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The Union Budget 2021, third for Finance Minister Nirmala Sitharaman, was presented in the Parliament on February 1, 2021, between 11.00 a.m. and 1.00 p.m. This was the first digital-only budget for India.

There were no changes announced in income tax slabs as was being expected by many before the budget. Healthcare sector has been given a decent push, an increase of around 137% in budgeted expenditure from last year for the sector.

Infrastructure was another sector that witnessed a big push from the government. There were several reforms announced that will aid the ease of doing business in future.

Read on to find out the top 10 highlights of Budget 2021:

1. Market Reaction

Stock markets climbed as high as 4% in intraday today. Nifty Bank was the top gainer for the day.

The benchmark indices ended more than 4.8% higher today.  Nifty was up 4.74% to 14,281.2 and Sensex ended 5% higher at 48,600.61 today. Some reports also claimed that Sensex and Nifty posted the best budget day gain since 1997.

BFSI and realty indices gained the most today:

  • BSE Bankex up 8.33%
  • BSE Finance Up 7.49%
  • BSE Realty up 6.65%
  • Nifty Bank up 8.26%
  • Nifty Finance 7.6%
  • Nifty realty up 6.31%
  • Nifty PSU Banks 7.83%

2. Healthcare Spend

The healthcare expenditure saw a massive jump of 137% to Rs 2.23 lakh crores in the union budget 2021. Around Rs 35,000 crores is being allocated for covid-19 vaccines.
The government has also allocated around Rs 64,180 crores for Swasth Bharat Yojana.

3. Infrastructure Push

For 2021-22, an outlay of Rs 5.54 lakh crores, 34.5% more than the budget estimate for 2020-21. A professionally managed Development Financial Institution (DF) for infrastructure financing will be set up and a sum of Rs 20,000 crores is being provided to capitalise this institution.
Debt financing of InvITs and Reits by foreign portfolio investors will be enabled which will help to fund in infrastructure and real estate.

4. Fiscal Deficit

Fiscal deficit for the current financial year ending March 21, 2021, is being pegged at 9.5% of the GDP and for the financial year 2021-22, the deficit is being estimated at 6.8% of the GDP. This signals a massive increase in i government expenditure.

To be able to fund this expenditure, the government will have to raise appropriate funds. Ms Sitharaman has said that the government will be raising around Rs 80,000.

5. Investments

Corporate Bond: To instil confidence in the corporate bond market during times of stress, a permanent institutional framework will be established. This institution will purchase investment-grade debt securities in stressed and normal times and will help in the development of the bond market.
Investor charter: The finance minister said that an investor charter would be introduced as a right of all financial investors across all financial products. This is being done keeping investor protection in mind.
Sebi as Gold exchanges regulator: The markets regulator, Securities and Exchange Board of India (Sebi) is being notified at the regulator for gold exchanges.

6. FDI in Insurance

FDI limit in insurance is being increased to 74% from the current 49%. Foreign ownership with necessary safeguard will be allowed. Majority of the board of directors will be resident Indians in this regard, said the finance minister.

7. Recapitalisation

Asset Reconstruction Company/A Bad Bank: An Asset Reconstruction Company Ltd. will be set up to consolidate and take over the existing stressed debt and dispose of off the assets to Alternate Investment Funds (AIFs) and other potential investors for eventual value realisation.
Recapitalisation of Public Sector Banks: Around Rs 20,000 crores is being allocated for recapitalisations of public sector banks, two of which (apart from IDBI bank) and a general insurer will become a part of the divestment programme. Names of the banks and the insurer have not yet been disclosed.

For the protection of retail customers, the finance minister reminded the parliament that the government had increased the deposit insurance to Rs 5 lakh from Rs 1 lakh. She has said that necessary steps will be taken for smooth implementation of the same.

Minimum loan size eligible for debt recovery under the Sarfesi Act to be reduced from Rs 50 lakhs to Rs 20 lakhs

8. Start-up Push

To give a push to companies majorly being managed by one person, termed as ‘One-Person Companies’, the finance minister announced that it will be incentivising incorporation of such companies.
There will be no restriction on paid-up capital and turnover. Conversion of such companies to any other kind shall be done with little to no obstacles.
Residency limit for such companies is being reduced to 120 days from 182 days, allowing non-resident Indians (NRIs) to incorporate one-person companies in India.

The budget has also extended the tax holiday for start-ups by another year to March 2022. Capital gains tax exemption has also been announced for start-ups.

9. Tax proposals

Senior citizens above 75 years with only interest income will not have to file income tax returns. The government is also proposing to introduce pre-filled tax forms. Details from capital gains from listed securities, dividend income, and interest income to also be pre-filled in tax forms.

10. Affordable Housing Loans

The finance minister has extended the benefit of additional interest deduction of Rs 1.5 lakh for small taxpayers to purchase affordable housing by one more year. This means that this tax benefit will be applicable to affordable home loans taken till 31st March 2022.
Earlier they were applicable until March 31, 2021.
This is over and above the Rs 2 lakh deduction available on the interest payment on housing loan subject to certain conditions.
Thus, the total deduction available to an individual taxpayer on the interest payment of a housing loan for buying an affordable house is Rs 3.5 lakh in a financial year.

There is a deduction of Rs 1.5 lakh available under section 80 C for principal payment as well.

11. Other Ease of Doing Business Measures

  • The government will be setting up a separate administrative sector to streamline ease of doing business for cooperatives.
  • It is also aiming to double the MSME allocation to 15,700 crores.
  • Tax audit limit has been increased from Rs 5 crores to 10 crores to improve ease of doing business for micro and small enterprises.
  • Developing a world-class fintech hub in GIFT city
  • Allocating Rs 1,500 crores for promotion of digital payments which will smoothen digital payments across the ecosystem
  • Setting up a conciliation mechanism for quick resolution of contractual disputes with Government/CPSES
  • A separate framework for debt resolution of MSMEs.
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