Union Budget Highlights 2021-22 – Key Takeaways
Finance Minister, Nirmala Sitaraman has presented Union Budget 2021-22. Salaried people are disappointed with no change in tax rates nor any benefits provided to them. Even some of the reliefs / benefits provided earlier are taken away. In this article, let me provide you a quick summary of Union Budget Highlights 2021-22 and Key take aways.
Union Budget Highlights 2021-22 – Quick summary
This year union budget 2021 was focused on 7 pillars.
- Health and wellbeing
- Financial Capital and Infrastructure
- Inclusive development of Aspirational India
- Reinvigorating Human Capital, Innovation and R&D
- Minimum Government Maximum Governance
Union Budget Highlights 2021-22 – Economic Reforms
Since health care is the need of the hour, government to spend Rs 64,180 Crores on the healthcare sector over next 6 years in the name of the PM Aatmanirbhar Swasth Yojana scheme. Govt sets aside Rs 35,000 Crores for Covid-19 vaccine in FY21-22.
Also Read: Best Healthcare Mutual Funds in India
Increase in FDI limits in insurance sector from 49% to 74%.
Govt to divest two PSUs and one insurance company.
Union Budget Highlights 2021-22 – Personal finance and Direct tax
Income Tax Return (ITR) forms would now be pre-filled with capital gains and bank interest details. These are available with banks / financial institutions, demat account brokers, mutual fund houses, etc. based on the PAN number, hence we need to see how accurately this can be pre-filled automatically.
Dividend payments by REITs and InvITs are not subject to TDS going forward.
Govt of India would notify rules for double taxation for NRIs on foreign retirement funds.
Reopening the income tax returns is reduced from 6 years to 3 years.
Senior Citizens who are 75 years and above are exempted for filing income tax returns if they have only pension income and interest income. However, this is only for exemption of ITR and not income tax. Banks would deduct TDS as per applicable tax guidelines.
One can file belated / revised income tax returns till 31-Dec of the assessment year instead of 31-Mar of the assessment year (old rule). Reduction of 3 months time.
If banks fail / goes bankrupt, there would be fast release of Rs 5 Lakh deposit insurance per bank and per account. Currently it takes months or years to get such insurance amount. Now such deposit insurance amount would be made available immediately.
Also Read: Which banks are covered under Deposit Insurance?
Interest on provident fund contributions above Rs 2.5 Lakhs a year would be taxed at normal rates. This is applicable only for the employee share of the provident fund. This would hit HNI or high income earner + whoever opted for the Voluntary provident fund. This would affect employees who are earning a basic of Rs 1.73 Lakhs per month and such PF contribution is Rs 20,800+ per month (translates to Rs 2.5 Lakhs contribution per annum).
Income tax exemption u/s 10 (10d) for premiums paid for more than Rs 2.5 Lakhs per year under ULIP is removed now.
The affordable housing additional deduction u/s 80EEA was extended now till 31st March 2022. The tax exemption has been granted for affordable rental projects.
Advance tax liability on dividend income shall arise only after declaration of payment of dividend.
Union Budget Highlights 2021 – Indirect Tax / Other highlights
Govt to spend Rs 1.4 lakh crore for Urban Clean India Mission
Govt proposes voluntary vehicle scrappage policy.
Proposal to outlay of Rs 1.1 lakh crore for Ministry of Road Transport and Highways
Govt of India is planning to spend Rs 1.1 lakh crore for Railways in FY22.
Long awaited LIC IPO would be targeted for closure in FY22.
Premium and luxury car prices would go up as there is an increase in excise duty.
Tax holiday for startups has been extended by 1 more year up to 31st March 2022.
If the employee’s PF contribution was deducted, but not deposited by the employer on time, it will not be allowed as a deduction for the employer.
Agriculture Infrastructure And Development Cess (AIDC) has been newly imposed on petrol and diesel at Rs 2.5 and Rs 4 per litre respectively.
Current exemption on import of leather will be withdrawn as they are domestically produced.
Announcement of Rs 95,000 crore to be spent on roads in West Bengal. This announcement for the state of Bengal could be due to the fact that there are polls in a few months.
100% electrification of Railways to be completed by 2023
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Nice compilation. Surprised to see VPF interest to be taxed for more than 2.5 Lac. None of the channels broadcast this news. Not only HNI, middle class people who save for their future on this instrument will get affected
you are right
Nicely summed up
Which sectors and stocks to focus on investment now on for long term investment.
Hello Venu, As indicated in the first paragraph of the article, Healthcare sector is given priority. Other than this, there are several other areas where government spending is there. Would analyze more and come back with investment options through specific article in coming days.
what are view on crypto ban biil ??
As per knowledge, there was no news on crypto ban bill which was supposed to be discussed during budget session yesterday. Lets wait for few more days.
I am contributing Rs1 lac per month in the Defence Officers provident fund in the current FY. Should I reduce it to Rs 20,800/- per month from 01 Apr 2021 onwards or let it remain the same?
Ashwani, Any amount above this, interest would be taxed. If you are okay to pay tax on interest, you can continue.
What is the tax liability in the subsequent years?
– on the amount that is over and above 2.5L in the first year
– on the interest amount (for which one has already paid the tax)
Could you please throw some more light on these aspects as well?
Hello AKS, There is no tax liability in subsequent years as it is clear that this rule is only for contributions made during financial year. e.g. if the excess is Rs 50K in 2021, you need to pay tax on interest earned on this excess 50K. Next year, this 50K is not an additional contribution (unless you are doing fresh contributions which is in excess of Rs 2.5 Lakhs).