Rs 5.25 lakh cr allocated for defence sector
GST collection at record Rs 1.4 lakh cr in Jan
400 new Vande Bharat trains; new products for farmers, MSMEs
NHs to be expanded by 25,000 kms, Taxpayers can update ITRs
New Delhi, Feb 1: Finance Minister Nirmala Sitharaman today unveiled a bigger Rs 39.45 lakh crore Budget, with higher spending on highways to affordable housing with a view to fire up the key engines of the economy to sustain a world-beating recovery from the pandemic.
While she primed up spending on infrastructure to create jobs and boost economic activity, Sitharaman did not tinker with income tax slabs or tax rates.
Her Budget for the fiscal year beginning April 2022 proposed a massive 35 per cent jump in capital expenditure to Rs 7.5 lakh crore, coupled with rationalisation of customs duty, an extension of time for setting up new manufacturing companies and plans for starting a digital currency and taxing crypto assets.
At a post-budget press conference, she parried questions on the middle class not being given relief in the form of tax cuts or raising of exemption, saying the Budget has not raised taxes last year or this year.
“We did not try to raise money through higher taxes as we did not want to burden people with taxes during a pandemic,” she said.
Just like last year, the Budget gave a big boost for infrastructure spending — from 5G spectrum auction, expanding national highways by 25,000 kms, inter-linking of rivers and manufacturing of 400 new generation Vande Bharat trains.
“The overall sharp rebound and recovery of the economy is reflective of our country’s strong resilience,” she said in her Budget speech in the Lok Sabha, vowing to lay the foundation for faster growth.
The budget prioritised economic expansion over fiscal consolidation.
“This Budget continues to provide the impetus for growth,” she asserted.
The budget raised duties on imported headphones, loudspeakers, smart meters used by power distribution companies and solar panels to bolster local manufacturing and create jobs. It also proposed to withdraw the anti-dumping tax on some steel products and extend an import duty exemption on scrap for another year as local consumers grapple with high prices for the alloy.
She also announced a new battery swapping policy for electric vehicles, allocated Rs 60,000 crore for piped water to 3.8 crore homes, provided Rs 19,500 crore worth of additional production-linked incentives for solar modules to boost local manufacturing and classified data storage as an infrastructure sector for providing cheaper and easier financing.
To boost infrastructure, she said contracts to lay optical fibre in rural areas will be awarded, Rs 48,000 crore has been set aside for affordable housing, national highways network will be expanded by 25,000 km, 4 multi-modal logistics parks will be set up, a string of ropeway projects are planned in hilly areas, a battery swapping policy will be announced, high priority has been accorded for Ken-Betwa river link project and defence R&D opened to private players.
Also, plan to use biomass pellets in thermal power plants in bid to rely less on coal was announced.
An auction of 5G telecom spectrum is planned in 2022, digital financial services are planned to be expanded and 1.5 lakhs post offices are to be connected to the core banking platform for financial inclusion and banking access to the non-banked population.
On the other hand, food, fertiliser and other subsidy outgo has been cut by 39 per cent.
Total Government spending will be 4.6 per cent more than the current year and additional support of Rs 1 lakh crore to States has been announced.
The Government continues on its path of supply-side economics and plans to boost investments, thereby increasing jobs and consumption instead of directly announcing any monetary relief to the lower end of the population.
The spending is being financed by a record borrowing which would include green bonds.
The fiscal deficit, which unexpectedly rose to 6.9 per cent of the GDP for the current fiscal year ending March 31, 2022, is projected to come down to 6.4 per cent next year and 4.5 per cent by 2025-26.
India’s economy is projected to grow by 9.2 per cent in the current fiscal, before slowing to 8-8.5 per cent in 2022-23 (April 2022 to March 2023). It had contracted by 6.6 per cent in the fiscal year ended March 31, 2021.
The budget’s “approach is driven by seven engines,” Sitharaman said, listing roads, railways, airports, ports, mass transport, waterways and logistics infrastructure as the key areas.
“All seven engines will pull forward the economy in unison”, complemented by energy transmission, IT communication, water and sewerage sector and social infrastructure, she said.
On the direct tax front, to further ease compliances for taxpayers, a new IT return system will be introduced and litigation will be reduced by restricting appeal rights of revenue authorities for consecutive years.
It marginally increased the time limit to commence production by March 31, 2024 for units opting for the beneficial corporate tax rate of 15 per cent.
To provide impetus to trust-based governance as a concept, an updated tax return system has been introduced wherein a taxpayer can file a tax return upon payment of specified taxes within 2 years from the end of the relevant assessment year.
To give a boost to the start-up community, she capped the surcharge on long-term capital gains at 15 per cent now.
From an indirect tax perspective, the concessional rate on capital goods imports under Project Import Scheme is proposed to be withdrawn to promote domestic industry and imports will be taxed at 7.5 per cent now.
The defence budget was increased to Rs 5.25 lakh crore for 2022-23 from last year’s allocation of Rs 4.78 lakh crore with a major push on procurement of weapons and military platforms from domestic players as well as to involve them in defence research and development.
Sitharaman said 68 per cent of the outlay for defence procurement will be set aside for buying from domestic industry and that 25 per cent of the allocation for Defence Research and Development (R&D) will be kept for collaboration with the private sector.
In another announcement, she said an independent nodal umbrella body will be set up for private players to meet their requirements for testing and new technologies and to get the certification.
The overall defence budget of 5,25,166 crore including Rs 1,19,696 crore for defence pensions is an increase of 9.8 per cent compared to last year’s total outlay. The defence budget excluding the pension component stands at Rs 4,05,470 crore.
In the defence budget, Sitharaman allocated Rs 1,52,369 crore for capital expenditure in 2022-23 that includes purchasing new weapons, aircraft, warships and other military hardware.
GST collections touched a record of Rs 1.40 lakh crore in January on rapid economic recovery, Sitharaman said.
The Minister said there has been a remarkable progress made in the Goods and Services Tax (GST) regime, but still a few challenges remain.
“Gross GST collection in January at record Rs 1,40,986 crores; this has been possible due to rapid economic recovery,” she said while presenting the Budget in the Lok Sabha.
January is the seventh straight month when the GST collection has crossed the Rs 1 lakh crore mark.
Sitharaman announced that 400 new Vande Bharat trains will be developed and manufactured over the next three years and new products will be introduced by the Railways for the benefit of small farmers and MSMEs.
The Railways has received an allocation of Rs 140367.13 crore in the 2022-23 Union Budget which is Rs 20,311 crore more than the revised figures of the previous fiscal.
Presenting the Union Budget for 2022-23, she said contracts for multi-modal parks at four locations will be awarded during the next fiscal.
“400 new-generation Vande Bharat trains with better energy efficiency and passenger riding experience will be developed and manufactured during the next three years,” she said.
These new trainsets are going to be made of light-weight aluminium, as opposed to steel, making each around 50 tonnes lighter in weight, consuming much less energy than their steel counterparts, she said.
Sitharaman on said national highways will be expanded by 25,000 kilometres (km) during 2022-23 and the national ropeway development programme will be taken up in the public-private partnership (PPP) mode.
She also said contracts for the implementation of multimodal logistics parks at four locations through the PPP mode will be awarded in 2022-23.
The Finance Minister said Rs 20,000 crore will be mobilised through innovative ways of financing to complement the public resources.
“PM Gati Shakti Master Plan for Expressways will be formulated in 2022-23 to facilitate the faster movement of people and goods.
“The national highways network will be expanded by 25,000 km in 2022-23,” she added.
He noted that the National Ropeways Development Programme will benefit North East, Uttarakhand, Himachal Pradesh and Kashmir.
Nirmala Sitharaman gave a one-time window to taxpayers to correct any discrepancy or omissions in their ITRs within two years of filing, subject to payment of taxes.
The Minister said this is an “affirmative step in the direction of voluntary tax compliance”.
Currently, if the IT department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication, and the new proposal would repose trust in the taxpayer.
“To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year,” Sitharaman said.
The Minister said that the I-T Department has established a robust framework of reporting of taxpayers’ transactions and some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment.
“Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return,” she said.
In a bid to tap the allied farm and food processing sectors to boost farmers’ income, the Government proposed higher budget allocation for these two sectors for the next fiscal, besides announcing finance support for startups, promotion of Kisan drones and PPP mode for delivery of high tech agri-services to farmers.
Sitharaman said inclusive development is one of the four priorities of the Government moving forward.
The Budget allocation for the Ministry of Agriculture and Farmers’ Welfare has been raised marginally by 4.5 per cent to Rs 1,32,513 crore for 2022-23 fiscal.
However, the Budget allocation for the Ministry of Fisheries, Animal Husbandry and Dairying has been increased by 44 per cent to Rs 6,407.31 crore and for Food Processing Industries by 2.25 times to Rs 2,941.99 crore for the next fiscal.
The Finance Minister said as part of the inclusive development, the government will implement a “rationalised and comprehensive scheme” to increase domestic oilseed production, thereby reducing the country’s dependence on the import of edible oils.
The Government will also bring in legislative and policy changes to promote agro-forestry and implement a comprehensive package, with states to adopt suitable varieties of fruits and vegetables that can be processed.
Further, the government will promote the use of ‘Kisan Drones’ for crop assessment, digitisation of land records and spraying of insecticides, she added.
Reflecting the Modi Government’s priority to internal security, the Union Budget allocated Rs 1.85 lakh crore to the Ministry of Home Affairs, with the majority of spending on central police organisations like the CRPF, BSF and for improving the infrastructure along the international borders.
The 2022-23 budget allocation to the MHA, helmed by Union Home Minister Amit Shah, is Rs 1,85,776.55 crore, nearly Rs 20,000 crore or about 11.5 percent more than the current fiscal when it was allocated Rs 1,66,546.94 crore.
Modernisation of police forces, intelligence gathering apparatus, women safety, cyber security and the decennial census also got priority in the budget.
The budget allocated the bulk of the MHA funds to the Police – Rs 1,17,687.99 crore in comparison to Rs 1,09,266.30 crore given in 2021-22.
Among the Central police organisations, the Central Reserve Police Force (CRPF), mostly responsible for internal security duties and fighting militancy in Jammu and Kashmir, has been allocated Rs 29,324.92 in comparison to Rs 27, 307.42 crore given in 2021-22.
The Border Security Force (BSF), which guards India’s border with Pakistan and Bangladesh, besides often handling internal security assignments, has been given Rs 22,718.45 crore in comparison to Rs 21,491.14 crore given in the current fiscal.
The Central Industrial Security Force (CISF), which protects vital installations like nuclear projects, airports and metro networks, has been given Rs 12201.90 crore in comparison to Rs 11372.54 crore allocated in 2021-22.
The Shashastra Seema Bal (SSB), which guards India’s borders with Nepal and Bhutan, has been allocated Rs 7653.73 crore in comparison to Rs 6940.42 crore given in 2021-22.
The Indo-Tibetan Border Police (ITBP), which guards the Sino-Indian border, got Rs 7461.28 crore in comparison to Rs 6965.02 crore given in the current fiscal.
The Assam Rifles, which is deployed along the India-Myanmar border and for anti-insurgency duties in the Northeast, has been allocated Rs 6658.41 crore in comparison to Rs 6046.25 crore given in the current fiscal.
The National Security Guard (NSG), the elite commando force to tackle any emergency security situation, has been allocated Rs 1293.37 crore in comparison to Rs 1151.16 crore given in 2021-22.
The Intelligence Bureau, a key domestic internal agency, has been given Rs 3168.36 crore in comparison to Rs 2793.02 given in the current fiscal.
The Special Protection Group (SPG), which protects the Prime Minister, has been allocated Rs 385.95 crore in comparison to Rs 386.50 crore given in 2021-22.
The Delhi Police, which is responsible for the security of the national capital, has been allocated Rs 10096.29 crore in comparison to Rs 11136.22 crore given in 2021-22.
While Rs 200 crore has been allocated for special schemes related to women security, Rs 2744.52 crore has been given for border infrastructure and management and Rs 2754.16 crore for modernisation of police forces.
A sum of Rs 3659.84 crore has been allocated for improving police infrastructure.
The budget also allocated Rs 3676 crore for the census-related work, which has been stalled for nearly two years due to the coronavirus pandemic, and Rs 565.72 crore has been allocated for the border area development programme. (PTI)
RBI to introduce digital rupee
The Reserve Bank of India (RBI) will introduce digital currency in the next financial year beginning April 2022 to boost the digital economy and efficient currency management, Finance Minister Nirmala Sitharaman proposed in her Budget 2022-23 speech today.
The introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also help in the currency management system, the Minister said.
“Digital currency will also lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23,” Sitharaman said.
She also said Rs 1 lakh crore financial assistance to States will be provided in 2022-23 to catalyse investments.
The Finance Minister further said that in 2022-23, states will be allowed a fiscal deficit of up to 4 pc of GSDP (Gross State Domestic Product).
The Minister also proposed to set up an expert committee to examine and suggest appropriate measures to scale up venture capital and private equity investment.
Venture capital and private equity invested more than Rs 5.5 lakh crore last year, facilitating one of the largest Start-up and growth ecosystems. Scaling up this investment requires a holistic examination of regulatory and other frictions, she said.
On blended finance, she said that the Government-backed Funds NIIF and SIDBI Fund of Funds had provided scale capital, creating a multiplier effect.
For encouraging important sunrise sectors, such as climate action, deep-tech, digital economy, pharma and agri-tech, the Government would promote thematic funds for blended finance with the Government share being limited to 20 per cent and the funds being managed by private fund managers, the Minister said.
“Creation of a blockchain-based central bank digital currency while bringing virtual digital assets under the tax net at the highest rate of 30 per cent will help reduce speculative play, especially in the cryptocurrency space,” Shravan Shetty, MD, Primus Partners- Digital Currency, said.
The Central currency will help bring the benefit of a digital currency to the economy in a structured framework, Shetty added.
Harry Parikh, Associate Partner – M&A Tax and Regulatory Services, BDO India, said a nonchalant introduction of taxation on digital currency coupled with a withholding tax on every transaction could give rise to a lot of compliance issues for crypto businesses. (PTI)
HIGHLIGHTS
FISCAL POSITION
[ India’s growth estimated at 9.2 pc, to be highest among large economies — Fiscal deficit in 2022-23 estimated at 6.4 pc of GDP
[ Total expenditure in 2022-23 pegged at Rs 39.45 lakh cr
[ Total receipts other than borrowings estimated at Rs 22.84 lakh cr in FY23
[ ‘Effective Capital Expenditure’ of Central Government estimated at Rs 10.68 lakh cr in 2022-23, which is about 4.1pc of GDP
[ Fiscal deficit in current year at 6.9 pc of GDP (against 6.8pc in Budget Estimates)
[ 60 lakh new jobs to be created under productivity linked incentive scheme in 14 sectors
TAX PROPOSALS
[ No change in personal income tax rates
[ Provision to file an updated return on payment of additional tax; can be filed within two years from the end of the relevant assessment year.
[ Updated return provision to enable assessee to declare income missed out earlier
[ Tax deduction limit increased from 10% to 14% on employer’s contribution to the NPS account of State Government employees
[ Incentives for Start-ups: Period of incorporation extended by 1 year, up to March 31, 2023 for eligible start-ups to avail tax benefit
[ Any income from transfer of any virtual digital asset to be taxed at the rate of 30 pc; gift of virtual digital asset also to be taxed in the hands of recipient
[ Health and Education Cess: any surcharge or cess on income, profits not allowable as business expenditure
[ No set off, of any loss to be allowed against undisclosed income detected during search, survey operations
[ Alternate Minimum Tax paid by cooperatives brought down from 18.5 per cent to 15 per cent
[ Payment of annuity and lump sum amount from insurance scheme to be allowed to differently-abled dependent during the lifetime of parents/guardians, that is on parents/ guardian attaining the age of 60 years
[ Surcharge on long term capital gains arising on transfer of any type of assets capped at 15 pc
[ Gradual phasing out of concessional rates in capital goods and project imports; applying a tariff of 7.5 pc, conducive to the growth of domestic sector
[ Over 350 exemption entries proposed to be gradually phased out, like exemption on certain agri produce, chemicals, fabrics, medical devices, and drugs and medicines for which sufficient domestic capacity exists
[ Customs rate, tariff structure simplified particularly for sectors like chemicals, textiles and metals
[ Customs duty rates to be calibrated for graded rate structure; to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters
[ Duty concessions to parts of transformer of mobile phone chargers, camera lens of mobile camera module and some other items to promote domestic manufacturing of high growth electronic items
[ Customs duty on cut, polished diamonds, gemstones cut to 5%; no duty on simply sawn diamond — Customs duty of at least Rs 400 per kg to be paid on imitation jewellery import
[ Customs duty on umbrellas raised to 20%; exemption to parts of umbrellas withdrawn
[ Customs duty exemption given to steel scrap last year extended for another year to offer relief to MSME secondary steel producers
[ Unblended fuel to attract an additional differential excise duty of Rs 2/ litre from Oct 1, 2022, to encourage blending of fuel
ALLOCATION AND REFORMS
[ Rs 2.37 lakh cr direct payment to 1.63 crore farmers for procurement of wheat, paddy
[ Rs 2 lakh cr additional credit for Micro and Small Enterprises to be facilitated under the Credit Guarantee Trust for Micro and Small Enterprises
[ For MSMEs, guarantee cover under ECLGS to be expanded by Rs 50,000 Crore to total cover of Rs 5 lakh cr
[ Raising and Accelerating MSME performance (RAMP) programme with outlay of Rs 6,000 crore to be rolled out for MSMEs
[ Rs 60,000 crore allocated to cover 3.8 crore households in 2022-23 under `Har Ghar, Nal se Jal’
[ Rs 48,000 crore allocated for completion of 80 lakh houses in 2022-23 under PM Awas Yojana
[ Additional allocation of Rs 19,500 crore for Production Linked Incentive for manufacture of high efficiency solar modules to meet the goal of 280 GW of installed solar power by 2030
[ Initial allocation of Rs 1,500 crore made to enable livelihood activities for youth and women under the Prime Minister’s Development Initiative for North-East Region (PM-DevINE)
[ SEZ Act to be replaced with new legislation to enable States to become partners in ‘Development of Enterprise and Service Hubs’
[ Defence: 68% of capital procurement budget earmarked for domestic industry in 2022-23, up from 58% in 2021-22
[ Defence R&D to be opened up for industry, Start-ups and academia with 25% of defence R&D budget earmarked
[ Scheduled Commercial Banks to set up 75 Digital Banking Units (DBUs) in 75 districts
[ 100 per cent of 1.5 lakh post offices to come on core banking system
[ e-Passports with embedded chip, futuristic technology to be rolled out
[ Battery swapping policy to be brought out for setting up charging stations at scale in urban areas for promotion of electric mobility
[ Centre for Processing Accelerated Corporate Exit (C-PACE) to be established for speedy winding-up of companies
[ Scheme for design-led manufacturing to be launched to build a strong ecosystem for 5G as part of the PLI scheme
[ Data Centres and Energy Storage Systems to be given infrastructure status
[ RBI to introduce digital rupee in FY23 to boost digital economy, better currency management. (PTI)
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