Budget 2021: FM Nirmala Sitharaman puts the focus on digitisation
Budget 2021 was definitely one like never before. It did not boast of several deductions under Section 80C or a multitude of schemes with tongue-twister-like names. Instead, the focus was on digitisation.
In terms of increasing tax audit limits for digitised businesses or taking assessment procedures faceless, Budget 2021 seemed to be subtly pushing for a digital revolution, without burdening taxpayers. It was also India’s first digital budget.
In a significant push to digitise businesses, the government has increased the tax audit limit under Section 44AB from Rs 5 crore to Rs 10 crore, where 95 percent of business transactions are done in digital mode.
The affordable housing sector got a mention with the additional deduction for loans taken under Section 80EEA extending till March 31, 2022. Further, to ease filing of returns, pre-filing of returns will take place, with details of capital gains, dividend income, and interest from deposits getting auto-populated.
Senior citizens above 75 years of age were given a huge relief with the exemption from filing income tax returns. This is, however, applicable only to those senior citizens who have pension and interest income. In case senior citizens want to claim a tax refund, they’ll have to e-file to their tax returns.
The time limit for the reopening of assessments in income tax proceeding has been reduced from six years to three years, except in cases of serious tax evasion cases, where evidence of concealment of income is over Rs 50 lakh-plus. In such cases, the assessment can be reopened until 10 years.
To benefit startups and other innovators, One-Person Companies (OPCs) can now be incorporated without any restrictions on the paid-up capital and turnover. They can be further converted into any other type of company and at any time.
The residency limit for an Indian citizen to set up an OPC has also been reduced from 182 days to 120 days. This would allow non-residents too to incorporate OPCs in India. This is a good move to encourage people to innovate and become entrepreneurs.
On indirect taxes, Finance Minister Nirmala Sitharaman announced that the government had already simplified the GST regime over the past four years with nil return filing by SMS, the Quarterly Returns Monthly Payments scheme, e-invoicing system, etc., amongst others.
What businesses actually wanted was simplification in day-to-day compliance such as claiming input tax credit and removing other bottlenecks in GST return filing. However, these issues were not addressed.
The FM also did not make any announcement on GST audits. However, the Finance Bill being passed has omitted the mandatory requirement of getting the annual accounts audited under GST, and reconciliation statements submitted by specified professionals. It is now assumed that the annual return will be self-certified. Clarity is still needed in this regard.
The government has also undertaken customs duty rationalisation to promote domestic manufacturing and help India export better. Eighty outdated exemptions have been overhauled. Over 400 old exemptions will also be reviewed this year.
A revised customs duty structure is to be put in place soon. There will also be rationalisation of procedures and ease in compliance to quicken investigation procedures and put a check on misuse of Foreign Trade Agreements (FTAs).
Other digital reforms
The government is all set to soon make faceless assessments the norm. The Income Tax Appellate Tribunal (ITAT) will become faceless for faster, more transparent resolutions.
The Dispute Resolution Committee (DRC) being set up will also conduct its procedures in a faceless manner. In a radical move, India will also see its first digital census this year.
Overall, Budget 2021 did not have much for those who lost jobs or faced a financial crisis last year when the COVID-19 pandemic hit. There were no measures announced in terms of tax benefits, deductions, direct job opportunities, etc.
Instead, the government chose to focus on macro-level economic measures and healthcare, which was the need of the hour.
For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page of budget.yourstory.com
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)