The Union Budget 2021–22 was presented amidst much speculation over how the Government would recover the recession-hit economy brought about by the effects of the COVID-19 pandemic. It was not surprising to find a major boost in the healthcare segment at the start of the budget announcement. The Finance Minister, Mrs. Nirmala Sitharaman, delivered the Union Budget 2021-22 under six pillars.
Here are the key highlights:
Pillar#1 – Health and Well-being
- Given the importance of the health care sector in these unprecedented times, there was a major push to the first pillar, health and well-being. The Finance Minister introduced the PM Aatmanirbhar Swastha Bharat Yojana to develop primary, secondary, and tertiary healthcare systems. This scheme would be entirely sponsored by the Centre and rolled out over the next six years. An allocation of Rs. 64,180 crores have been made towards the scheme.
- An additional fund of Rs. 35,000 crores have been set aside for the COVID-19 vaccine, with a provision of further funding if needed.
- The Finance Minister also introduced voluntary scrapping of old vehicles in a bid to reduce air pollution. Private vehicles beyond 20 years and commercial vehicles beyond 15 years would have to undergo fitness tests.
Pillar #2 – Physical and Financial Capital and Infrastructure
- The completion of 11,000 KM of National Highways by March 2022.
- New highways are to be developed in Kerala, Tamil Nadu, West Bengal, and Assam.
- Providing a boost to metro projects in Kochi, Chennai, Nagpur, Nashik, and Bengaluru through central funding and the launch of metro services in 27 cities.
- FDI share by foreign stakeholders in the insurance sector would be raised to 74% from the current 49%.
- The provision of Rs. 20,000 crores through equity infusion in public sector banks.
- An Asset Reconstruction and an Asset Management Company would be established to manage stressed loans.
- IDBI Bank, two unnamed PSU banks, and one general insurance company would be strategically disinvested.
Pillar #3 – Inclusive Development for Aspirational India
- A number of reforms were introduced in the agricultural and MSME sector under this pillar.
- The Operation Green Scheme, which currently covers onions, potatoes, and tomatoes, would be expanded to include more products.
- Agri credit target has been set at Rs. 16.5 lakh crores.
- A provision of Rs. 15,700 crores has been made towards the MSME sector for its growth and development.
Pillar#4 – Reinvigorating Human Capital
- The Finance Minister stressed the importance of labour and made various provisions for their benefit.
- To promote education, the Budget proposes the strengthening of more than 15,000 schools under the National Education Policy.
- Moreover, a provision for setting up 100 new Sainik schools has been made by partnering with NGOs, private schools, and state governments.
Pillar#5 – Innovation and R & D
- Again, emphasizing the concept of Aatmanirbhar Bharat, the Finance Minister has made several provisions to boost innovation and R&D in the economy.
- An allocation of Rs. 50,000 crores, to be spent over a period of 5 years, has been made towards the National Research Foundation.
- Rs. 1,500 crores have been set aside to promote digitized payments.
Pillar #6 – Minimum Government, Maximum Governance
- The final pillar, Minimum Government, Maximum Governance, emphasized the importance of better governance with a provision of Rs. 3,768 crores for the forthcoming census, which is touted to be India’s first digital census.
The Fiscal Deficit targets
- For the financial year 2020–21, the fiscal deficit stood at 9.5% of the GDP, and for the forthcoming financial year 2021–22, the deficit is estimated at 6.8% of the GDP.
- The Finance Bill also increased the Contingency Fund of India six times to Rs. 30,000 crores from the current Rs. 500 crores.
Tax proposals and reforms introduced
Part B of the Union Budget proposes direct and indirect tax changes and reforms for individual and corporate tax-payers.
Here are the highlights of these reforms:
- Senior citizens, aged 75 years and above, who have income only from pension and interest have been exempted from filing income tax returns.
- NRIs can enjoy tax relief as double taxation has been discontinued.
- Agriculture Infrastructure and Development Cess (AIDC) has been levied on petrol and diesel prices at Rs. 2.5/litre and Rs. 4/litre respectively.
- Income tax deduction under Section 80EEA on affordable housing has been extended by another year. Now, home buyers availing of home loans up to 31st March 2022 can avail of tax deduction on loan interest up to Rs. 1.5 lakhs.
- Start-ups can also enjoy tax holiday by another year, till 31st March 2022.
- There would be no advance tax liability on dividend income. Tax liability would be computed after a dividend is declared.
The Union Budget 2021–22 is aimed at providing an impetus to growth to the economy grappling with the pandemic and slowdown.
Here’s a take on the Union Budget 2021-22 by our Bank’s Treasury Desk. Budget FY22 - HDFC Bank
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