Union Budget 2021 – The Post COVID Bharat

The year of 2020 - The Year of Coronavirus - The Year of Aatmanirbhar Bharat

As the year began, with almost zero production of Personal Protection Kits (PPE) for the fight against COVID 19 to the being the world leader in production of PPE kits to being the world leader in production of vaccines, India(Bharat) has seen a sea change of perception across the world. Where we are looked up to. Where we are sought for help. Where we are present to help. This is an unprecedented year that has seen massive change in the way of life and in public perception.

The Union Budget of 2021 is unique. It comes with the fiscal challenges thrown to the economy by COVID 19 and the implementation of the Aatmanirbhar Bharat Abhiyan, it also holds significance over the rebound of the economy thrown in over the past few months with Unlock in progress in the fight against COVID 19.

As I present my forecast for the Union Budget to be presented on 1st February 2021, I will be focusing on three major aspects as usual -

1. Direct Taxation

2. Indirect Taxation

3. Corporate Governance

DIRECT TAXATION

The argumentative Indian says that we have a tax structure that focuses on a very small subset of taxpayers and are therefore perpetually disadvantaged because those who are wealthy are paying a lot of taxes and get no benefits per se.

[I had made the below mentioned argument last year also - This is further strengthened by the farmers agitation who are massive gainers of subsidies of the government]

My first point of focus shall be that all subsidies that are non-essential be done away with. The total subsidy bill of the government runs upto ₹3,00,000 crores which is almost 1/6th of the collection of taxes in the Government of ₹20,00,000 crores.

The only two changes that I expect the Government to make in the direct taxation will be to either increase the limit of deduction under Section 80C of the Income Tax Act, 1961 from the existing ₹1,50,000 to ₹2,00,000/- or more with focus on investing in government securities or insurances like the National Savings Certificate (NSC) or the Sukanya Samriddhi Yojana, or to increase the limit of deduction under Section 80CCD(1B) for the National Pension Scheme (NPS) from the existing ₹50,000/- to ₹1,00,000/-.

Any other change will be radical and I don’t expect the Government to venture with all the challenges posed during the fight against COVID 19.

INDIRECT TAXATION

The Indirect Taxation System has become overtly complicated with the introduction of automatic population of figures from GSTR1 to the GSTR3B to be filed monthly.

The absence of the facility for revision of figures for the said month is causing a lot of hardship to normal taxpayers who are small and do not employ the help of professionals for the compliance of the same. This could be time bound (30 days or so within filing)

Increased spending potential due to the savings in rationalization of direct tax will spur growth in collection of indirect taxes. Let the idea be to have a high volume of sales than higher rates of taxes.

CORPORATE GOVERNANCE

[This is an old demand of last year that NEEDS to be done AS SOON AS POSSIBLE]

1. Companies to file only 1 annual return inclusive of KYC norms, deposits and all declarations as required by the Companies Act, 2013. MCA has to place the onus of audits on ICAI and ICSI members for Secretarial Audits and Statutory Audits. Tighten norms of reporting for CAs in case of fraud and ensure compliance.

2. Get rid of examinations and all other ideas for Directors as well as Independent Directors. Companies with public money to ensure audit is reported to SEBI in one form with details and compliance is maintained.

We need to get rid of the bureaucratic/judicial rigmarole that the companies are put through to start or run their businesses. We have to let them earn money and run on the principle of their money, their wish.

As the Government prepares the ground by way of the introduction of a Bill in the Parliament of India for the setting up of the National Bank for Financing Infrastructure and Development, I hope and pray that they speed up the implementation of the National Infrastructure Plan outlaid at an amount of ₹1,00,000 crores in the last Union Budget presented.

The fact that the Government recognizes this as a Black Swan event and admits to taking two full years on the path of full recovery in the Economic Survey of 2020-21 presented in the Lok Sabha yesterday gives hope that we are on the right path. The macroeconomic factors and numbers are encouraging and we are on the path of a full recovery. These are signals of hope and not of despair. Consumer spending is high, retail markets have mostly crawled back. I wish to see that the policy support remains and that consumer sentiment is respected in this Union Budget.

Jai Hind.