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Analysis of Union Budget'21

Budget Blinks For Individuals

1. No ITR for senior citizens in certain cases- Conditions for applicability:

•Age >75 years;

Must have Pension Income;

May have Interest Income (from any source) but should be received/receivable in the same account as the pension income;

•Bank computes and deducts TDS;

2. Pre-filled ITR- ITR can now be pre-filled with all of the following information – salary income, tax payments, TDS, details of capital gains from listed securities, dividend income, and interest from banks and post office.

3. Dispute Resolution Committee (DRC)- An individual with an income upto INR 50 Lakhs and disputed income upto INR 10 Lakhs can now approach the DRC for resolution of any dispute.

4. TDS on high value goods- An individual must now deduct TDS @0.1% on purchase of goods from any seller of an aggregate value of more than INR 50 Lakhs.

5. Advance Tax on Dividend Income- Advance Tax liability on dividend income shall arise only after declaration/payment of dividend.

6. Tax on Capital Gains on ULIP- Capital Gains on Unit Linked Insurance Policy (ULIP), of annual premium >INR 2.5 Lakh, which was exempt, will now be taxable (applicable on policies issued after.

7. Hike in Prices- Prices of AC, Fridge, Mobile Phones & Chargers are likely going to increase in lieu of hike in customs.

8. Interest on PF to be Taxed- Interest on employee’s contribution to EPF of over INR 2.5 Lakh in year will now be taxable.

9. No Hike in Petrol & Diesel Prices- Even though a new cess has been levied on petrol & diesel, excise duty has been reduced equally, such that net pocket pinch to consumer is Nil for the time being.

10. Removal of Double Taxation of NRI’s Retirement Fund- Income of NRIs (who have come back to India) from their retirement fund in a foreign country will be taxed in India only on receipt of such income and not on accrual basis. (provided the foreign country also taxes such income on receipt basis).

Budget Blinks for Business

1. Ease in compliances-

•Tax Audit turnover limit increased to INR 10 Crores, provided less than 5% of total expenses are incurred in cash and less than 5% of total receipts are received in cash.

•GST Reconciliation Statement can now be self-certified. Certification by CA/CMA is done away with.

•Definition of Small Companies widened. Likely to benefit approx. 2 lakh companies through ease in MCA compliances like rotation of auditors, lesser penaties, reduced number of board meetings required, CARO requirement etc.

2. Faceless proceedings in ITAT- Now all communications between the Income Tax Appellate Tribunal and the Assessee will be through electronic modes and any personal hearing will be done through video-conferencing.

3. Supply to SEZ- Supply made to a SEZ Unit/Developer can be Zero-Rated only if it is for authorised operations.

4. Reduction in time limit for re-opening of escaped income- Assessment u/s 147 of Income having escaped assessment can now be opened only up to 3 years from the end of the relevant assessment year (earlier: 6 years).

5. Return of GST Refund if export proceeds are not received- GST refund shall be returned along with interest in case export sale proceeds are not received within the time limited stipulated under FEMA.

6. Due date of Belated/Revised ITR- Due date to file belated/revised ITR has been brought back from 31st Mar of the assessment year to 31st Dec of the assessment year.

7. GST ITC only if reflected in 2A- Input Tax Credit on Purchases can only be claimed if the invoice is appearing in the GSTR 2A of the taxpayer.

8. Interest on late payment only to the extent of cash liability- Interest on late payment of tax is to be calculated on tax paid out of cash ledger only and no interest will be levied on the payment made by utilizing ITC.

Income Tax Rate For 2021-22

For Individuals:

For Businesses:

Start-Up Specifics
  • Extension of Capital Gains Exemption- To incentivise funding of the start-ups, exemption from capital gains arising from transfer of a residential property which is subsequently invested into a startup is extended by 1 more year i.e. upto 31st March’22.

  • Formation of an Alternative Investment Fund (AIF)- Earlier it was a common practice to adopt the structure of an AIF for the purpose of investing into several startups, without seeking approval of SEBI or adhering to SEBI’s extant regulations on functioning of AIFs. However, now a person can neither sponsor nor carry on the activity of an AIF without obtaining a certificate of registration from SEBI.

  • Extension of Tax Holiday to Startups- To incentivise setting-up of more start-ups in the country, the eligibility period to claim tax holiday for the start-ups is extended by 1 more year to 31st March’22.

  • Formation of One-person Company- To incentivise new businesses to choose company form of legal entity, several amendments are made in relation to One- person Companies (OPCs) viz.:

1. Limit on paid up share capital of INR 50 Lakhs and on revenue of ₹2 Crores are removed;

2. Ease in conversion to any other type of company;

3. Reduction in residency limit for an Indian citizen to set up an OPC from 182 days to 120 days in the immediately preceding financial year;

Impact of Custom Rate Changes

What Gets Cheaper ?

  • Textile - Nylon chips, fiber and yarn (approx. 2.5%);

  • Petrochemical - Naphtha (approx. 1.5%);

  • Metals - Copper Scrap, Iron and Steel melting scrap, Stainless Steel Scrap (approx. 2.5%);

  • Precious Metals - Metal coins, Platinum, Gold and Silver (approx. 2.5%);

What Gets Expensive ?

  • Mobile Phones (approx. 2.5%);

  • Power Banks and other rechargeable batteries using lithium-ion-cells (approx. 2.5%);

  • Refrigerators (approx. 2.5%);

  • Air conditioners (approx. 2.5%);

  • Imported Toys;

Our Take:

The GOI has introduced ‘Agriculture Infrastructure and Development Cess’ on various goods that attract customs and excise duty.In many goods, like petrol and diesel, the duty amount has also been reduced such that net pocket pinch to consumers is Nil.

So why is the cess introduced? Hint: while duties are shared with State Governments, cess is solely the Centre’s revenue.

The entire document is provided below:

CKA Analysis of Union Budget'21
Download PDF • 1.97MB

What gets Cheaper?What gets Che


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