Budget 2021: Experts Speak


Budget 2021: A snapshot
by Nangia Andersen LLP

Budget 2021 rests on six pillars: Health and Wellbeing, Physical and Financial Capital, Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D, Minimum Government and Maximum Governance. While speculations were rife that an additional tax burden would be introduced to partially fund the pandemic related expenses, however, much to everyone’s delight, there was no such ‘Covid cess’. The Government’s strong-will for making the IFSC in GIFT City, a global financial hub is evident from the series of tax benefits which have been introduced in addition to the existing ones. Some of the key announcements are as follows:

Individual Taxation

  • Deemed LTC fare scheme in lieu of regular LTC formally introduced in the statute.
  • Interest earned on contribution to Provident Fund taxable to the extent it relates to contribution in excess of INR 0.25 Million in a previous year
  • Closing date for sanction of loan for affordable residential house property extended from March 31, 2021 to March 31, 2022
  • Senior citizen of age 75 years or above having pension and interest income not required to file the return of income, if TDS deducted on such income

Corporate Taxation

  • “Goodwill” shall not qualify as an asset eligible for depreciation under the Act
  • Deduction shall not be allowed on late deposit of employees’ contribution to PF and other similar schemes
  • Presumptive scheme for professionals shall not include LLPs
  • The scope of profit linked deduction for the developers engaged in developing affordable housing project has been enlarged and the timeline has been extended up to March 31, 2022
  • Threshold requirement for tax audit increased from INR 50 million to INR 100 million where 95% of the transactions are in digital mode

Exemption and investment in eligible Start-Ups

  • Date of incorporation for an eligible start up to claim profit linked deduction extended to, before April 1, 2022
  • Exemption from capital gain on transfer of residential property by subscribing shares of a start-up also allowed up to March 31, 2022

Tax incentive for units in IFSC

  • Eligible investment fund or eligible fund manager shall not constitute business connection in India
  • Income of non-resident from transfer of non-deliverable forward contracts entered with off-shore banking unit of IFSC shall be exempt from tax
  • Income of non-resident from royalty on account of lease of aircraft by a unit of IFSC shall be exempt from tax
  • Capital gains exempt on transfer of shares of a company in India on relocation of fund to IFSC
  • Income from transfer of aircraft or aircraft engine exempt for a unit in IFSC

Capital Gains

  • The safe harbour limit in case of transfer of land & building has been increased from 10% to 20% for transfers up to June 30, 2021
  • Definition of “slump sale” to include transfers other than sale also

Improving efficiency of Tax Administration

  • Faceless procedures proposed to be extended to appeals before the ITAT
  • Constitution of Dispute Resolution Committee to prevent new litigation for taxpayers where returned income is INR 5 Million or less and variation in order is INR 1 Million or less
  • Current Authority for Advance Rulings shall cease to operate and will be replaced by a Board of Advance Ruling

Reduction in time limits

  • Time limit for initiating reassessment proceedings to be limited to 3 years except cases involving escapement which involve alleged tax evasion exceeding INR 5 million
  • Time limit for filing of belated or revised return of income reduced by 3 months to 31st December of relevant Assessment Year.
  • Time limit for the processing the return of income reduced from 1 year to 9 months from end of financial year in which ITR is filed
  • Time limit for issuance of notice for scrutiny assessment to be reduced from 6 months to 3 months from the end of assessment year

TDS/TCS provisions

  • Amendment made to allow benefit of tax rates as per DTAA to income earned by Foreign institutional Investors
  • Scope of TDS extended to purchase of goods by specified buyers from the resident sellers
  • TDS/ TCS to apply at higher rate in case of non-filers of income tax return

Rationalisation of Equalisation Levy

  • Equalization levy shall not apply to considerations taxable as fee for technical services or royalty under the Act read with the DTAA
  • Income subject to Equalization levy shall be exempt from tax under the normal provisions with effect from April 1, 2020

Goods and Services Tax

  • Annual compliance burden reduced for taxpayers. Self-certified reconciliation statement to replace reconciliation statements audited by specified professionals
  • Provisions relating to levy of interest on Net GST liability made applicable retrospectively from 1 July 2017
  • IGST to restrict the zero-rated supply on payment of integrated tax only to a notified class of taxpayers or notified supplies of goods or services
  • Supplies made to Special Economic Zone would be allowed as Zero-rated supply in terms of IGST only where said supplies would have been made for authorised operations
  • Measures taken to deter ITC frauds

Customs Duty

  • Agriculture Infrastructure and Development Cess as a duty of Customs being imposed on the import of certain goods specified in First Schedule of CTA to finance the improvement of agriculture infrastructure and other development expenditure
  • Filing of bills of entry made mandatory before the end of day preceding the day of arrival of goods except in certain specified cases
  • Goods entered for exportation making wrongful claim of remission or refund liable to confiscation
  • Penalty prescribed in specific cases where any person claims refund of tax or duty discharge, using fraudulent invoices, on exports of goods
  • A definite period of two years, extendable by one year prescribed for completion of customs investigation
  • Conditional exemption from duty of customs to have a validity of two years unless specifically provided otherwise, or varied or rescinded earlier
  • Common Customs Electronic Portal to act as a one-point digital interface for the trade to interact with the Customs Authorities

Changes in Excise Tariff

  • Agriculture Infrastructure and Development Cess of INR 2.5 per litre imposed on petrol and INR 4 per litre on diesel as an additional duty of excise. However, there would be no additional burden on the consumer as Basic Excise Duty and Special Additional Excise Duty have been calibrated

Budget 2021 was surely an enthralling one as India’s expectations were running high. A well-structured Budget portraying an honest effort of the government to address the fiscal and economic crisis, and rendering procedural simplification.


Budget 2021: Enhanced Indo-Canadian Relations
by Invest India – Canada Desk and Strategic Investment Research Unit

This decade’s first budget has been a resounding success as it heralds a call to making India more self-reliant and a more vital business partner for the world. The ambitious policies laid down by Finance Minister Nirmala Sitharaman will pave the way for India to attain its vision of becoming an inalienable nodal point in the global supply and value chains. The focus on infrastructure development and simplifying governance signal a remarkable rise in foreign direct investments (FDI) towards India.

For India, the end of the pandemic’s economic impact has been in sight for some months now. A V-shaped recovery has become evident as industries and cities are roaring back to life, bringing energy to the economy and its core sectors. Budgetary specifications will further this trend. Simplifying administration of direct taxes while increasing compliance and boosting the privatisation of PSUs (including banks) through legislative amendments will boost investor confidence in India’s regulatory framework. Furthermore, FDI permitted under the automatic route for the insurance sector—from 49 percent to 74 percent—will be welcomed by foreign investors looking to capitalise on India’s expanding insurance market.

In its continuous pursuit to strengthen investments in the clean energy sector, the budget emphasises capturing the energy emission trends from renewables to hydrogen. Boosting non-conventional energy projects such as solar and the proposed National Hydrogen Mission will help fulfil India’s clean energy goals under the Paris Agreement. Improving infrastructure in the energy sector through Smart Metering will not just help conserve energy but can provide opportunities to several startups that provide energy management solutions.

Innovative technologies are at the heart of the new energy economy. Given that Canada is home to world-leading electricity, battery, carbon capture and storage (CCS) and hydrogen technology companies, it is one of many countries competing in these areas. There is a need to maximise the value of current energy resources and continue developing new lower-carbon sources. Hence, this is a crucial sector where India and Canada can mutually benefit from collaboration as both countries strive towards clean fuel.

There has been a renewed interest on both sides on strengthening collaboration in agriculture and Agri-tech. In a recent India-Canada Agri-tech Virtual Seminar organised by the Indo-Canadian Business Chamber (ICBC), Minister of Agriculture and Agri-Food of the Government of Canada, Mary-Claude Bibeau highlighted the fact that Canada and India have a proud history of strong bilateral trade and collaboration in agriculture, with a vibrant trading relationship in agriculture and agri-food, valued at over USD 1.5 billion. [1] Adding that in India, rapid economic growth is driving new consumer demands and preferences, and Canada can help India meet those demands through scientific and technological expertise in food processing, food safety and transportation infrastructure. Minister Bibeau concluded by reiterating that as we look to the future, expanding and diversifying mutual trade and investment opportunities between Canada and India will also help both economies recover after the pandemic.

The increase in the agriculture credit with a target of INR 16.5 lakh crore and the allocation of infrastructure fund for the development of Agricultural Produce Market Committee (APMC) reiterates the government’s commitment to welfare farmers. A 25 percent allocation hike from INR 30,000 crore to INR 40,000 crore towards the Rural Infrastructure Development Fund will promote better price realisation for farmers via lower losses and better value capture. This outlay is for APMCs to augment their infrastructure facilities. All these efforts, coupled with Canada’s state-of-the-art technologies in agriculture, can be leveraged by India to revolutionise agricultural production and techniques.

The pandemic has highlighted the importance of robust healthcare infrastructure. In placing public health at the forefront and by committing to spend INR 35,000 crore, the government has not only responded to the emergency created by the pandemic but has also shown its faith in an imminent end to this public health crisis. The 137% hike in health and wellness budget will allow more capital flow into these startups, facilitating further growth of the R&D sector. India has been one of the very few countries to have developed vaccine for Covid-19 virus, which makes India globally relevant in the healthcare sector now more than ever. The government plans to channel more money into the vaccine development programme through the budget 2021. Total health research expenditure in Canada has consistently increased since 1975 in the total amount spent on the sector. [2] Both countries can boast of talented medical professionals and researchers and given the current crisis; the two countries can combine synergies for the development of preventive and curative health facilities.

There is also a growing trust in India’s growth story among Canadian companies and a massive opportunity for Indian apparels to increase their market share in Canada. Canada is a thrust market for India, and Apparel Export Promotion Council (AEPC) has made continuous efforts to participate in Apparel Textile Sourcing Fair, Canada. This year’s budget gives a greater thrust for the same by proposing seven mega textile parks to boost jobs, provide world-class infrastructure, and create global champions in exports.

The focus on infrastructure up-gradation and capital expenditure promises to enhance efficiency in the economy and smoothen investors’ experience as they set up or expand their India presence. The National Infrastructure Pipeline (NIP), first announced in December 2019, has been expanded to 7,400 projects while 217 projects worth over INR 1 lakh crore have been completed. The NIP has had a profound impact in streamlining India’s infrastructure development efforts, and this new, more significant role will be instrumental in furthering the government’s efforts. The expansive commitments towards improving and expanding rail, port and highway infrastructure and connectivity will similarly help India achieve its manufacturing potential and transform from a service-sector led economy to a global manufacturing hub. The government’s commitment to spend INR 1.97 lakh crore on PLI schemes covering 13 sectors enhance manufacturing and incentivise greater investments in the segment.

The Indian government, staying true to its self-sufficiency goals, employment generation, and promotion of businesses, has given out substantial policies and measures to revive the country’s essential sectors that experienced monetary losses accruing to the pandemic. The time is ideal for foreign economies to invest in India and reap the benefits of being early participants in India’s economic revolution.

With increasing synergies in construction, energy, healthcare, agriculture and many others, Indo-Canadian relations’ potential seems as wide as the great white north itself.

[1] https://pib.gov.in/PressReleasePage.aspx?PRID=1662148
[2] https://www.statista.com/statistics/436571/total-health-research-spending-canada/


Budget 2021: Gearing up for an Atmanirbhar Education System
by Ramananda SG, Vice President – Sales & Marketing, Pearson India

India’s first post-Covid-19 Budget was truly momentous as it was the first one to be presented digitally on a tablet, paving way for several announcements related to digitization across sectors. Overall, the education sector was allotted INR 93,224 crore. Key highlights from Budget 2021 are:

  • National Education Policy (NEP), announced last year, was given added impetus with over 15,000 schools being qualitatively strengthened to become exemplar schools. This move has the potential to set the foundation for new-age education system of the 21st century by institutionalizing e-learning and blended learning through partnerships with the EdTech players.
  • CBSE Board Exams will be reformed in a phased manner to test for conceptual clarity, analytical skills, and application of knowledge in real-life situations. The move will lessen academic pressure while offering more choice to students.
  • Setting up of National Digital Educational Architecture (NDEAR) will not only support teaching and enhance blended, experiential, and immersive learning but will also help in educational planning, governance, and administrative activities of state governments. The introduction of National Professional Standards for Teachers (NPST) is yet another new initiative aimed at enhancing the capabilities of teachers.
  • Setting up of the Higher Education Commission of India is expected to provide clarity in the introduction of academic programs in various educational institutions. This will also encourage vocational and professional skills training for the youth with a mixture of e-learning and skill-building.
  • Further, realigning the existing National Apprenticeship Training Scheme (NATS) to provide post-education apprenticeship will lead towards a more skilled and talented workforce.

The educational reforms announced in Budget 2021 will no doubt bring about a deeper transformational shift and help accomplish the objectives of an inclusive and Atmanirbhar education system for India. However, for India to emerge as a true education superpower, it should strengthen the aspects that attract foreign students to study in India. Covid-19 has created a fear in the minds of students, parents, and governments alike not to be venture into countries like China, US and Europe. This is India’s opportunity to attract top foreign universities as well as promote Indian universities to venture into foreign terrain. Further, as envisioned in NEP, India should continue to focus on education quality, international benchmarking, and outward orientation.


Budget 2021: Impact on Agri-Tech
by Vasant Bennett, Managing Partner, Emergent Gateway

Indian agriculture is transitioning from the grain deficit era of the 1950s and 60s to the grain surplus era after the green revolution. However, India still faces daunting challenges. The grain surplus has not translated into a nutrition surplus – India still suffers from a nutrition deficit. Additional challenges include the fragmentation of land, the unsustainability of farming for the small landholders and the governments burgeoning food subsidy bill.

As the Prime Minister of India stated prior to the presentation of the Union Budget 2020-2021 in parliament, this year was unusual in that the Finance Minister had to present “4-5 mini-budgets.” Not surprisingly, the mini-budgets and the final budget all addressed agriculture.

Notwithstanding the farmers protests and the offer by the government to suspend it by 18 months, the agricultural reforms that came out of one of the ‘mini-budgets’ amid the pandemic is by far the most consequential. It starts the process of easing the vice-like grip that the government has on the procurement, storage, and distribution of grain. Some of the consequences of this over-arching government involvement include the strain on government finances (food subsidy bill stands at CAD 42.4 billion this fiscal year), unintended impact on the production-mix and the persistent nutrition deficit in a grain surplus country.

The other consequential measure is the CAD 18 billion Agriculture Infrastructure Fund targeted at “aggregators, cooperative societies and farm entrepreneurs”. The government defines farmgate as “cold chains and storage infrastructure and establishing post-harvest management infrastructure”.

The themes that were articulated in the landmark ‘India Canada Agri-Tech Virtual Seminar’ of October 2020 on the Canada-India agri-tech relationship continue to resonate today post-budget. These include plant protein to address the nutrition deficit, post-harvest storage and handling to address post-harvest losses and mechanization to bridge the productivity and the income gap, especially for small landholding farmers.