Budget 2021: From Tax Relief To Expenditure Push, What To Expect From This Budget?

From increase in standard deductions under the old tax regime and changes in the slabs in the new regime to rise in overall expenditure for FY22 are some of the announcements likely in the Budget 2021.

Budget 2021: With the economy bearing the brunt of Covid-19 in 2020, now all eyes are set on the annual budget to be presented by finance minister Nirmala Sitharaman on February 1, 2021. This year the budget will be paperless for the first time in history. This year is different as the country is overcoming its toughest economic situations owing to pandemics, and people have now pinned all hopes on the budget looking for some relief.

The Budget session is scheduled to begin on January 29, 2021.

Here is what you can expect in the upcoming Budget

Tax relief for common man

As per the report in Moneycontrol, there are chances that govt increase standard deductions under the old tax regime and change slabs in the new regime. Finance Ministry may give relief of up to Rs 80,000 in the total tax liability, the report says citing its sources.

The current tax slabs are NIL for those earning between Rs 0-2,50,000: 

5 percent for income between Rs 2.5-5 lakh (Total income minus Rs 2,50,000)

Rs 5 lakh-Rs 7.5 lakh - Rs 12,500 + 10% of total income exceeding Rs 5 lakh

Rs 7.5 lakh to Rs 10 lakh - Rs 37,500 + 15% of total income exceeding Rs 7.5 lakh

Rs 10 lakh to Rs 12.5 lakh - Rs 75,000 + 20% of total income exceeding Rs 10 lakh

Rs 12.5 lakh to Rs 15 lakh - Rs 12,5000 + 25% of total income exceeding Rs 12.5 lakh 

Those earning above Rs 15,00, 000 - Rs 1,87,500 + 30% of total income exceeding Rs 15 lakh 

As per its sources, there can be certain relief under the old regime as one of the proposals was to increase the standard deduction. Currently, the standard deduction is up to Rs 50,000.

Increase in overall expenditure

As per an Economic Times report, overall expenditure for FY22 could be increased by about 12-14% over the budgeted estimate for this year. Govt may relax fiscal consolidation roadmap to give itself more room to spend. Centrally sponsored schemes may be restructured to divert funds to priority areas. The budget for FY22 could swell to nearly Rs 35 lakh crore. According to experts, government needs to ensure strong expenditure growth in the Union Budget with targeted fiscal support

Expert believe higher allocation to the rural employment guarantee scheme and a cost burden sharing scheme targeted at the hospitality sector is needed

Some experts in the ET report such as Sudipto Mundle, who was a member of the 14th Finance Commission, has suggested spending more on schemes like Pradhan Mantri Gram Sadak Yojana that offers income support while building infrastructure in the country

Steel Sector

The government may also look at the issue of inverted duty structure for certain steel products in the Budget next week to boost domestic manufacturing, as per the PTI. Inverted duty structure refers to taxation of inputs at higher rates than finished products that results in build-up of credits and cascading costs. Sources said that the government may consider removing customs duties on raw materials used for manufacturing of certain flat-rolled products of stainless steel.

Power Sector

Even the power sector can look forward to announcements by the FM during this budget.  As per the Blooomberg report, the plan to revive power utilities could include some specific measures such as separating power feeder grids for farmers and residential users, and installation of prepaid smart meters to stop pilferage and encourage timely payment.

According to the report, the spending would spread over several years and would focus on upgrading infrastructure and technology of the ailing utilities. The plan for carrying out reforms for reducing losses of state distribution utilities was sought by the nation’s power ministry and is under discussion, added Bloomberg. India is planning to spend Rs 3 lakh crore or about $41 billion on a new plan to revive regional electricity retailers, claimed Bloomberg

MSME Sector

The minister for Micro, Small and Medium Enterprises (MSME) and Road Transport & Highways Nitin Gadkari said five crore jobs should be created by the MSME sector this year. He observed that there are 6.5 crore MSME units in the country and 11 crore jobs have been created through the sector till now. Gadkari said the turnover of village industries at present is Rs 80,000 crore, which needs to be increased to Rs 5 lakh crore. This may find a mention in this Budgest as well.