Comprehensive analysis

Foreword
Reforms, disinvestment, status quo on tax rates and long-term
infrastructure development have been the focus of this year’s Budget.
As expected, the government stepped up expenditure on various
large-scale projects to provide impetus to the economy and largely
relied on asset monetisation and borrowings to fund the same.
No change in the tax rates achieves twin objectives. First, it provides a
big relief to taxpayers as their tax outgo does not increase. Second, it
sends a strong message to the investors globally that government iscommitted to a long-term low tax rate regime and provides certainty on
the broad tax policy framework.

Administrative reforms, such as faceless assessment at the Tax
Tribunal level, reduction in the time period for the re-opening of tax
assessments and further impetus to the digital transactions are all
moves in the right direction, aimed at helping gain further on ease of
doing business.

Vikas Vasal
National Managing Partner - Tax
Grant Thornton Bharat LLP

Comprehensive analysis: Union Budget 2020-21#GTonBudget

Economic overview (1/2)
India’s economy is expected to contract for the first time in more thanfour decades
Real GDP growth% y-o-y•India’s COVID-19 induced
gross domestic product (GDP)contraction reduced
significantly from -23.9% yearon-year in the April-Junequarter to -7.5% in JulySeptember quarter•

Recovery remained uneven
with service sector lagging
industrial sector and private
consumption trailinginvestment•

The Economic Survey
indicates signs of a V-shaped
recovery of the economy•

Economy is at 94% of
the pre-pandemic levels

15
10

8.2

6.2 5.75

4.4 3.1

0

-5
-10

-7.5

-15
-20

-23.9

-25

Source: Central Statistics Office

Economy is witnessing a v-shaped recovery
Recovery in industrial production
120

100

80

60

IIP
Primary

40

CapitalIntermediate Goods

20

Infra & construction
Consumer Durables
Consumer non-durables

0

Source: Central Statistics Office3

Comprehensive analysis: Union Budget 2020-21

Economic overview (2/2)
Fiscal deficit much higher than budgeted
9.5

6.8

6.5
6.0

5.9

4.3

• To ensure that the economy isgiven the requisite push, thefiscal deficit in FY 22 is alsobudgeted at 6.8% of GDP

4.9

4.9

4.6

4.5
4.1

3.9 4.0

3.9
3.5 3.5 3.4

3.3• Fiscal deficit for financial year
(FY) 21 has been revised up
from budgeted 3.5% to 9.5%
of GDP, due to highexpenditure and weak
revenues on account of
COVID-19 induced lockdown

3.5

2.5

• New glide-path for fiscal
consolidation has beenannounced and fiscal deficit isexpected to be steadily
reduced to below 4.5% by FY
2025-26

Source: Budget documents; RE: Revised estimate; BE: Budgeted estimate

Share of capital expenditure
100
90

35
12.0

11.8

14.1

14.4

12.3

13.3

12.5

30.5

15.9

80

25

70

20

60

15

50
40

88.0

88.2

85.9

85.6

87.7

86.7

87.5

87.3

84.1

10
5

30
20

0

10

-5

0

-10
2013-142014-15

Revenue

2015-16

2016-17

Capital

Source: Budget Documents

430

Comprehensive analysis: Union Budget 2020-21

2017-18

2018-192019-20 2010-21RE 2021-22BE

Growth in Capital Expenditure (% YoY) (right)

As per the revised
estimates, at INR 5.54
lakh crore, there has been
a 34.5% increase in thecapital expenditure

Tax proposals

5©2021 Grant Thornton Bharat LLP. All rights reserved.

Key direct tax proposals (1/6)
Key changes in individual taxation Key changes in corporate taxation
No change in individual slab rates

No change in corporate tax rates

Taxation of proceeds from highpremium unit linked insurance plan
(ULIP)

Employees’ contribution to welfare
funds• Any sum received under a ULIP, issued on orafter 1 February 2021, is not eligible for tax
exemption if the annual premium exceeds INR
2.5 lakh• Such ULIPs are proposed to be treated as a‘capital asset’ and proceeds would be liable tocapital gains tax in case of equity oriented
mutual funds• The rules for computation of capital gains
shall be prescribed separately

Taxability of interest on employees’
contribution to Provident Fund (PF)Interest attributed to employees’ contribution
towards PF in excess of INR 2.5 lakh during theprevious year is proposed to be taxable in thehands of employee

Relief to resident senior citizens
It is proposed that resident senior citizens, whohave attained the age of 75 years, are notrequired to file return of income if they havepension income or interest income from a
specified bank and have no other income

No deduction will be allowed to employer in caseof delay in deposit of employees’ contribution to
PF and Employee State Insurance (ESI)This clarification has been
introduced to counter existing
judicial precedents on the matter.

Tax audit
Turnover threshold for tax audit is proposed to
be increased from INR 5 crore to INR 10 crore,in case the cash receipts and payments do not
exceed 5% of the total receipts and payments,
respectively

Increase in tolerance limit on sale ofresidential units
Currently, in the hands of real estate developers
and buyers, the difference between stamp duty
value (SDV) and actual sale consideration (ASC)is taxable if SDV exceeds 110% of ASC
It is now proposed to increase this limit to 120%on fulfilment of below conditions:• Transfer takes place between 12 November
2020 and 30 June 2021
• Transfer is by way of first-time allotment of theresidential unit

• The consideration involved in such transfer
does not exceed INR 2 crore

6Comprehensive analysis: Union Budget 2020-21

Key direct tax proposals (2/6)

Equalisation levy on e-commerce
operators
Following clarifications are proposed forequalisation levy:• If consideration for e-commerce supply of
goods or services are taxable as ‘royalty’ or‘fee for technical services’, the same would be
excluded from the purview of equalisation
levy• Any leg of a transaction, such as placing or
acceptance of orders/offers, making online
payment for supply of goods/provision ofservices, shall trigger the levy
• Consideration received shall be subjected toequalisation levy on the gross amountirrespective of whether the e-commerce
operator owns the goods orprovides/facilitates e-commerce services• Exemption from income tax is now alignedwith the date of introduction of equalisation
levy, i.e., 1 April 2020

Minimum Alternate Tax (MAT)• It is proposed to adjust the earlier years’ bookprofits for the purpose of MAT computation forsecondary adjustment(s) or advance pricing
agreement (APA) by making an application to
the tax officer, who must dispose it off withinfour years from the end of the year in which
the application is received• Expenses and income related to dividend
earned by foreign company are required to be
adjusted from the book profits where income
is taxed at a rate lower than MAT as per
double taxation avoidance agreement

7

Comprehensive analysis: Union Budget 2020-21

Revision of time limits• Capital gains tax exemption on transfer ofresidential property, if the consideration isinvested in equity shares of a ‘start-up’; isproposed to be extended by one year, up to
31 March 2022
• Tax holiday extended by one year for startups incorporated upto 31 March 2022
• 100% tax holiday for profits and gains fromaffordable housing projects extended by one
year up to 31 March 2022. It is also proposed
to extend this benefit to rental housing
projects, as may be notified by the central
government• For first-time home buyers, the existing
deduction of INR 1.5 lakh on the interest on
loan taken for residential house property, is
proposed to be extended by one year up to
31 March 2022
• Time limit for filing belated or revised return is
proposed to be reduced by three months.
Such return can now be filed within ninemonths from the end of the assessment year
(AY) or completion of the assessment,
whichever is earlier• Time limit for issuing scrutiny notice is
proposed to be reduced from six months tothree months, from the end of relevant AY• Time limit for completion of assessment
reduced to nine months from existing 12months for AY 2021-22 onwards

Key direct tax proposals (3/6)
Rationalisation of provisions relating to capital gains and income
from other sources‘Slump sale’ definition amended• It is proposed that the definition of ‘slump
sale’ will include all types of transfers,
therefore exchange and other forms oftransfer will come within the ambit ofcapital gains tax• Computation mechanism provided forslump sale will also apply to slump
exchange transactions

Depreciation on ‘goodwill’• The Supreme Court in Smifs Securities[2012] 348 ITR 302 (SC) had held that
depreciation is allowed on goodwill• It is proposed that goodwill is not eligiblefor depreciation whether acquired pursuant
to a restructuring or specifically purchased• Depreciation claimed, if any, on such
goodwill before 1 April 2020, will need tobe adjusted from the cost of acquisition

8

Comprehensive analysis: Union Budget 2020-21

Transfer of capital asset on
dissolution/reconstitution
Profits and gains from receipt by apartner/member of any capital asset at the timeof dissolution/reconstitution of firm/associationof persons (AOP) /body of individuals (BOI) is
subject to capital gains tax in the hands of thefirm/AOP/BOI. It is now proposed:• Balance in the capital account of thepartner/member shall be calculated without
considering increase due to revaluation of
any asset or self generated goodwill/otherasset• Receipt of money or other asset shall also
be included for the purpose of computing
capital gains tax

Key direct tax proposals (4/6)
Collection and recovery of taxes
Tax deducted at source (TDS) on
dividend and interest
It is proposed that tax will not be deducted on:• Dividend income credited or paid to realestate investment trusts (REITs) andinfrastructure investment trusts (InvITs) withretrospective effect from FY 2019-20• Interest income paid or payable by an
infrastructure debt fund with effect from FY
2020-21

TDS on purchase of goods
With effect from 1 July 2021, it is proposed thata buyer of goods shall deduct tax on payments
made to domestic sellers in excess of
INR 0.5 crore at the rate of 0.1% (5% in case of
no PAN/Aadhaar) provided the buyer’s turnoverexceeds INR 10 crore
In case where TDS and TCS on purchase ofgoods are both applicable, then provisions of
TDS shall applyHigher TDS/TCS in certain cases
With effect from 1 July 2021, taxpayers who
have not filed their tax returns for two years shallbe subject to a higher rate of TDS and TCS as
follows• Twice the rate specified in the Act• Rate of 5%
If the specified person does not have a PAN, the
TDS/TCS shall be higher of the rates prescribedor stated above

Lower withholding tax rate for foreign
portfolio investors (FPIs)
It is proposed that the benefit of lower tax
withholding rate, at the time of payment ofdividend, under tax treaties to be made available
to FPIs subject to availability of a valid tax
residency certificate

No TDS on dividend paid to business
trustWith effect from 1 April 2020, it is proposed that
dividends paid by special purpose vehicle (SPV)to business trusts (REITs/InvITs) will not be
subject to withholding tax

Advance tax on dividend income
No interest is proposed to be charged on shortfall in payment of advance tax on dividend income(except deemed dividend) provided full tax thereon is paid in subsequent installments

9Comprehensive analysis: Union Budget 2020-21

Key direct tax proposals (5/6)
Reassessment provisions

Dispute resolution

It is proposed to revamp reassessment
provisions:Introduction of Interim Board for
Settlement (Interim Board)• Triggers for reopening will be given a wider
import by the substitution of the words‘information which suggests’ instead of‘reasons to believe’

Income Tax Settlement Commission (ITSC) to
be discontinued and the same shall be replacedby one or more Interim Boards• Process to be made more stringent andclearly defined• Time limit for reopening is revised as follows:– Three years (without any monetary limit)
and– 10 years (where escaped income is likely
to exceed INR 50 lakh)

Dispute Resolution Committee
New scheme is proposed to be introduced toprovide early tax certainty to small and medium
taxpayers. The objective is to prevent new
disputes and settle issues at initial stages
Cases proposed to be covered would include:• Taxpayers whose returned income is lessthan INR 50 lakh
• Aggregate adjustments proposed or made by
tax authorities to taxable income is less than
INR 10 lakh

Advance rulings
It is proposed to replace the Authority for
Advance Rulings (AAR) with one or more board
for advance rulings
The advance ruling will not be binding on theapplicant or the tax authority and would be
appealable before high courts

Faceless Income Tax Appellate
Tribunal (ITAT)
It is proposed that a scheme for disposal of
appeals by the ITAT in a faceless manner will be
notified10

Comprehensive analysis: Union Budget 2020-21

Key direct tax proposals (6/6)
Tax incentives for units located in International Financial
Service Centre (IFSC)
Tax incentive to an investment divisionof an offshore banking unit in IFSC
Investment division of foreign banks is proposed
to be tax exempt in respect of income fromtransfer of specified securities if it is located in
an IFSC, subject to specified conditions

Relocation of funds – tax exemption
Relocation of offshore funds before 31 March2023 to an IFSC is proposed to be tax neutral,
subject to certain conditions

Other incentives• It is proposed to provide tax exemption on
income earned, by a non-resident ontransfer of non-deliverable forward contracts
entered into with an offshore banking unit of
IFSC• Location of a fund manager of an eligible
investment fund in an IFSC would notconstitute taxable presence in India for thefund, subject to conditions which may berelaxed by the central government

Aircraft leasing activities in IFSC
In order to provide tax incentive to aircraft
leasing activities, the following tax amendments
are proposed:• Royalty income received by a non-resident on
account of lease of aircraft paid by a unit in
IFSC would be exempt from income tax
subject to specified conditions• Benefit of tax holiday is proposed to beextended to income earned by a unit in IFSC
from transfer of aircrafts or aircraft engines,
subject to specified conditions

11

Comprehensive analysis: Union Budget 2020-21

Issuance of Zero-coupon bond by
infrastructure debt fund
It is proposed that infrastructure debt funds
can issue zero-coupon bonds to support fundraising for the infrastructure sector.

Key allied laws proposals
Companies Act, 2013
• It is proposed to widen the ambit of small
company definition by increasing the limits ofpaid-up share capital and turnover limits to
INR 2 crore and INR 20 crore, respectively• Following changes are proposed for one
person company (OPC) :– Allow non-resident Indians to set up an
OPC– Remove ceiling on paid up share capital– Flexibility for subsequent conversion to
any other form of company– Criteria for residency of a person setting
up an OPC is reduced to 120 days
• It is proposed to de-criminalise offences
under Limited Liability Partnership (LLP) Act
in line with Companies Act, 2013

Increasing FDI in insurance sector
FDI limit for insurance companies to be
increased from 49% to 74% under the
automatic route
Foreign ownership and control in suchinsurance companies shall be allowed withthe following safeguards:

12•

Majority of directors and KMPs should beresident Indians with 50% directors being
independent directors•

Specified percentage of profits to beretained as general reserve

Comprehensive analysis: Union Budget 2020-21

Securitisation and Reconstruction of
Financial Assets and Enforcement ofSecurity Interest Act, 2002
• Minimum ticket size for debt recovery reduced
from INR 50 lakh to INR 20 lakh, for nonbanking financial institution (NBFCs) having
asset size of more than INR 100 crore• Asset reconstruction company to be permitted
to purchase/securitise defaults/ debts ofpooled investment vehicle owed to banks

Indian Stamp Act,1899
Stamp duty to be exempt on specified transfer ofbusiness or asset or right in immovable property
from government companies (including its
subsidiary, unit or joint venture) to thegovernment or other government companies,
subject to specific approval

Securities Exchange Board of India
Act, 1992 (SEBI)• An alternative investment fund (AIF)/businesstrust to obtain a certificate of registration fromSEBI prior to commencing any activity• SEBI to be notified as regulator for gold
exchanges

Life Insurance Corporation Act, 1956
• Enabling amendments for proposed initialpublic offering of Life Insurance Corporation(LIC) have been made• Government to maintain majority
shareholding in LIC of not less than 51%

Key indirect tax proposals (1/3)
Goods and Services Tax
Following proposals to be made effective from the date to be notified
Amendment for zero rated supplies• Zero rated supplies made to special economic
zone restricted to supplies made forauthorised operations• Only notified class of taxpayers or notifiedclass of goods or services eligible for zerorated supplies on payment of integrated tax(IGST)• Non-realisation of sale proceeds withinprescribed time limits under Foreign
Exchange Management Act, 1999 (FEMA) for
export of goods to entail return of refund
amount along-with applicable interest

Retrospective amendments (1 July
2017)
• Definition of ‘supply’ amended retrospectively
to include activities or transaction involving
supply of goods or services by any person(other than individual) to its members orconstituents or vice versa• Interest on delayed payment of tax to be paidon net basis

Self certification of reconciliation
statement• Removal of mandatory requirement offurnishing annual reconciliation statement(GSTR-9C) by certified professionals. Further,annual return (GSTR-9) may contain suchdetails to be submitted on self-certification
basis

13

Comprehensive analysis: Union Budget 2020-21

Additional condition to avail input tax
credit (ITC)• Can be availed by recipient only when
supplier has reported the invoice/debit notedetails in their return statement of outward
supplies

Widening the scope of self-assessedtax• Scope for self-assessed tax enhanced toinclude details of outward supplies; has beenreported in GSTR-1 but not considered in
GSTR 3B

Changes in assessment procedures• Seizure and confiscation of goods in transit to
be treated as a separate proceeding fromrecovery of tax• Provisional attachment of property/bankapplicable from the initiation of any
proceedings till the expiry of one year fromthe date of order• Mandatory pre-deposit of 25% of penalty
amount for filing appeal against any order
passed in seizure of goods in transit• Minimum amount of penalty in case ofdetention/confiscation of goods orconveyance increased to 200% and 100%,
respectively

Power to call information• Enhancement of power of jurisdictional officer
to call for information from any person in
relation to any matter within the GST law

Key indirect tax proposals (2/3)
Customs
Effective from enactment of FinanceBill 2021• Investigation related to evasion of customs
duties to be completed within two years(extendable by one more year)• Any new condition-based customs duty
exemption notification to automatically expire
on 31 March on completion of two years fromthe date of exemption• All existing condition-based duty exemption
notifications to expire on the prescribed end
date or 31 March 2023, whichever is earlier• Bill of entry to be filed one day in advance
before arrival of goods• Goods entered for exportation to claim
illegitimate export benefits liable to be seized• Fraudulent credit availed on exported goods
liable to penalty equal to five times of therefund amount• Common electronic portal proposed to set up
to facilitate registration, filing bill of entries,
shipping bill, amendment in the filed
documents by the customs authorities, etc.

14

Comprehensive analysis: Union Budget 2020-21

Effective from 2 February 2021
• Amendment to Customs (Import of Goods at
Concessional Rate of Duty) Rules, 2017
(IGCR Rules):– Allow 100% out-sourcing for manufactureof goods on job work
– Imported capital goods used for the
specified purpose to be cleared on
payment of differential duty, along withinterest, on depreciated value• Rules in relation to Anti-dumping Duty,
Safeguard Duty and Countervailing Duty havebeen amended to bring further operational
clarity

Proposals aimed towards
enhancement of trade facilitation,
stricter penal action and avoidanceof manual interventions

Key indirect tax proposals (3/3)
Rationalisation of customs duty
rates on specific goods from 2
February 2021 (refer annexure)• Changes in product-specific customs duty
rates to ensure:– Level playing field to domestic
manufacturing industry, MSMEs, etc.
– Promotion of value addition in specificsector electronics– Reduction of cost of inputs and correctionof inverted duty structure
Changes in above duty rates are in linewith the government's aim to protect,safeguard and boost domestic market,
ultimately fulfilling the objective ofAtmanirbhar Bharat

Other proposal
Concession can be availed under Form C byregistered person engaged in reselling or use ofgoods in manufacturing of goods covered underCentral Sales Tax (CST) i.e., petrol or diesel

15

Comprehensive analysis: Union Budget 2020-21

New levy of Agriculture
Infrastructure and Development
Cess (AIDC) effective from 2
February 2021
Customs• AIDC to be levied on specified goods
imported into India with simultaneous
reduction in basic customs duty rates on suchproducts to ensure no additional duty burden• Social Welfare Surcharge (SWS) exemptedon the value of AIDC imposed on gold andsilverCentral Excise• AIDC to be levied on manufacturing or
production of petrol and high-speed diesel(HSD), with simultaneous reduction in excise
duty rates on such products to ensure no
additional duty burdenSectoral overview

16©2021 Grant Thornton Bharat LLP. All rights reserved.

Infrastructure
Roads and highways

Key highlights•

At INR 5.54 lakh crore, perhaps thehighest-ever increase in the outlay from thebudgeted estimates of last year; a 34.5%
increase•

INR 1.18 lakh crore budgeted for the Ministryof Road Transport and Highways; of this INR
1.08 lakh crore is for capital expenditure, thehighest ever provided•

National Infrastructure Pipeline (NIP), thefirst-of-its-kind, is aimed at improving
infrastructure in the country•

Another 11,000 km of National Highways
corridor to be developed by the end of 2022•

More economic corridors in Tamil Nadu, West
Bengal, Kerala and Assam proposed withhuge outlays for each state toconstruct/complete construction of these
economic corridors•

Key focus of this budget:– Creating institutional capacity andframeworks to boost sector– Thrust on monetising assets– Increase share of capex in each subsector•

Professionally managed Development
Finance Institution (DFI) will be set up witha capital of INR 20,000 crore for funding
infra projects•

Asset monetisation to be throughmonetising public infrastructure. A nationalmonetising pipeline for brownfield
infrastructure will be launched

Railways• The new National Railway Plan aims at afuture-ready railway system will be completed
by 2030. The Western Dedicated Freight
Corridor (DFC) and Eastern DFC will becommissioned by June 2022
• An outlay of INR 1.10 lakh crore budgeted, of
which 1.07 lakh crore is for capital
expenditure• Additional stretches announced including East
Coast corridor, East West corridor and North
South corridor

Water• Provision of water supply to 4,378 urban
local bodies through the launch of Jal
Jeevan Mission Urban, with an outlay of
INR 2.87 lakh crore covering 2.86 crore
households with tap connection• Urban Swachh Bharat Mission 2.0 will be
implemented with INR 14,1678 crore overthe five-year period from 2021

17

Comprehensive analysis: Union Budget 2020-21• By 2023, 100% completion of Broad-Gauge
route

Infrastructure
Urban infrastructure

Power, ports and others•

Focus on improving urban mobility••

For increasing the share of public transport in
the overall urban transportation, expansion of
metro line networks and bus transport
services announced

To increase competition in the power
distribution sector, a framework will be put inplace so that consumers will have a choiceof more distributors•

Reforms-based result-linked power
distribution sector scheme will be launchedwith an outlay of INR 3.05 lakh crores over 5
years. The scheme will provide assistanceto DISCOMS for Infrastructure creation
including pre-paid smart metering andfeeder separation, upgradation of systems,
etc., tied to financial improvements•

A hydrogen energy mission to be launched
to generate power•

Operations of major ports will be shifted to
private sector•

INR 2,000 crore allocated to fund seven port
projects under public-private partnership(PPP) for FY 2021-22•

Scheme for promoting Indian companies
participating in global tenders for port
projects to be launched•

A scheme for INR 18,000 crore for bus
transport to be launched. This will include
creation of a department of innovative publicprivate partnership (PPP) to increase
operating 20,000 buses•

Central counterpart funding extended to
Kochi Metro, Chennai Metro, Nagpur Metro,
Nagpur Metro and Bangalore Metro

18

Comprehensive analysis: Union Budget 2020-21

Banking, financial
services and insurance
Key highlights•••

Constitution of asset reconstruction
company/asset management company in thebanking sector to transfer bad and stressedloans
To restore confidence of retail depositors inthe banking industry, an effective
implementation framework would be put inplace, where the depositors would be able towithdraw amounts of up to INR 5 lakh against
their deposits, which now stands insured
under the Deposit Linked Insurance Scheme
Increase in FDI limit from 49% to 74% in theinsurance industry, where control andsignificant ownership can rest with foreign JV
partner/s with safeguards, such as majority
directors to be Indian residents and where
50% of the Board to comprise of Independent
Directors•

Outlay of INR 20,000 crore proposed tocapitalise public sector banks (PSBs)•

Proposed privatisation of two PSBs and one
general insurance company in 2021-22

•

•
•

19

•

Under Securities Contracts (Regulation) Act,
1956 (SCRA), pooled investment vehicles
can now borrow and issue debt securities inaccordance with SEBI regulations•

Proposal to consolidate the SEBI Act, 1992,
the Depositories Act, 1996, the SCRA andthe Government Securities Act, 2007 into arationalised single securities market code.
The text of the code has not yet been notified•

Debt financing by FPIs have been proposed
to enable easy access of finance to InvITs
and REITs for augmenting funds in theinfrastructure and real estate sectors•

Tax benefits proposed to IFSC

– Royalty income received by a nonresident on account of lease of aircraft
paid by a unit in IFSC would be exempt
from income tax subject to specified
conditions– Tax exemption to investment division of abanking unit of a non-resident located in
an IFSC– Tax exemption for income earned by anon-resident on transfer of nondeliverable forward contracts entered intowith an offshore banking unit of IFSCLife Insurance Corporation of India to comeout with an IPO which could constitute amajor portion of the budget of INR 1.75 lakhcrore of disinvestment target– Tax neutral relocation of existing offshore
fund to IFSCSEBI to be notified as the regulator for gold
exchange•

Funds that are established in India as trust or
any other eligible entity that raises moneyfrom investors and invest as per the SEBI
regulations, have been brought under unified
definition of pooled investment vehicle

For FPIs, tax to be withheld at source on
dividend income received from Indiancompanies, either at a rate as per the tax
treaty or the Income-tax Act, 1961, whicheveris lower•

No tax to be withheld on dividend income
paid to a REIT/InvIT by a SPV

Comprehensive analysis: Union Budget 2020-21

Auto and manufacturing
Key highlights••

Advanced traffic management system withspeed radars, variable message signboards,
GPS-enabled recovery vans to be installed in
all new four and six lane highways•

Scheme to augment public transport system
by inducting more buses

Introduction of the long-awaited voluntary
vehicle scrappage policy– Commercial vehicles that are 15 years
old, and personal vehicles more than 20
years old, will have to be scrapped basedon fitness test

– Allocated spend of INR 18,000 crore to
improve public transport; procure 20,000
buses– Details of scheme to be announced by
the Ministry of Road Transport and
Highways (MoRTH)••

Customs duty reduced to 7.5% on stainlesssteel; to provide relief to metal recyclers•

Allocation of INR 2,217 crore for 42 urban
centres with a million-plus population forclean air
– Move to spread awareness about thebenefits of using electric vehicles (EVs) tothe environment and its contribution to
make the air clean– Immediate acceleration for clean mobility- EVs and charging infrastructure20– Deployment through public private
partnership model

Comprehensive analysis: Union Budget 2020-21

Step to boost sales for commercial vehicle
manufacturers as well as employment
opportunities– Commercial vehicle demand to receive
support from construction-led
infrastructure push in sectors such as
roads and urban infrastructure•

Proposal to set up DFI– Encourage PPP in setting up institutional
structures; monetisation of assets andinclusion of states

Healthcare
Healthcare systems

Key highlights•

Budget allocation increased to INR 223,846
crore, which is 137% more than theprevious year’s total budgeted expenditureof INR 94,452 crore

Vaccination initiative•

INR 35,000 crore allocated for COVID-19
vaccine•Pneumococcal vaccine will be extended to
the whole country; it is currently limited to
five states•

Strengthen National Centre for Disease
Control, its five regional branches and 20
metropolitan health surveillance units•

Expansion of Integrated Health Information
Platform•

15 health emergency operations centers andtwo mobile hospitals to be established•A national institution for One Health, a regional
research platform for World HealthOrganisation South East Asia to be set up•

Operationalise 17 new public health units(PHUs) and strengthen 33 PHUs•

9 bio-safety Level III laboratories to be set up•

4 regional National Institutes for Virology to be
set upNational Nursing and Midwifery
Commission Bill•

Proposal to introduce a transparent andefficient regulation for 56 allied healthcare
professions

PM Atmanirbhar Swasth Bharat
Yojana•Outlay of INR 64,180 crore over six years•

Support for 17,788 rural and 11,024 urban
health and wellness centers•

Public health labs in all districts and 3,382
block public health units in 11 states•

Critical care hospital blocks in 602 districts
and 12 central institutions

21

Comprehensive analysis: Union Budget 2020-21

Nutrition•

Launching the Mission Poshan 2.0 by merging
Supplementary Nutrition Programme andPoshan Abhiyan•

Intensified strategy to improve nutritional
outcomes across 112 aspirational districts

Indirect taxes•

Medical devices imported by internationalorganisations and diplomatic missions (reduced
customs duty to 0% from 5%)•

Decrease in rates for consumption of nicotine
intended for inhalation without combustion(reduced to 0%)•

Placebos/blinded (or double-blinded) clinical
trial kits for a recognised clinical trial, put up inmeasured doses (reduced to 0% from 10%)

Agriculture and allied
sectors
Key highlights•

Budgetary outlay for Ministry of Agriculture
and farmers Welfare declined to INR 1.31
lakh crore from INR 1.40 lakh crore in theprevious budget–•

Operation Greens Scheme
–

•

•

–

1,000 mandis to be integrated with National
Agriculture Market–

Agriculture Infrastructure Fund to be madeavailable to Agricultural Produce Market
Committee (APMCs) for augmenting theirinfrastructure

Five major fishing harbours – Kochi, Chennai,
Visakhapatnam, Paradip, and Petuaghat andother fish landing centers along rivers andwaterways to be developed•

Warehousing Development and Regulatory
Authority (WDRA) to be strengthened to set
up a commodity market ecosystemarrangement including vaulting, assaying,logistics etc. in addition to warehousing•

Rural Infrastructure Development Fund to beenhanced to INR 40,000 crore from INR
30,000 crore•

The Minimum Support Price (MSP) regime
has undergone a sea change to assure pricethat is at least 1.5 times the cost of
production across all commodities•

To provide adequate credit to our farmers, theagricultural credit target has been enhanced
to INR 16.5 lakh crore in FY22•

To further facilitate credit flow under thescheme of Stand-Up India for SCs, STs, andwomen, reduce of the margin money
requirement is proposed from 25% to 15%,
and to also include loans for activities allied toagriculture•

AIDC has been imposed on specified goods - including alcoholic beverages, gold, silver,
cotton, peas, apple, petrol, and diesel. This
will be used to develop agri infrastructure to
improve production, processing andconservation infrastructure•

To promote the domestic market, customs
duty on cotton increased from nil to 10% andfrom 10% to 15% on raw silk and silk yarn

Micro Irrigation Fund
Created under National Bank For Agriculture
And Rural Development (NABARD), with anexisting corpus of INR 5,000 crore, anadditional INR 5,000 crore to be added

Multipurpose Seaweed Park–

22

Scope enhanced to cover 22 perishable
crops from the earlier coverage of tomato,
onion and potato•

eNAM/APMCs–•

Department of Agriculture and Farmers
Welfare (DAFW) has witnessed INR 10,000
crore shortfall while Department ofAgricultural Research and Education has its
outlay maintained at previous budgetarylevelsFisheries hubs

To be established in Tamil Nadu

Comprehensive analysis: Union Budget 2020-21

Micro, small and medium
enterprises
Key highlights•

Outlay of INR 15,700 crore; more thandouble than the allocation in FY21•

Incentivise incorporation of One Person
Companies (OPCs) to boost start-ups•

New portal development to collectinformation on unorganised labour force,
migrant workers especially, to help formulate
schemes for them•Stand Up India Scheme for SCs, STs and
women

•

Social security benefits extended to gig andplatform workers

•

•

•

To incentivise digital transactions and reducecompliance burden, the limit for tax audit forsuch persons/enterprises has been
increased from INR 5 crore to INR 10 crore•

Easy access to raw materials and exports ofvalue-added products. Proposition to review
more than 400 old exemptions this year.
This will be done through extensive
consultations to place a revised customs
duty structure, free of distortions•

Minimum wages will apply to all categories ofworkers and they will all be covered by the
Employees State Insurance Corporation

Reduced customs tariffs on raw material
imports related to electronic and mobile
phone industry, iron and steel, textiles andchemicals, also for gold and silver•

Women will be allowed to work in all
categories and also, in night-shifts withadequate protection

Increased customs tariff to protect leather
and gems and jewellery sector productmanufacturers•

To improve credit discipline, for NBFCs withminimum asset size of INR 100 crore, theminimum loan size eligible for debt recovery
is proposed to be reduced from the existinglevel of INR 50 lakh to INR 20 lakh•

To ensure faster resolution of cases,
strengthen NCLT framework, implement ecourts system and introduce alternate
methods of debt resolution, DRC and special
framework for MSMEs•

Compliance burden on employers will be
reduced with single registration and licensing
and online returns•

Revision of the definition under theCompanies Act, 2013 for small companies by
increasing their thresholds for paid up capitalfrom ‘not exceeding INR 50 Lakh’ to ‘notexceeding INR 2 crore’ and turnover from‘not exceeding INR 2 crore’ to ‘not exceeding
INR 20 crore’

23

Comprehensive analysis: Union Budget 2020-21

Technology, digital andstart-ups
Key highlights
Customs duty

Impetus to innovation and R&D• INR 50,000 crore for National Research
Foundation (NRO) over a period of five years• INR 1,500 crore for a proposed scheme that willfurther boost the digital payment ecosystem• Development of a world class Fintech hub at GIFT
city
• National Language Translation Mission (NTLM)
launched to enable the wealth of governance-andpolicy related knowledge on the internet being
made available in major Indian languages

Benefits for start-ups• Start-up tax holiday and exemption from capitalgains now extended to eligible start-ups for one
more year up to 31 March 2022
• OPC can also be incorporated by non-resident
Indians• Time limit for the residency of a person setting upsuch companies is reduced to 120 days

• Limit on paid-up capital and turnover removed for
OPC

24

Comprehensive analysis: Union Budget 2020-21

Customs duty rates increased on certain
inputs/parts of mobile-phones and electronic
products to provide impetus to domestic
manufacturing:• Rate on molded plastics for manufacture of
charger or adapter increased from 10% to 15%
w.e.f. 2 February 2021
• Rates on inputs/raw materials for manufacture of
charger or adaptor (other than printed circuitboard assembly (PCBA) and molded plastic) of
cellular mobile-phones increased from NIL to
10% w.e.f. 2 February 2021
• Rates on inputs/parts for manufacture offollowing components of mobile-phones
increased from NIL to 2.5% w.e.f. 1 April 2021
–

PCBA

–

Camera module–

Connectors–

Specified parts like back cover, side keysetc.

• Rate on inputs/raw materials of certain goods
such as ink cartridges, other machines capableof connecting to an automatic data processing
machine or to a network, ink spray nozzle
increased from NIL to 2.5% w.e.f. 1 April 2021

Technology, digital andstart-ups
Key highlights
Data analytics

Digital initiatives of government•

INR 3,786 crore for India’s first Digital
Census for 2021•

INR 1500 crore earmarked for providing
financial incentive to promote digital payment
mode•

The Budget 2021 proposes a whole newgambit of technology for MCA-21 3.0
including data analytics, artificial intelligence,machine learning to make regulatory filings
smooth for businesses and startups toimprove the experience of the users

25

Comprehensive analysis: Union Budget 2020-21•

Asset monetisation dashboard proposed
for tracking the investment of various
mega infrastructure projects of the country
including the roads, highways, railways,
petroleum•

The real time information available
through the proposed dashboards will in
the longer run provide data sets ready to
be analysed and improve the investor’s
decision-making capabilities

Real estate

Key highlights
REITs/InvITs••

Affordable housing

Debt financing of REITs/InvITs by FPIs will be •enabled by making suitable amendments in therelevant legislations. This will further easeaccess of finance to InvITS and REITs thus
augmenting funds for infrastructure and real•estate sectors
Dividend paid to REITs/InvITs shall be exempt
from TDS. The taxability of dividend will be
determined in the hand of recipient. This will
boost more retail investors participation inprimary REIT/InVIT issues•

Eligibility of incremental deduction of interestof INR 1.5 lakh , introduced in Budget 2019,has been extended by one more year up to
31 March 2022

To support affordable housing developers,
tax holiday has been extended by one more
year up to 31 March 2022
Tax exemption extended to notified
affordable rental housing projects primarily
focusing on migrant labourers

Safe harbour on real estate
property•

26

Comprehensive analysis: Union Budget 2020-21

To avoid any income tax litigation on sale ofreal estate property by developers, it is
proposed to increase the safe harbour to
20% from 10% between the transaction
value and SDV of such property

Annexure (1/4)

Changes in basic customs duty for creating level-playing field for the benefitof farmer, MSME and other domestic manufacturers (effective from 2
February 2021)
Prebudget

Postbudget

Cotton0%

5%

Cotton waste

NIL

10%

Raw silk (not thrown) and silk yarn /yarn spun from silk
waste

10%

15%

Denatured ethyl alcohol (ethanol) for manufacture of
excisable goods

2.5%

5%

Prawn feed

5%

15%

Fish feed in pellet form

5%

15%

Flours, meals and pellets of fish, crustaceans, molluscs
or other aquatic invertebrates

5%

15%

Maize bran

NIL

15%

De-oiled rice bran cake

NIL

15%

Carbon black

5%

7.5%

Bisphenol A

NIL

7.5%

Epichlorohydrin

2.5%

7.5%

Builder’s ware of plastic, not elsewhere specified or
included

10%

15%

Polycarbonates

5%

7.5%

Category

Agricultural
products
and fishery
SectorChemicals

Plastics

27

Description of goods

Comprehensive analysis: Union Budget 2020-21

Annexure (2/4)

Changes in basic customs duty for creating level-playing field for the benefitof farmer, MSME and other domestic manufacturers (effective from 2 February2021) (Continued)
Prebudget

Postbudget

Wet blue chrome tanned leather, crust leather, finishedleather of all kinds, including their splits and slides

NIL

10%

Cut and polished cubic zirconia

7.5%

15%

Synthetic cut and polished stones

7.5%

15%

Tunnel boring machines

NIL

7.5%

Parts and components for manufacture of tunnel boringmachines

NIL

2.5%

Auto sector

Specified auto parts such as ignition wiring sets, safety
glass and parts of signaling equipment

7.5% /
10%

15%

Metal
products

Screws, nuts, etc.

10%

15%

Category
LeatherGems andJewellery

Capitalgoods andMachinery28

Description of goods

Comprehensive analysis: Union Budget 2020-21

Annexure (3/4)
Changes in customs duty to promote value addition in the electronics sector

Prebudget

Postbudget

Inputs, parts or sub-parts for manufacture of specified
parts of mobile phones including:(1) PCBA(2) Camera module(3) Connectors(To apply with effect from 1 April 2021)

0%

2.5%

PCBA and moulded plastic for manufacture of charger or adapter

10%

15%

Inputs and parts (other than PCBA and moulded plastic) of mobile charger

Nil

10%

Inputs, parts and sub-parts (other than PCBA and Li-ion cell) for
manufacture of Lithium-ion battery and battery pack(To apply with effect from 1 April 2021)

0

2.5%

Specified insulated wires and cables

7.5%

10%

Inputs and parts of LED lights or fixtures including LED Lamps

5%

10%

Solar inverters

5%

20%

Solar lanterns or solar lamps

5%

15%

Description of goods

29

Comprehensive analysis: Union Budget 2020-21

Annexure (4/4)

Changes in customs duty on raw materials and inputs used by domestic
manufacturers for reducing cost of inputs and correction of inverted duty
structure
Inputs/raw
materials(for sector)

Description of goods

Prebudget

Postbudget

Petrochemical
Industry

Naphtha4%

2.5%

TextileIndustry

Caprolactam

7.5%

5%

Nylon chips

7.5%

5%

Nylon fibre and yarn

7.5%

5%

Iron and steel melting scrap, including stainless steel
scrap (up to 31 March 2022)

2.5%

NIL

Primary/semi-finished products of nonalloy steel

10%

7.5%

Flat products of non-alloy and alloy-steel

10%/
12.5%

7.5%

Long products of non-alloy, stainless andalloy steel

10%

7.5%

Raw materials used in manufacture of CRGO Steel

2.5%

NIL

Copper scrap

5%

2.5%

Aviation
SectorComponents or parts, including engines, formanufacture of aircrafts by public sector units of the
Ministry of Defence

2.5%

0%

Precious
MetalsGold and silver*

12.5%

7.5%*

Gold dore bar*

11.85%

6.9%*

Silver dore bar*

11%

6.1%*

Platinum, Pallidum, etc.

12.5%

10%

Gold/silver findings

20%

10%

Waste and scrap of precious metals

12.5%

10%

Feed additives or pre-mixes

20%

15%

Ferrous andnon-ferrous
metalsAnimalHusbandry* Also to attract agriculture infrastructure and development cess at the rate of 2.5%30

Comprehensive analysis: Union Budget 2020-21

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