FRBM Act which the Finance Minister laid on the Table of the House as part of the FRBM Documents.
• On 9th December 2020, the 15th Finance Commission submitted its final report, covering the period 2021-2026.
• The Government has laid the Commission’s report, along with the explanatory memorandum retaining the vertical shares of the states at 41%. On the Commission’s recommendation, the Budget provided Rs. 1,18,452 crore as revenue deficit grant to 17 states in 2021-22.

PART-B

In Part B of the Budget Speech, the Union Minister Smt. Nirmala Sitharaman seeks to further simplify the Tax Administration, Litigation Management and ease the compliance of Direct Tax Administration. The indirect proposal focuses on custom duty rationalization as well as rationalization of procedures and easing of compliance.

DIRECT TAX PROPOSALS

• The Finance Minister provided relief to senior citizens in filing of income tax returns, reduced time limit for income tax proceedings announced setting up of the Dispute Resolution Committee, faceless ITAT, relaxation to NRIs, increase in exemption limit from audit and relief for dividend income.
• She also announced steps to attract foreign investment into infrastructure, relief to affordable housing and rental housing, tax incentives to IFSC, relief to small charitable trusts, and steps for incentivizing Start-ups in the country.
• The Budget seeks to reduce compliance burden on senior citizens who are of 75 years of age and above. Such senior citizens having only pension and interest income will be exempted from filing their income tax return.
• The paying Bank will deduct the necessary tax on their income. The Budget proposes to notify rules for removing the hardship of non-Resident Indians returning to India on the issue of their accrued incomes in their foreign retirement account.
• The Budget proposes to make dividend payment to REIT/InvIT exempt from TDS.
• For Foreign Portfolio Investors, the Budget proposes deduction of tax on dividend income at lower treaty rate. The Budget provides that advanced tax liability on dividend income shall arise only after the declaration or payment of dividend.
• The Minister said that this was being done as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax.
• The Finance Minister proposed to extend the eligibility period for claim of additional deduction for interest of Rs. 1.5 lakh paid for loan taken for purchase of an affordable house to 31st March, 2022
• In order to incentivize start ups in the country, Smt. Sitharaman announced extension in the eligibility for claiming tax holiday for start ups by one more year till 31st March, 2022.
• In order to incentivize funding of start ups, she proposed extending the Capital Gains exemption for investment in start ups by one more year till 31st March, 2022.
• Finance Minister said that the Direct Tax Vivad se Vishwas Scheme announced by the Government has been received well. Until 30th January, 2021, over one lakh ten thousand tax payers have opted to settle tax dispute of over Rs. 85 thousand crores under the Scheme.
• To further reduce litigation of small tax payers, she proposed to constitute a Dispute Resolution Committee. Anyone with a taxable income uptoRs. 50 lakh and disputed income uptoRs. 10 lakh shall be eligible to approach the Committee.
• She also announced setting up of National Faceless Income Tax Appellate Tibunal Centre.
• Budget proposes to increase the limit for tax audit for persons who are undertaking 95 per cent of their transaction digitally from Rs. 5 Crore to Rs. 10 Crore.
• In order to allow funding of infrastructure by issue of zero coupon bonds, the Budget proposes to make notified infrastructure debt funds eligible to raise funds by issuing tax efficient zero coupon bonds.
• In order to promote International Financial Services Centre (IFSC) in GIFT City, the Budget proposes more tax incentives.

Vivad se Vishwas Scheme 

• The vivad se vishwas scheme was announced by Union Finance Minister Nirmala Sitharaman during her budget speech on February 1, 2020. The scheme aims to settle the huge number of pending direct tax cases.
• The amnesty scheme, at present, covers disputes pending at the level of commissioner (appeals), Income Tax Appellate Tribunals (ITAT), high courts, the Supreme Court and those in international arbitration.
• It offers a complete waiver on interest and penalty to the taxpayers who pay their pending taxes.
• The scheme aims to benefit those whose tax demands are locked in dispute in multiple forums.

INVIT & REIT

• Infrastructure investment trusts (InvIT) are investment trusts designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time. They are similar to REIT but invest in infrastructure projects such as roads or highways which take some time to generate steady cash flows.
• Real Estate Investment Trust (REIT) is an investment vehicle that owns & manages investment grade and income-producing real estates properties such as offices, malls, industrial parks, warehouses, hospitality, healthcare centers, and almost any asset that can produce an annuity revenue stream

National Faceless Assessment Scheme

• The government’s faceless tax assessment scheme, an attempt to remove individual tax officials’ discretion and potential harassment for income tax payers, has managed to deliver about 24,000 final orders since its introduction in August 2020.
• It is an attempt to remove individual tax officials’ discretion and potential harassment for income tax payers.
• The scheme allows for appropriate cases where a certain hearing is necessary, so then after following protocols, a hearing is given.
• The main objective is to remove physical interaction as much as possible.

Zero Coupon Bonds

• A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
• Some bonds are issued as zero-coupon instruments from the start, while others bonds transform into zero-coupon instruments after a financial institution strips them of their coupons, and repackages them as zero-coupon bonds.
• Because they offer the entire payment at maturity, zero-coupon bonds tend to fluctuate in price, much more so than coupon bonds.
• A zero-coupon bond is also known as an accrual bond.
• The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor’s return.

INDIRECT TAX PROPOSALS

• Finance Minister has said that Deep analytics and artificial intelligence have been deployed to identity tax evaders and fake billers, launching special drives against them.
• The Finance Minister assured the House that every possible measure shall be taken to smoothen the GST further and remove anomalies such as the inverted duty structure.
• She announced that extensive consultation will be conducted and from 1st October, 2021, a revised custom duty structure free of distortions will be put in place. She also proposed that any new custom duty exemptions henceforth will have validity upto to the 31st March following 2 years of the date of its issue.
• The Finance Minister announced withdrawal of a few exemptions on parts of chargers and sub-parts of mobile phones further some parts of mobiles will move from “NIL” rate to a moderate 2.5 per cent.
• She also announced reducing custom duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy and stainless steel. She also announced exempting duty on steel scrap for a period upto 31st March 2022.
• The Minister also proposed an Agriculture Infrastructure and Development Cess on a small number of items. She said “while applying the cess, we have taken care not to put additional burden on consumers on most items.
• The cess is not uniform and varies from product to product.
• This Cess is applicable on petrol and diesel. But, the amount levied as AIDC is being counter-balanced by an equal reduction in Basic Excise Duty & Special Additional Excise Duty to the same extent, thus ensuring nil impact on fuel.
• Some of the items on which AIDC has been imposed include gold, silver and dore bars (2.5%), alcoholic beverages (100%) and crude palm oil (17.5%), Crude soyabean and sunflower oil (20%), Apples (35%), Coal, lignite and peat (1.5%), Specified fertilizers (Urea etc) (5%), Peas (40%), Kabuli Chana (30%), Bengal Gram/Chick peas (50%) Lentil (Mosur) (20%), Cotton (not carded or combed) (5%).
• Regarding rationalization of procedures and easing of compliance, the Finance Minister proposed certain changes in the provisions relating to ADD and CVD levies.
• She also said that to complete customs investigation, definite time-lines are being prescribed. The Minister said that the Turant Custom Initiative rolled out in 2020 has helped in putting a check of misuse of FTAs.

TURANT CUSTOMS INITIATIVE

• This step has been taken by CBIC for fulfilling its commitment to a Faceless, Paperless, and Contactless Customs under the umbrella of its “Turant Customs” programme.
• The launch of paperless documentation on exports is a sequel to a similar initiative that was begun for imports w.e.f. 15th April 2020.
• Green Customs:These initiatives will do away with the present requirement to take paper printout of these documents thereby promoting Green Customs.
• Business Friendly: Equally importantly exporters would not have to visit the Customs Houses for this purpose and can better utilize their time in promoting their business.
• Implementation: Turant Customs, which has as its main component Faceless Assessment, would be implemented in phases across the entire country by 1st January 2021.
• Benefits: These reforms are based on enhanced use of digital technology to reduce the time and costs for the importers, exporters and other stakeholders, thereby improving India’s ranking in the World Bank’s “Trading Across Borders” parameter of its Ease of Doing Business (EoDB) index.

IMPORTANT BUDGETARY TERMS