FISCAL POSITION

Union Budget 2021, the first budget of the decade, also the first digital budget, presented in the backdrop of COVID-19 crisis, estimates total expenditure for 2021-22 at Rs 34.8 lakh crores. Expenditure in 2021-22 has increased at an annual rate of 14% over 2019-20. Revenue expenditure (expenditure for the normal running of government departments, interest charges on debt) is estimated to be Rs 29.3 lakh crores and capital expenditure (government spending that goes into the creation of assets like schools, hospitals, roads, etc.) is estimated to be Rs. 5.5 lakh crores.

Government Receipts (income of the government) are estimated at 19.7 lakh crores (an increase of 6% over 2019-20) leaving deficit of 15 lakh crores to be covered by borrowings (27% annual increase over 2019-20). Fiscal deficit (difference between the total income of the government and its total expenditure) is estimated to be 6.8% of GDP. Government borrowing from the market is planned around Rs 12 lakh crores. The rest is to be funded through multilateral borrowings, Small Saving funds and short-term borrowings. The nominal GDP is estimated to grow at a rate of 14.4% in 2021-22.

Last Year’s Fiscal Position

Budget 2020-21 estimated total expenditure at Rs 30.4 lakh crores, but the actual expenditure came out to be Rs 34.5 lakh crores. Revenue receipts which were estimated to give the government 20 lakh crores were revised to Rs 15.5 lakh crores. Fiscal deficit estimated at 3.5 % of the GDP was pegged at 9.5 % of the GDP.

Break Up of Government Receipts

SourceEstimates (in lakh crore)
A. Tax Receipts 
i) Indirect Taxes11.2 (6.3 from GST)
ii) Income Tax5.61
iii) Corporation Tax5.47
iv) Excise Duty3.35
B. Non-Tax receipts2.43
C. Disinvestments1.75

Non-tax revenue consists of interest receipts on loans given by the centre, dividends and profits, external grants and receipts from general, economic, and social services, among others.

Gross Tax revenue is estimated at Rs 22.1 lakh crores, of which the central government’s share is Rs 15.45 lakh crore. Devolution to states, estimated at 6.65 lakh crores, is marginally higher than last year’s devolution.

DIRECT TAX PROPOSALS

  • Exemption from filing tax returns for senior citizens over 75 years of age and having only pension and interest income
  • National Faceless Income Tax Appellate Tribunal Centre to be established
  • Eligibility for tax holiday claim for start-ups extended by one more year
  • Capital gains exemption for investment in start-ups extended till 31 March,2022

INDIRECT TAX PROPOSALS

  • Reduction in Custom Duty: On certain Iron and steel products, Textile products, Gold and Silver, Chemicals.
  • MSME- To incentivise exports of garments, leather and handicraft items, exemption on import of duty-free items rationalised.
  • Agriculture- Customs duty on cotton set at 10% and increase on duty on raw silk and silk yarn from 10% to 15%.

What’s cheaper, What’s costlier

Costlier

  • Cars
  • Electronic appliances
  • Leather Items
  • Shoes
  • Mobiles and Home Appliances

Cheaper

  • Gold, silver and other precious metals like platinum and palladium
  • Medical devices imported by international organisation and diplomatic missions
  • Nylon Clothes

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