The 2021 Union Budget is a comma and not an exclamation point


At 11am, when Nirmala Sitharaman started to read out the budget, she spent the first 25 minutes going over what the government had announced just five months ago. If you really think about it, this is the Finance Minister’s fourth budget in the past year. 

The first was the 2020 union budget last February. The second was during the lockdown when the government said they were pumping cash through schemes worth ₹20 lakh crore, experts said it was less. Then a quarter later, the finance minister was back again. This time with budget #3. And then five months later, she presented the 2021 union budget (budget #4). 

We discussed this in a previous post where we said that due to rising debt and slowing GDP, job creation may become difficult. When she actually got down to the budget some of it was reinforcing what was announced in her three previous attempts. There were some new line items as well. That’s important.

Look, the budget is a lot of noise. 

₹10,000 crore for infrastructure, 137% more for healthcare, fine print on alcohol cess, details, convoluted statements. It has everything. But that’s not why you’re here. That’s something the newspapers detailed out for you. You’re here because you want to understand how this budget affects you. You directly. 

So, let’s break it down. 

Let us give you six things that you need to care about and what they mean.

1. Gold: The minister announced that the government would be reducing import duties on gold & silver from 12.5% to 7.5%. But then stuck on a small 2.5% cess, which would aid agriculture and development. How does it affect you? When you’re out to buy gold, it is cheaper. 

2. Pre-filled ITR forms: These are a pain. So far, those who fill these forms themselves and haven’t farmed it out to their CA, will know that forms come prefilled with your income and TDS included. Now, the returns form will have capital gains dividend and interest incomes on it as well. It does two things.

  1. Reduce the time it takes to file your taxes
  2. Reduces chances of error and then fearing the tax notice

But there is some nuance here. Over the last few years, the government has doubled down on linking all your financial transactions and investments to your PAN and Aadhar card. This has helped the government collate information and ease the filing process. There is a conversation here to be had about privacy, but we’ll leave that for another time. 

3. Double taxation: Non-Resident Indians (NRIs) usually have a complex task at hand when they have to consolidate accrued income in foreign accounts. Getting tax credits in India is hard. Without going into the details, the Finance Minister has proposed alterations to double taxation rules, which simplifies things for them.

4. Tax on capital gains: There was no change. We’ll repeat. No change. Yes, it may have played better if the tax limits on gains from capital were increased. But no change is positive too. 

5. Tax slabs: It is the same as last year. And if you remember last year’s budget, then you know that it’s actually the same as the year before, if you wish to make that choice.

6. Startups: The government extended the tax holiday for startups by another year. It doesn’t mean much since most tech startups across the world, especially in the early stage, don’t generate profits.

Now that you’ve got your bit. There is a wider point of view that may affect you. It was a challenging budget. The novelty factor had faded and there was a tightrope to walk. There were some who assumed that Sitharaman would lean towards austerity and tax the middle class. She removed the taxman from most interactions, including the tribunal where disputes land up. To offer comfort to taxpayers she even reduced the time to reopen tax assessments to three years, half of the earlier limitation period. Only those disputes that have good evidence of evasion of more than ₹50 lakh can be reopened after three years. All of this means less friction for you. 

Fuel prices will eventually go up, a cess on goods also increases prices, even if it’s just a little bit. One of the most significant aspects of the direction the government is headed is tucked away in one of the annexures. It revealed that the government has steadily increased customs duty on 4,000 items over the past six years. That means the government has been building a wall to protect domestic industry. There will be a subtle push to buy products manufactured in India compared to those overseas (Read China). The made in India logo may start to take a greater significance in your life. 

All of this is to kickstart the economy. India has gone through several phases of growth drivers. From liberalization to outsourcing to name just two. But these cards can only be played so many times. This time, the finance minister has decided not to stifle wealth creation but chose entrepreneurship as her growth driver. She has asked private enterprises to pave the way for a new India. 

But you know this better than anyone, there is always a difference between the forecasting you do on your spreadsheet and the actual spends to chase your ambitions. The real challenge begins now. Stay with us through the year and we’ll help shine light on everything you will need to know.

about CRED

CRED is a members-only platform that rewards the creditworthy individuals of India with exclusive experiences, rewards and upgrades.