Budget 2021 Overview
The Union Budget of 2021 has boosted the healthcare and infrastructure industry. Specified senior citizens, NRIs and small taxpayers can surely cheer on the Income Tax front. With the enhancement of the tax audit limit and redefining of the provisions in the Companies Act, businesses can concentrate more on upscaling, and expansion with lesser compliance worries. On the indirect taxes front, considering the difficulties faced by GST registered taxpayers, the Government has taken a remarkable stand on GST annual returns and audit. We have compiled the key highlights of this budget herein below:
Changes in GST Laws
- To ease GST compliances, the concept of GST audit is proposed to be dropped. In simple words, GSTR-9C will be eliminated. Section 44 of the CGST Act will be substituted to remove the mandatory requirement of furnishing an audited reconciliation statement.
- Filing of the annual return (GSTR-9) on a self-certification basis will be possible. Furthermore, when required, the Commissioner will be given the right to exempt taxpayers from the requirement of filing the annual return.
- From now on taxpayers can claim ITC only when the suppliers furnish the invoice/debit note’s details in their GSTR-1.
- Any supply of goods or services by any person (other than individuals), to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration will attract GST.
- Interest on net cash liability will be charged retrospectively.
- Provisional attachment will remain valid for the entire period starting from the initiation of any proceedings (under Chapter XII, Chapter XIV or Chapter XV) till the expiry of a period of one year from the date of order.
- ‘Self-assessed tax” will include the tax payable in respect of outward supplies, the details of which have been furnished under section 37(FORM GSTR-1), but not included in the return furnished under section 39 (GSTR-3B).
- No appeal can be filed against an order made under sub-section (3) of section 129 ( a proper officer detaining or seizing goods or conveyances should issue a notice specifying the tax and penalty payable and thereafter pass an order for payment of tax and penalty) unless the appellant has paid a sum equal to 25% of the penalty.
- The proceedings relating to detention, seizure and release of goods and conveyances in transit are delinked from the proceedings related to the confiscation of goods or conveyances and levy of penalty.
- Information obtained under sections 150 and 151 can not be used for any proceedings under the Act without giving the person concerned an opportunity to be heard.
- Only goods or services supplied for authorised operations, to a Special Economic Zone developer or a Special Economic Zone unit, will be zero-rated.
Direct Tax Reforms
- Senior Citizens above 75 years of age earning only pension and interest income are exempted from filing their Income Tax Returns (ITR).
- To reduce compliance burden, details of Capital Gains, Dividend Income and Interest Income will be prefilled in the Income Tax Returns.
- Assessments can be re-opened only within 3 years (previously 6 years). However, when the income concealed is more than INR 50 lakhs, the time available for this is 10 years (approval required).
- Faceless Dispute Resolution Panel will be constituted to help small taxpayers having total Income up to INR.50 lakhs and disputed income of INR 10 lakhs.
- Double Taxation for NRIs will be eliminated.
- The threshold limit for Income Tax Audit is increased to INR 10 crores (from INR 5 crores) if at least 95% of the transactions are digitally served.
- Dividend payment to REIT/InvIT to be exempted from TDS.
- Deduction under section 80EE - Interest for Affordable housing loan (up to INR 1.5 lakhs) is extended for loans taken till 31 March 2022.
- Affordable housing projects can enjoy tax holiday till 31 March 2022.
- Startups can relish a tax holiday until 31 March 2022.
- Capital Gains arising out of investment in startups are also exempt until 31 March 2022.
- Charitable trusts running Hospitals and Educational Institutions can claim relief up to INR 5 crores (previously INR 1 crore).
- *The Customs Duty rate is revised for certain products. Points to be noted here are:
- Customs duty on :
- Copper scrap is reduced to 2.5% (previously 5%).
- Solar inverters is increased to 20% (previously 5%)
- Solar lanterns is increased to 15% (previously 5%)
- Basic and Special additional excise duty on petrol and high-speed diesel oil (both branded and unbranded) is reduced as well.
- Basic Customs Duty (BCD) on gold and silver is reduced.
- New tariff items under 2404 11 00 and 2404 19 00 have been inserted in accordance with upcoming HS 2022 nomenclature. Further, NCCD of 25% is prescribed on these tariff items with effect from 1st January 2022.
- The customs duty on cotton, silks, alcohol, is increased.
- The exemption on import of leather will be withdrawn.
- A new initiative called ‘Turant Customs’ will be introduced for faceless, paperless, and contactless customs measures.
*Note: The revised rates will be applicable from 2 February 2021.
- The definition of ‘Small Companies’ as per the Companies Act 2013 is amended. The capital threshold is increased to INR 2 crores (previously INR 50 lakhs). Furthermore, the threshold for Turnover is increased to INR 20 crores (previously INR 2 crores).
- All restrictions on One-Person Company are removed. Furthermore, the threshold to arrive at the residential status is reduced to 120 days (previously 182 days).
- For startups, the Government has proposed to reduce the margin money requirement to 15% from 25%.
- The first digital census in the history of India is on the cards.
- Scrapping policy for vehicles is announced. A fitness test after 20 years for personal vehicles and 15 years for commercial vehicles is proposed.
- Agriculture Infrastructure and Development Cess will be imposed on petrol and diesel at INR 2.5 and INR 4 per litre respectively.
Download the Highlights of Budget 2021 here.
Additional Reading - Union Budget 2021