Budget 2021 makes positive strides for freelancers
At Refrens.com, we reviewed the Union Budget 2021 presented by Finance Minister Nirmala Sitharaman to understand its impact on freelancers and the gig economy in general.
The Budget was analysed alongside the studies done by us from time to time with 75,000-plus freelancers and small businesses.
Welcome changes in one-person company norms
The finance minister has proposed the following changes in the norms for one-person companies (OPC) under the Companies Act, 2013:
a) No restriction on paid-up capital
b) Allowing conversion to public or private at any time
c) Reduction in the residency period for Indian citizens from 182 days to 120
d) Allowing non-resident Indians to incorporate OPCs in India.
These are welcome changes as the transition from being a freelancer to a full-fledged agency will now be smoother. We already have many freelancers registered as OPCs on our platform or people running agencies on a personal PAN to ease compliance. We are hopeful this number will increase and more will transform to LLPs/PLCs soon.
Boost for digital payments
The focus on digitization was evident right from the finance minister presenting the first paperless Budget to the announcement of the first digital census. Sitharaman has earmarked Rs 1,500 crore to boost digital payments. For micro, small and medium enterprises, she has proposed to increase the audit exemption limit from an annual turnover of Rs 5 crore to Rs 10 crore, if 95% of the transactions are done online.
These changes will certainly have a cascading effect on freelancers. I am hopeful that more freelancers and small businesses will adapt to digital payments. As of now, about 37% of freelancers on our platform use our payment gateway or other digital modes for payments; we expect this increase to 60% by the year-end. This is a reflection of the transformation of the economy at large.
Social security for gig and platform workers
For the first time ever, gig workers will be covered by Employees’ State Insurance and minimum wages will apply on all categories of workers, along with a few other measures. At the same time, employers will be able to manage all these compliances with ease, as per the provisions of Budget 2021.
Although this is largely applicable to unskilled workers, we believe it is a good starting point to formalize the gig economy. Soon, we will see skilled freelancers also coming under this umbrella that is there in other countries.
Social security will solve one of the fundamental hindrances that makes many people not choose freelancing as a full-time career option. Currently, it is very difficult even for a skilled freelancer to get loans or credit cards. When the government recognises this sector, mainstream financial institutions will also design their products around freelancers.
Need more changes for ease of doing business
One of the pain points for this industry is the difficulty in collecting international payments due to compliance issues. If the government can ease payment collection from international clients, say, for certain threshold of payments, Indian freelancers will be able to draw a good balance between international and Indian clients in line with Prime Minister Narendra Modi’s vision of making India the world’s fastest growing economy.
We have significant competition in B2B services building up in southeast Asian countries. By making international transactions easier for freelancers and small agencies, we will be able to make an impact of the scale the likes of Infosys and TCS have done for India’s economy and employment.
Overall this is a very positive Budget for the digital economy and freelancers. This lays the foundation for more reforms and recognition to come for this industry.
For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page or 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.)