Updated: Nov 29, 2021
With coronavirus knocking the bottom out of the economy, the budget has created an atmosphere for recovery. The budget for 2021 rests on six pillars in an environment never before. It ticked all the right boxes that would strengthen the path of recovery.
Health and wellbeing
Physical, Financial & Capital Infrastructure
Inclusive development for aspirational India
Reinvigorating human capital
Innovation and R&D
Minimum government & maximum governance.
It is a budget of growth, amped up healthcare, infrastructure and enthused for clean-up of stressed assets & focus on the stable tax regime. These are effective booster shots.
While the budget has significantly increased allocation to health, the most important highlights are allocation for vaccines Rs.35,000 crore and the new scheme ‘PM Atmanirbhar Swasth Bharat yojana’ to improve the health system.
Reinvigorating human capital is one of the six pillars of Budget 2021. In this FM announced significant measures on education, skilling, and recognizing gig workers. Proposal of launching a portal for gig workers, building & construction workers, among others are formulated health, housing, skill, and many other schemes to support migrant workers. Including women to work in all categories
by providing security for night shifts and making minimum wage applicable for all categories of workers covered under ESIC. All these measures are of significant help but this has merely reiterated the legislative measure like night shift in all sectors and minimum wage but no financial allocation for it.
The budget has restricted avenues for tax-free returns for middle-class taxpayers – No change in tax rates or slabs means that income taxes pay-out for most people are unaffected. The steady budget helped in market steadiness instead of imposing new taxes. But if someone has opted for VPF or people with a high salary it is a bit bad. Since they have to pay taxes on the interest if the PF contribution is higher than 2.5 lakh annually. Anyone, with a monthly PF contribution of up to Rs.20,833 (annually 2.5 Lakh) therefore a basic pay of up to Rs.1.73 lakh per month is safe. So far return on investment of any amount in the voluntary provident fund along with EPF and ULIP was tax-free on maturity. Now from 1st April’21, it is taxable.
Also, perhaps taking a cue from the case of Kingfisher Airlines where PF dues were not deposited in time- the finance bill has introduced a harsh clarification. Some employers delays in depositing the employee contribution and benefits from keeping the money of the employee for a few days/month. The budget emphasis that any delay in depositing the PF amount by the due date, i.e. 15th of the next month even if the employer deposits the amount before filing income tax returns, will not benefit them. The employer’s taxable income will stand enhanced to the extent of the late deposit. This step is beneficial as firms cannot drag their feet on their share of PF.
The start-ups continue to enjoy tax benefits. The tax holiday on 100% of profits (for a block of 3 years in the first 7 years of incorporation) has been extended by one year to cover start-ups incorporated till March 31, 2022. There are not many surprises for the start-ups.
Overall, the budget balances both growth and development aspirations, especially in a difficult year.
Author – Moumita Ray
Moumita Ray is a human resource leader with rich experience in designing & developing strategies, processes, enhancing capabilities, and building a culture to help businesses achieve their excellence.