Union Budget of 2021- Focus on Direct taxes

 Introduction

With the end of FY 2020-21 end around the corner, all the entities either having their legs in India or entirely being based in the country itself needs to sit down and brainstorm, again and again, now that is the amount of potential that the Budget has for this year.

Now the above statement only highlights a significant aspect of the Budget, Not the whole of it; our Finance Minister Nirmala Sitharaman, when presented it pointed out that the Budget needs to care of the economy, its people as its aspect, and it also needs to account for the pandemic going on, with the vaccines out for the public—That's just a lot of money.

The Union Budget is the annual budget of the Indian Republic. It is usually presented every year in February by the Union Finance Minister in the Lok Sabha

The Union Budget is also known as the Annual Financial Statement. According to Article 112 of the Constitution of India, the budget is a statement of the countries expected expenditure and receipts. 

All Constituents

The budget consists of the Annual Financial Statements, Demand for Grants, Appropriation Bill, Finance Bill, etc. The budget consists of the Capital Budget, Revenue Budget, Expenditure Budget, and it also has the next fiscal year's estimates.

In the Union Budget, the disbursements and receipts of the government comprise the various types of government funds in India namely, the Consolidated Fund of India, the Contingency Fund, and the Public Account.

Now closing on to the topic of 'Direct Tax', it refers to the Tax which is direct to be paid to the government by an individual whether the individual is a company or a person. 

Like when a transaction is completed, a certain amount of the transaction price is gone towards a tax i.e., Goods and Services Tax, these types of taxes are called indirect taxes, and are collected by individuals to individual and are transferred many times and finally paid to the Government as Input/Output GST.

Direct taxes consist of Income taxes, Property Tax, Capital Gain Tax, these are taxes that are directly paid to the government, there is no intermediary between the government.

Sector Overview

Direct Taxes

This year's Union Budget was a pretty good allocation of funds in our personal opinion, this year's budget focused mainly on decentralizing the sectors and finally allowing them to live off their own and survive in the competition.

The government now finally understands that their income should from the taxes and not from owning companies ex: Air India has been in losses for almost a decade now and all the losses are having a direct impact on the Government and the Aviation Industry altogether.

This year the direct taxes have been simplified and ease of compliance has been amplified for both the tax administrators and the public both (with the decreased litigation), although no changes were made in the income tax slab rate i.e., no major changes in exemptions and deductions.

Senior resident citizens of India over the age of 75 with only pension funds and interest income from the same bank in which he is receiving his pension income are exempted from filing income tax returns. This bank is specified, and the citizen is required to furnish a declaration to the specified bank.

Presently the tax assessments can be reopened up to 6 years and in serious tax frauds up to 10 years. This has been reduced to 3 years and in the case of serious tax frauds, up to 10 years but with approval from the Principal Chief Commissioner.

The taxability of interest on provident fund schemes is exempted regardless of how large the contribution is, going forward interest rates earned on PF balance if the annual contribution of PF exceeds Rs. 2.5 lakhs annually will be taxable.

There is a deduction in respect of interest on a loan taken for a residential house property from any financial institution up to one lakh fifty thousand rupees. The condition is that the loan has been sanctioned during the period beginning on 1st April 2019 and ending on 31st March 2021 is now proposed to be extended to 31st March 2022.

Relating to this homebuyers were taxed for the differential between the purchase price and stamp value if the latter was excessive. Due to which a difference of 10% is considered to be normal. Taking into account the reduction in the real estate prices the budget plans to increase the safe harbor benchmark from 10% to 20% thus avoiding taxation in the hands of the home buyers. This provision applies from 12th November 2020 to the 30th June of 2021 considering it's a first-time allotment of residential houses and the purchase price of the house does not exceed Rs. 2 Crore.

The dividends will be taxable from the hands of the shareholders from the 1st of April 2020. From an advanced tax perspective, the taxpayers can't pre-empt dividend distribution, leading to interest under section 234C of the income tax act 1961.