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THE BUDGET - OVERSIMPLIFIED

~VIVAN


The common man doesn't seem to be satisfied with the Union Budget. One's in-hand salary remains unaffected. “This budget was all about healthcare, infrastructure and financial reforms” – Uday Kotak

The economy runs on 3 pillars; Export, FDI, and consumption. The working class is concerned about the 3rd pillar only. For consumption, one requires PDI (Personal Disposable Income), that is the ability to spend. This Budget has not made much of a difference to the purchasing power of people. However, the stock market had a positive reaction towards the budget. Sensex jumped 2,315 points and showed its 2nd highest rise ever.



Due to the pandemic, Government’s expenditure has increased many folds than what was planned earlier. This has resulted in a fiscal deficit ( A situation where expenses of Government exceed the revenue). Fortunately, to come out of the fiscal deficit, The Government has not put pressure on the taxpayer. The Government hopes to achieve the consolidation, first, by increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from the compilation of assets. In simple words, The government expects to see a rise in the number of taxpayers rather than imposing higher taxes. Secondly, practicing disinvestment, that is, selling off parts of the PSUs (Public Sector Units) and utilizing the money to cover up for the fiscal deficit.

The Budget has provided relief to senior taxpayers (75 years+) from filing I-T returns if they only earn a pension and/or bank interest. The time limit for the reopening of the assessment has been halved to 3 years. This can prove to help build confidence in the taxpayer. However, there are no exemptions for covid-19 related medical expenses.

Education is one area where investments were expected to be much higher than what they are. The budget has not helped in making education affordable by reducing the standard 18% GST. Last year The Government had devoted Rs 99,000 Crore to education. This year, the number has dropped down to Rs 96,000 Crore. A sum of Rs 650 Crore has been devoted to digital learning, compared to Rs 300 Crore in the previous year. This industry (digital Learning) has seen an 8 fold increase since Covid-19. Expenditure should have been at least 16 times to remain ahead of the curve but it has only become double.

 One can not deny the fact that this budget favours the entrepreneur than the employee. Start-ups continue to enjoy benefits as the tax holiday on 100% of profits has been extended by one year. Tax audit is now required only if the revenue threshold is 10 crore or more, provided 95% of transactions are made digitally. There has also been Removal and relaxations on restrictions on the formation of OPCs (One Person Companies). However, many MSMEs still remain unregistered. Taking steps to register and formalizing these companies will help in decreasing tax evasion.

Another thing that one must keep in mind is that India has improved its rank in the index of ease of doing business (63rd out of 190 countries), but when it comes to ease of starting a business, India ranks 130. The Budget does not lay much emphasis on this either.


Comments

  1. Ajay sharma7/2/21 4:07 PM

    The budget has focussed on sectors like infrastructure highways etc to revive consumption..its not a populist budget but its a budget which sincerely aims to allocate money where it is required thinking long time benefits for india..healthcare is one..putting a cap on defence imports to 40 percent of total capital purchase is two..building highways at a faster pace..to connect the country and enhance movement of goods is three..disinvestment especially from psus is four....its surely a budget thinking few years ahead..

    ReplyDelete
  2. Shivender7/2/21 11:11 PM

    Beautifully analysed but if we talk about the theme of budget it is long term. It will give booster dose to economy.
    Government has curbed it's expenditures, seized defence budget and focused more on infra & industry. Tax regime is unchanged though fiscal deficit was going to be high. It's coverup has been made through disinvestment. Privatization is the only solution to ill, money churning PSUs and the decision is made.
    Share market sensed the positivity of the budget and responded historically.

    ReplyDelete

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