Rs 4.78 lakh cr for defence, 19 pc hike in capital outlay
* Govt earmarks Rs 35,000 cr for COVID-19 vaccine
NEW DELHI, Feb 1:
Finance Minister Nirmala Sitharaman today proposed a sharp increase in expenditure on infrastructure, doubling of healthcare spending and raising of the cap on foreign investment in insurance in her Budget for the next fiscal in a bid to pull the economy out of the trough.
The Budget for the fiscal year beginning April made no changes in personal or corporate tax rates but raised customs duties on certain auto parts, mobile phone components and solar panels in order to provide impetus to domestic manufacturing.
It also imposed an Agriculture Infrastructure and Develop-ment Cess (AIDC) on the import of certain items (like apples, peas, lentils, alcohol, chemicals, silver and cotton) to finance agricultural infrastructure and other development expenditure. But its impact on prices has been offset by an equivalent or more reduction in the import duty.
Interest on employee contributions to PF over Rs 2.5 lakhs per annum effective April 1, 2021, has now been made taxable. Click here to watch video
In the previous 2020 Budget, the finance minister had capped the tax exemption on employers contribution to PF, NPS and superannuation funds at an aggregate of Rs 7.5 lakh per annum.
In a relief to senior citizens, those above 75 years of age with only pension and interest income would no longer have to file income tax returns, subject to certain conditions.
Delivering her third straight Budget, Sitharaman allocated Rs 5.54 lakh crore for capital creation in the infrastructure sector. This included Rs 1.18 lakh crore for the roads and highways sector and Rs 1.08 lakh crore for railways.
The allocation was 37 per cent more than last year.
The increased spending is aimed at creating demand in the economy and support job creation.
With just 1 per cent of GDP being spent on health, she proposed raising of the spending to Rs 2.2 lakh crore next fiscal to help improve health systems as well as fund vaccination drive against coronavirus.
“We decided to spend big on infrastructure in this Budget. We attended to the need of the health sector,” she told a press conference after presenting the Budget for 2021-22 in Lok Sabha. “We decided to give greater impetus to the economy in this Budget.”
Additional resources required are targeted to be raised through divestment and monetisation.
While Rs 1.75 lakh crore is being targeted from the sale of non-strategic public sector companies, the government will get Rs 30,000 crore from the new agri cess.
With Government spending more to support economy during the pandemic that hit revenue collections, the fiscal deficit — the difference between revenue and expenditure — for the current year was put at 9.5 per cent of the gross domestic product (GDP) as against a target of 3.5 per cent. For the next fiscal, the fiscal deficit was projected at 6.8 per cent.
“We have spent, we have spent and we have spent. That’s why fiscal deficit has reached this number,” she said.
She also signalled that the fiscal policy support of the economy will continue for at least three years, with the deficit being brought under 4.5 per cent by FY2025-26.
Officials in her ministry at the press conference explained that the new limit for interest-free PF would hit less than 1 per cent of the total EPFO base.
For the agriculture sector, she maintained the reform momentum such as the extension of farm credit provision to farmers, commodity expansion under ‘Operation Green’ and extension of Agriculture Infrastructure Fund (AIF) to APMCs.
In order to incentivise the purchase of affordable house, the finance minister proposed to extend the period for claiming an additional deduction for the interest of Rs 1.5 lakh paid for home loans by one year to March 31, 2022.
To remove hardship faced by NRIs in respect of their income accrued on foreign retirement benefits account due to mismatch in taxation, new rules for alignment will be notified.
Foreign direct investment (FDI) limit in insurance was proposed to be raised to 74 per cent from the current 49 per cent.
Also, a tax deducted at source (TDS) of 0.1 per cent will be levied on the purchase of goods exceeding Rs 50 lakh in a year. The responsibility of deduction shall lie only on persons whose turnover exceeds Rs 10 crore.
Reduction in customs duties on gold and silver should bring some relief to the consumers while the hike in import duty on certain iron and steel products may adversely affect the real estate and infrastructure sector.
An agri cess of Rs 2.5 per litre on petrol and Rs 4 per litre on diesel was also slapped but this was offset by a reduction of an equivalent amount in the excise duty — making it price neutral for consumers.
Tax filing simplification for investors through pre-filled capital gains and interest income and a reduction in the limit for tax assessment reopening from six to three years will improve taxpayer confidence.
The policy on rationalisation of customs rates and procedures which started a few years back has been further moved ahead this year with a plan to review over 400 customs exemptions and a policy of having future exemptions with a validity period of two years.
The government capital expenditure as a proportion of GDP is set to pick up from 1.7 per cent in FY20 to 2.3 per cent in FY21 and further to 2.5 per cent in FY22, which will be a 17-year high figure and will enhance medium-term growth prospects.
To address concerns around asset quality, credit loss and liquidity stress, this Budget proposed to infuse additional capital of Rs 20,000 crore into PSU banks for providing continued credit access to wholesale and retail borrowers.
On the new cess, Finance Secretary Ajay Bhushan Pandey said, “We have imposed agri cess on about 14-15 items. The total amount that we estimate (to get) is Rs 30,000 crore.”
Customs duty on cotton, silk, maize bran, certain gems and jewellery, specified auto parts, screws and nuts was hiked.
To promote value addition in the electronics sector, the same was raised for printed circuit board assembly, wires and cables, solar inverters and solar lamps.
The import duty on naphtha, iron and steel melting scrap, aircraft components, gold and silver was reduced.
The Government has increased the capital outlay for the armed forces by nearly 19 per cent while allocating a total of Rs 4.78 lakh crore for defence budget for 2021-22 as against Rs 4.71 lakh crore last year.
Rs 1.35 lakh crore has been set aside for capital expenditure that includes purchasing new weapons, aircraft, warships and other military hardware, according to the Union Budget presented in the Lok Sabha by Finance Minister Nirmala Sitharaman.
The capital outlay in the defence budget 2020-21 was Rs 1.13 lakh crore.
In a tweet, Defence Minister Rajnath Singh thanked Prime Minister Narendra Modi and Sitharaman for increasing the defence budget to Rs 4.78 lakh crore and said the nearly 19 per cent hike in the capital expenditure is the highest-ever increase in the last 15 years.
The Defence Minister also expressed happiness over Sitharaman’s budget proposal to open 100 new Sainik schools.
The total outlay of Rs 4.78 lakh crore included an allocation of Rs 1.15 lakh crore for payment of pensions. Significantly, the allocation for payment of pension has come down as it was Rs 1.33 lakh crore in the previous budget.
Excluding the pension outgo, the total revenue expenditure, which includes expenses on payment of salaries and maintenance of establishments, has been pegged at Rs 2.12 lakh crore.
Military experts expressed satisfaction on the overall allocation considering the adverse impact of the coronavirus-triggered pandemic on the economy, though, they said, India will have to gradually increase defence spending to deal with increasing external threats.
“I am satisfied with the total allocation to the armed forces considering the state of the economy in view of the impact of the coronavirus pandemic,” said Dr Laxman Behera of the Manohar Parrikar Institute for Defence Studies and Analyses.
He said the increase of around Rs 22,000 crore in capital outlay is a welcome move which will help the three services in carrying on with their modernisation drive.
“I specially thank PM and FM for increasing the defence budget to Rs 4.78 lakh cr for FY 21-22 which includes capital expenditure worth Rs 1.35 lakh crore. It is nearly 19 per cent increase in defence capital expenditure. This is the highest ever increase in capital outlay for defence in 15 yrs,” Defence Minister Singh tweeted.
The Government also proposed a budget outlay of Rs 2,23,846 crore for health and wellbeing in 2021-2022, an increase of 137 per cent from the previous year, with Rs 35,000 crore earmarked for COVID-19 vaccine in the upcoming fiscal.
Sitharaman positioned health and wellbeing as one of the six crucial pillars of ‘Atmanirbhar Bharat’ (self-reliant India).
“Health and wellbeing have formed the topmost priority of the Union government during the ongoing COVID-19 health crisis. It is the foremost of the six crucial pillars that form the foundation of the Union Budget,” she said.
“I have provided Rs 35,000 crore for COVID-19 vaccine in Budget Estimates 2021-22. I am committed to providing further funds, if required,” she said.
Lauding the Budget, Union Health Minister Harsh Vardhan said Rs 35,000 crore allocated for COVID-19 vaccines and commitment to providing further support as needed will help end this pandemic and expedite economic recovery as well.
Underscoring the importance of health and wellbeing for the growth and development of the country, the allocation has been increased to Rs 2,23,846 crore in budget estimate 2021-22 as against this year’s budget estimate of Rs 94,452 crore.
In this budget, Rs 71,268.77 crore has been allocated to the Ministry of Health and Family Welfare. In the last budget, Rs 65,011.8 crore was initially allocated for the financial year 2020-2021, but in revised estimates it was increased to Rs 78,866 crore because of COVID-19.
The Finance Minister also announced that a new centrally sponsored scheme, Prime Minister Aatmanirbhar Swasth Bharat Yojana, will be launched with an outlay of about 64,180 crore over six years.
This will develop capacities of primary, secondary, and tertiary care health systems, strengthen existing national institutions, and create new institutions, to cater to detection and cure of new and emerging diseases.This will be in addition to the National Health Mission.
The main interventions under the scheme include support for rural and urban health and wellness centres, setting up integrated public health labs in all districts and block public health units in 11 states, establishing critical care hospital blocks in 602 districts and 12 central institutions, strengthening of the National Centre for Disease Control, its five regional branches and 20 metropolitan health surveillance units.
It also includes expansion of integrated health information portal to all states/UTs to connect all public health labs, operationalisation of 17 new public health units and strengthening of existing public health units at points of entry setting up of 15 health emergency operation centres and two mobile hospitals, a national institution for health, a regional research platform for WHO South East Asia Region, nine Bio-Safety Level III laboratories and four regional National Institutes for Virology.
An allocation of Rs 2,663.00 crore has also been made to the Department of Health Research in the 2021-22 budget.
The Ministry of AYUSH has been allocated Rs 2970.30 for the next fiscal as against Rs 2,122.08 crore proposed for 2020-2021 fiscal.
The pneumococcal vaccine, a made in India product, is limited to only 5 states at present. It will now be rolled out across the country. “It will avert more than 50,000 child deaths annually,” Sitharaman said.
She stressed that investment in health infrastructure in budget 2021-22 has increased substantially.
“Progressively, as institutions absorb more, we shall commit more,” she said. (PTI)
Highlights
* Spending on healthcare hiked by 137 pc to over Rs 2.23 lakh crore
* Rs 35,000 cr outlay for COVID vaccine in fiscal beginning April 1
* Today India has 2 vaccines available, 2 more vaccines are expected soon
* Sharp increase in capital expenditure for next fiscal to Rs 5.54 lakh cr, up from Rs 4.39 lakh cr of last fiscal
* Fiscal deficit for current fiscal at 9.5 pc, against 3.5 pc budgeted
* Fiscal deficit for next fiscal pegged at 6.8 pc, Government to borrow Rs 12 lakh crore
* Committed to bring down fiscal deficit below 4.5 pc of GDP by 2025-26
* ITR filing not mandatory for senior citizens above 75 years, banks to deduct TDS
* Time bar for reopening I-T assessment cases halved to 3 years, for serious frauds it is 10 years
* Income tax return filers increased to 6.48 cr in 2020 from 3.31 cr in 2014.
* Agri infra cess of 2.5 pc on gold, silver and dore bars; 35 pc on apples
* Agri infra cess of 30 pc on Kabuli chana, 10 pc on peas, 50 pc on Bengal gram/chickpeas, 20 pc on lentil (mosur); 5 pc on cotton
* Rs 2.5 per litre agri infra cess on petrol, Rs 4 on diesel
* New Agri Infra Development Cess to be applicable from February 2
* Tax deptt to notify rules to remove hardships of double taxation faced by NRIs
* Tax holiday for startups, capital gains exemption extended by 1 yr
* Tax exemption for aircraft leasing cos; tax exemption for notified affordable housing for migrant workers.
* Rs 1.5 lakh tax deduction on payment of interest for affordable housing extended by 1 yr
* Exemption from tax audit limit doubled to Rs 10 cr turnover for companies doing most of their business through digital modes
* Proposes review of over 400 customs duty exemptions; to begin extensive consultation from October 2021
* Customs duty on certain auto parts, solar equipment raised
Allocation and reforms:
* FDI in insurance increased to 74 pc from 49 pc
* Disinvestment target pegged at Rs 1.75 lakh crore
* BPCL, IDBI Bank, two more PSU banks, one insurance company to be privatised among others
* PSU Bank recapitalisation pegged at Rs 20,000 crore next fiscal
* Aatmanirbhar health programme with an outlay of Rs 64,180 cr to be introduced
* Budget proposals rest on 6 pillars– health and well-being, physical and financial capital and infra, inclusive development for aspirational India, human capital, innovation and R&D, Minimum Governance and Maximum Governance
* Govt to introduce a bill to set up development financial institution with an outlay of Rs 20,000 cr
* Voluntary vehicle scrapping policy to phase out old vehicles; fitness tests after 20 yrs for personal vehicles
* National monetisation pipeline for potential brownfield infrastructure assets
* Rs 3,726 cr for forthcoming Census which will be the first digital census. (PTI)
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