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Balanced, Forward-Looking Budget For Infra Space: Experts

The much-awaited Union Budget for FY22 presented by the Finance Minister (FM) Nirmala Sitharaman has received the 'Thumbs Up', from experts on several counts

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The Finance minister in her Budget 2021 speech announced a slew of taxation reforms along with an increased spending on healthcare with Rs 35,000 crore on Covid-19 vaccine development. The FM proposed significant changes to the taxation process by announcing the scrapping of filing of Income Tax Returns (ITR) for senior citizens over the age of 75 years under certain conditions. The FM also announced new rules for removal of double taxation for NRIs, and a reduction in the time period of tax assessments.  

In order to reduce harassment to taxpayers, the FM also announced a reduction in the time frame for reopening of income-tax assessment cases from 6 years currently to 3-years.  

The FM also increased the Tax Audit limit from Rs 5 crore to Rs 10 crore for individuals.  

The FM also announced an extension of an additional year for Startups to get their tax holiday. Sitharaman also announced that the advance tax liability on dividend income shall arise after declaration of payment of dividend.  

Yes, the fiscal deficit for FY21 will jump to 9.5 per cent of the GDP, a 3.5 per cent higher than the Budget Estimates (BE) but that was on account of a dip in government revenue due to the onslaught of Covid-19 pandemic, the FM informed the Parliament during her Budget speech. Due to the pandemic, there was a sharp rise in deficit and market borrowings, the FM said. The FM said that the government will look to borrow Rs 80,000 crore to fund the deficit this year and shared that the Gross market borrowings for next year would be kept at Rs 12 lakh crore.  

In health care spending, Sitharaman announced a total spend of Rs 2,83,846 lakh crore including Rs 35,000 crore for Covid-19 vaccine development and inoculation. But the projected fiscal deficit for FY22 has been outlined at 6.8 per cent of the GDP and a fiscal consolidation roadmap will be followed to bring down the fiscal deficit to under 3.5 per cent by FY26, the FM said.  

Highlight Points 

Tax Exemption for Aircraft Leasing Companies 

  • Tax Exemption for Notified Affordable Housing for Migrant Workers 
  • One-Year Extension on Rs 1.5 lakh deduction on payment of interest for affordable housing  
  • Exempt from TDS: Dividend Payments to REIT (Real Estate Investment Trusts) and Invit's (Infrastructure Investment Trusts)  
  • Tax Holiday for StartUps extended by 1-year 
  • Exemption on Capital Gains on Investment in Startups Extended by One-Year 
  • NRIs allowed to operate One-Person Companies in India 

Employers Not Allowed Deduction for Late deposit of Employee's Contribution to PF

Real Estate & Infra Focus

Anuj Puri, Chairman, ANAROCK Property Consultants pointed out that the extension of the tax holiday for affordable housing projects for one more year will help bring in more new supply within this segment. “As per ANAROCK Research, affordable housing already accounts for more than 35% of the supply across the top 7 cities in the country. As anticipated, affordable housing and rental housing got a big boost with the Govt. extending the period for an extra deduction of INR 1.5 lakh available for loans up to 31st March 2022. This will keep demand buoyant for affordable housing in 2021 as well,” Puri said.  

In the Budget, the FM focused on infrastructure which according to Puri of ANAROCK, ‘got a major push’. As per the announcement, the FM proposed building 8,500-km of highways by March 2022. Then there were big infra-sops announced for poll-bound states including West Bengal, Tamil Nadu, Kerala and Assam. Puri said for real estate developers the announcement of a Customs Duty cut on steel to 7.5% “will create some space to real estate developers who may not be in a position to increase prices immediately”.

From highway construction to expansion in civil aviation and the start of inland waterway freight services, the FM announced an allocation of Rs 5.54 lakh crore. “This allocation will help to boost the infra sector. The infrastructure sector is a key driver for the Indian economy and the most tangible evidence of the nation’s progress. Investment in this sector has a cascading impact on all sectors such as the banking and financial sector, logistics, power sector. The infrastructure sector also aids in employment generation and socio-economic development of the country,” said K.K.Kapila, Co-chairman, CEAI  Infra Committee and President Emeritus, International Road Federation (IRF). 

Rajat Johar, Country Head, Skootr, India’s ‘Premium Managed Office Space’ provider, pointed out that the office spaces, which have been the most impacted sector due to the work from home scenario, could have been recognized in this budget. “A reduction in stamp-duty duty for commercial real estate, offering single-window clearance and reduced GST on leasing would have helped in the market recovery,” he said.  

Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry said the focus of the budget on six pillars, including Health and Well-Being, Physical and Financial capital and infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and Research & Development, and Minimum Government and Maximum Governance is highly encouraging and would go a long way to build a New India.

Are experts Happy?

Jaideep Ghosh, COO, Shardul Amarchand Mangaldas & Co termed the Budget as 'Comprehensive', focused on healthcare, human resources, infrastructure, disinvestment, and technology'. "The calibrated steady fiscal consolidation plan proposed over the next years is appropriate in these challenging times. With all-round growth with an enhanced self-reliance as the need-of-the-hour, this budget seems to cover the relevant areas. As always, implementation is critical,” Ghosh said.

Dr. Jaijit Bhattacharya, President, Centre for Digital Economy Policy Research termed the Union Budget as an "excellent budget" but not a "transformational budget". "It has adopted a brilliant strategy of large-scale infrastructure rollout, funded by asset monetization of existing road, power lines, gas pipelines, and railway assets. The budget also covers funding of New Education Policy which is what I have been asking for as it will provide the human resources needed for growth in this decade. Adequate provisions have been made for health, education, agriculture, MSME's and Start-Ups. Hope there is the removal of GST on digital payments and removal of Angel tax as a follow-up of the budget. Overall, the budget manages to put up a convincing package to fund the desired goals while providing revenue lines for the same," said Bhattacharya.  

Amit Kapur, Joint Managing Partner, J Sagar Associates said, "The budget speech expectedly has given a strong signal for infrastructure development focusing on actualizing the ambitious national infrastructure pipeline targeting an investment of Rs.111 lakh crores over 5 years. The signal comes from the announced budgetary allocations and decisions (a) central allocation of Rs5.54 lakh crores, (b) state allocations of Rs.2 lakh crores, (c) announcement to tap into budgetary resources of PSUs and wide-ranging InVITs monetizing assets in highways, power transmission, gas pipelines, dedicated freight corridors, airport.”  

Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP pointed out that that as per the popular expectation, health was given a prominent platform and was the "first pillar" of the Budget Speech. "Health budget has been increased by around 138 per cent is definitely a welcome move," he said. "There are other steps which are on the expected line - the increase in FDI limit for insurance companies from 49% to 74% was overdue. However, the response is to this is to be seen since still the majority in board and conditions of independent director have been stipulated. The setting up of DFI is inevitable if the infrastructure target is to be met. The asset reconstruction company to buy and resolve stressed portfolio is a much-needed one especially with stressed assets expected to reach 14%. Recapitalization of PSU Banks with Rs 20,000 crore seems to be on the lower side," said Vijayasarthy. 

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Union Budget 2021-22 Union budget 2021