As India hopes to recover from the COVID-19-induced economic crisis, all eyes are now on the Union Budget for the upcoming financial year.
The Union Budget 2021 will be presented by Finance Minister Nirmala Sitharaman on February 1, 2021, and the Centre has already started consulting stakeholders and industry experts ahead of the budget announcement.
Here are some key expectations from Union Budget 2021.
SGB scheme: Amending Section-47 with reference to sovereign gold bonds scheme
One expectation from the 2021 Budget is that capital gain provisions shouldn't contain any particular year's reference with regards to sovereign gold bonds (SGB) scheme.
Under the Income-Tax Act's Section-47, SGB transfers by way of redemption shouldn't be considered as transfers for capital gain purposes. However, this applies only to SGB Scheme, 2015, and Section-47 should be amended to remove any particular year's reference.
Rationalising tax slab rates
The Budget 2020 adopted a carrot and stick approach where lower slab rates were available only to those taxpayers who opted to forego (almost) all tax deductions and benefits.
At present, only those individuals earning Rs 5 lakh or less are exempt from paying taxes. However, the convoluted rebate structure is such that a person earning Rs 5.10 lakh will have lower after tax disposable income than a person earning Rs 500,000!
“This is because the moment your income exceeds Rs 500,000, you are required to pay tax on the entire income in excess of Rs 2.5 lakh which is the basic exemption limit for most individual taxpayers. This complex rebate structure should be done away with and the basic exemption limit of Rs 250,000 should be increased to Rs 500,000. Also, there exists a strong case to reduce the tax rate to 5% for incomes up to Rs 8 lakh,” says Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co.
Work from home deduction
The current pandemic has resulted in promoting a culture of “Work from Home” which will be encouraged by employers in times to come as it reduces transportation cost, travelling time and improves work life balance. “As employees would be incurring additional expenditure such as internet charges, rent, electricity, furniture etc to create a home office, it is recommended that an additional standard deduction of Rs 50,000 should be introduced for expenditure incurred while working from home,” says Singhania.
Pharma Sector
the government spend on the healthcare sector to be around Rs 50,000-Rs 60,000 crore, which in turn would have a higher share on the budgetary allocation to the sector. "While the budget should continue to ensure wider implementation of schemes like Ayushman Bharat, as against the marginal increase in budget allocation for healthcare every year, the budget this year should put health on top priority and increase spends on public health substantially from previous years," says Nikhil Chopra, CEO & Whole Time Director, J.B. Chemicals & Pharmaceuticals.
The pharmaceutical sector is expecting more reduction in duties to bring down the prices of medicines. Currently, GST on drugs is taxed under four categories - nil, 5%, 12% and 18%. While a few life-saving drugs are taxed at nil rates, some are taxed at 5% and the majority fall under the 12% GST slab. Extensions of a tax deduction on R&D and product development are some of the other demands of the pharma sector. The industry also seeks a 150% deduction in tax on in-house R&D.
With the upcoming Union Budget 2021, the infra sector has many expectations from the Modi government. Alstom, which has more than 5700 full times employees in India, has manufactured and supplied rolling stock to Chennai Metro, Kochi Metro, Lucknow Metro and Mumbai Metro L3 (Ongoing) and has also undertaken Signalling, Telecom and Power supply projects for various metro corporations including – Delhi, Bengaluru, Lucknow, Chennai Kochi, Mumbai L2 and 7, Jaipur, Nagpur, etc., in line with the ‘Make-in-India’ initiative. It has requested Finance Minister Nirmala Sitharaman to continue with ease of doing business reforms in the Union Budget 2021.
According to Alstom, a crucial pre-requisite to spur growth will be predictable, transparent and competitive public policies. With particular focus on efficient as well as fair support during the execution of the project. Addressing challenges in execution of the project such as timely payments, fast, fair and efficient solving of execution-related issues, and most importantly ensuring compliance of all players with localization requirements. The company also requested the Modi government to ensure a level-playing field between original domestic firms and foreign entities who have demonstrated sincere and genuine efforts to develop domestic capacities as well as capabilities, through significant industrial investments and robust transfer of technologies.
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