The Finance Minister kept her word of bringing a Budget which was “a budget like never before” when she did away with the reams of Budget documents and presented a paperless budget. But the difference ended there. As earlier, the FM’s Budget speech went on interminably – for an hour and forty-eight minutes. There were no path-breaking announcements either but then the FM’s hands were severely tied in the wake of the coronavirus pandemic. As Mrs Nirmala Sitharaman clarified quite early in her speech, out of the total Budget Expenditure of Rs.34.5 lakh crore in FY 2020-21, the Atmanirbhar Bharat packages (which were mini-Budgets in themselves) accounted for Rs 27.1 lakh crore. She took pride in keeping expenditure on an even keel, at a time of falling revenues, but the Revised Estimates for 2020-21 show a fiscal deficit of 9.5 per cent, as against the Budget Estimate of 3.5 per cent, raising concerns of inflation.

The pandemic showed up the chinks in our healthcare sector, and as expected, the healthcare sector got a big push with aggregate allocation increasing from Rs 94,452 crore to Rs 2,23,846 crore ~ an increase of 137 per cent. A sum of Rs. 35,000 crore has been earmarked for Covid-19 vaccine development and a sum of Rs 64,180 crore has been allocated to Pradhan Mantri Aatmanirbhar Swasth Bharat Yojana (PMASBY) for developing primary, secondary, and tertiary healthcare in addition to the National Health Mission in the next six years. The FM has further promised 17,000 rural and 11,000 urban health and wellness centres and integrated public health labs in each district under PMASBY.

A major beneficiary of increased budget allocation has been the railways, which got an injection of the “record sum of Rs 1,10,055 crore, of which Rs 1,07,100 crore was for capital expenditure only.” The major part of this expenditure would be on the Eastern and Western Dedicated Freight corridor, which are expected to be commissioned by June 2022. Electrification of tracks and construction of some new track accounts for the rest of the expenditure. However, surprisingly, no date for resumption of regular train services was announced by the FM.

The three poll-bound states got special treatment with allocation of special funds for road and highway development projects, with Kerala getting Rs.65,000 crore, Assam Rs 3,400 crore and West Bengal Rs 25,000 crore.

Budget 2021 sets great store by divestment, with Air India, Pawan Hans, BPCL, SCI, IDBI and BEML proposed to be sold in 2021-22. The FM, without naming, told that two public sector banks and one general insurance company are also to be sold in 2021-22. The increase in FDI limit in the insurance sector by 25 per cent to 74 per cent appears to be designed to facilitate disinvestment in LIC and the other unnamed insurance company. As an incentive for disinvestment, purchasers of PSUs would be allowed to claim the PSU’s earlier losses. The Eastern and Western Dedicated Freight Corridors are proposed to be monetised at the earliest, which may explain the large expenditure on railway infrastructure in the current Budget.

Additionally, the Government has asked Niti Aayog to identify the next lot of companies for strategic sale. The wholesale divestment of PSUs has been criticised by the Opposition, which has accused the Government of handing over the nation’s assets to crony capitalists. As a caveat, it is worth mentioning that the Government has not been very successful in divesting its assets in the last six years; almost all sales of PSUs have been to other PSUs.

The defence budget has remained almost static with the allocation for defence increasing marginally from Rs 4.71 lakh crore to Rs 4.78 lakh crore, which appears insufficient in light of the current stand-off with China. Perhaps, the Government hopes for an early resolution to the conflict.

Counterintuitively, Customs Duties have been increased on a host of items including mobile phones, electronic items and food items like apples, peas, kabuli chana, Bengal gram/chickpeas and lentils, while Customs Duty has been reduced on gold and silver. A new cess, Agriculture Infrastructure and Development Cess, is to be imposed on petrol at Rs 2.50 per litre and on diesel at Rs 4 per litre. For other items Agriculture Infrastructure and Development Cess is to be paid at 2.5 per cent. This levy is sure to set off an inflationary cycle which would be worsened by the projected Budget Deficit of 6.8 per cent in 2021-22, as against the 3 per cent prescribed by the FRBM Act.

The Budget proposals on Direct Taxes are not noteworthy. Tax slabs have been left unchanged but there have been some small procedural changes. In line with the faceless philosophy, proceedings before the Income-tax Appellate Tribunal, which is the highest fact-finding body under the Income-tax Act, have been made faceless. The Income-tax Settlement Commission, a statutory arbitration body existing for more than 50 years, has been abolished with effect from 1 February 2021, which appears retrograde, coming at a time when the Government and the legal fraternity are batting for conciliation and arbitration.

There is good news for pensioners over 75 years who would not have to file their return of income. For salary earners, tax exemption to cash allowance in lieu of LTC, has been given statutory recognition. Units located in the International Financial Services Centre (IFSC), Gandhinagar have been incentivised with exemptions. The time limit for filing of tax returns, assessment of tax returns and selection of tax returns for scrutiny all have been reduced by three months. The benefit of these provisions is not clear.

Formation of Dispute Resolution Committees (DRCs) has been proposed for taxpayers, where the returned income is less than Rs 50 lakh and the aggregate monetary value of the dispute is less than Rs 10 lakh. The FM has done well to supplant the Authority for Advance Rulings (AAR) with a Board for Advance Rulings. The AAR was a high-profile body headed by a retired judge of the Supreme court and having a Supreme Court/High Court judge as member, took at least five years to deliver judgements. The new Board for Advance Rulings would be manned by senior serving officers of the Income-tax Department, who, it is hoped, would be more prompt in adjudication.

A point of concern is the proposal to scrap commercial vehicles after 15 years and private vehicles after 20 years. There are many senior citizens who do not have the wherewithal to change their old cars, which are necessities but are not much used on day to day basis. Such people would find their satisfactorily running cars scrapped by passage of time.

There are some disappointments in the Budget also. Not much attention has been paid to the cutting of wasteful expenditure. Centrally Sponsored Schemes and Central Sector Schemes that account for Rs 14.32 lakh crore of expenditure have not been reviwed. Perhaps, badly performing Schemes could have been axed or modified. Revenue shortfall of Rs 5.43 lakh crore in the year 2020-21, is a cause of concern. Budget Estimates for 2021-22 peg Revenue Receipts at Rs 22.17 lakh crores – an increase of 17 per cent over the Revised Estimates for 2020-21, which may not materialise, even after the steep hikes in the duties on petrol and diesel.The Budget has not fulfilled the expectations of many who were waiting for something revolutionary ~ provisions to enhance expenditure, to kickstart the economy. But what George Washington had said more than three centuries ago about the Budget still holds true: “We must consult our means rather than our wishes.”

In the ultimate analysis, the Finance minister has been wise in not going overboard and keeping expenditure within reasonable limits.

The writer is a retired Principal Chief Commissioner of Income-TaxThe Finance Minister kept her word of bringing a Budget which was “a budget like never before” when she did away with the reams of Budget documents and presented a paperless budget. But the difference ended there. As earlier, the FM’s Budget speech went on interminably – for an hour and forty-eight minutes. There were no path-breaking announcements either but then the FM’s hands were severely tied in the wake of the coronavirus pandemic. As Mrs Nirmala Sitharaman clarified quite early in her speech, out of the total Budget Expenditure of Rs.34.5 lakh crore in FY 2020-21, the Atmanirbhar Bharat packages (which were mini-Budgets in themselves) accounted for Rs 27.1 lakh crore. She took pride in keeping expenditure on an even keel, at a time of falling revenues, but the Revised Estimates for 2020-21 show a fiscal deficit of 9.5 per cent, as against the Budget Estimate of 3.5 per cent, raising concerns of inflation.

The pandemic showed up the chinks in our healthcare sector, and as expected, the healthcare sector got a big push with aggregate allocation increasing from Rs 94,452 crore to Rs 2,23,846 crore ~ an increase of 137 per cent. A sum of Rs. 35,000 crore has been earmarked for Covid-19 vaccine development and a sum of Rs 64,180 crore has been allocated to Pradhan Mantri Aatmanirbhar Swasth Bharat Yojana (PMASBY) for developing primary, secondary, and tertiary healthcare in addition to the National Health Mission in the next six years. The FM has further promised 17,000 rural and 11,000 urban health and wellness centres and integrated public health labs in each district under PMASBY.

A major beneficiary of increased budget allocation has been the railways, which got an injection of the “record sum of Rs 1,10,055 crore, of which Rs 1,07,100 crore was for capital expenditure only.” The major part of this expenditure would be on the Eastern and Western Dedicated Freight corridor, which are expected to be commissioned by June 2022. Electrification of tracks and construction of some new track accounts for the rest of the expenditure. However, surprisingly, no date for resumption of regular train services was announced by the FM.

The three poll-bound states got special treatment with allocation of special funds for road and highway development projects, with Kerala getting Rs.65,000 crore, Assam Rs 3,400 crore and West Bengal Rs 25,000 crore.

Budget 2021 sets great store by divestment, with Air India, Pawan Hans, BPCL, SCI, IDBI and BEML proposed to be sold in 2021-22. The FM, without naming, told that two public sector banks and one general insurance company are also to be sold in 2021-22. The increase in FDI limit in the insurance sector by 25 per cent to 74 per cent appears to be designed to facilitate disinvestment in LIC and the other unnamed insurance company. As an incentive for disinvestment, purchasers of PSUs would be allowed to claim the PSU’s earlier losses. The Eastern and Western Dedicated Freight Corridors are proposed to be monetised at the earliest, which may explain the large expenditure on railway infrastructure in the current Budget.

Additionally, the Government has asked Niti Aayog to identify the next lot of companies for strategic sale. The wholesale divestment of PSUs has been criticised by the Opposition, which has accused the Government of handing over the nation’s assets to crony capitalists. As a caveat, it is worth mentioning that the Government has not been very successful in divesting its assets in the last six years; almost all sales of PSUs have been to other PSUs.

The defence budget has remained almost static with the allocation for defence increasing marginally from Rs 4.71 lakh crore to Rs 4.78 lakh crore, which appears insufficient in light of the current stand-off with China. Perhaps, the Government hopes for an early resolution to the conflict.

Counterintuitively, Customs Duties have been increased on a host of items including mobile phones, electronic items and food items like apples, peas, kabuli chana, Bengal gram/chickpeas and lentils, while Customs Duty has been reduced on gold and silver. A new cess, Agriculture Infrastructure and Development Cess, is to be imposed on petrol at Rs 2.50 per litre and on diesel at Rs 4 per litre. For other items Agriculture Infrastructure and Development Cess is to be paid at 2.5 per cent. This levy is sure to set off an inflationary cycle which would be worsened by the projected Budget Deficit of 6.8 per cent in 2021-22, as against the 3 per cent prescribed by the FRBM Act.

The Budget proposals on Direct Taxes are not noteworthy. Tax slabs have been left unchanged but there have been some small procedural changes. In line with the faceless philosophy, proceedings before the Income-tax Appellate Tribunal, which is the highest fact-finding body under the Income-tax Act, have been made faceless. The Income-tax Settlement Commission, a statutory arbitration body existing for more than 50 years, has been abolished with effect from 1 February 2021, which appears retrograde, coming at a time when the Government and the legal fraternity are batting for conciliation and arbitration.

There is good news for pensioners over 75 years who would not have to file their return of income. For salary earners, tax exemption to cash allowance in lieu of LTC, has been given statutory recognition. Units located in the International Financial Services Centre (IFSC), Gandhinagar have been incentivised with exemptions. The time limit for filing of tax returns, assessment of tax returns and selection of tax returns for scrutiny all have been reduced by three months. The benefit of these provisions is not clear.

Formation of Dispute Resolution Committees (DRCs) has been proposed for taxpayers, where the returned income is less than Rs 50 lakh and the aggregate monetary value of the dispute is less than Rs 10 lakh. The FM has done well to supplant the Authority for Advance Rulings (AAR) with a Board for Advance Rulings. The AAR was a high-profile body headed by a retired judge of the Supreme court and having a Supreme Court/High Court judge as member, took at least five years to deliver judgements. The new Board for Advance Rulings would be manned by senior serving officers of the Income-tax Department, who, it is hoped, would be more prompt in adjudication.

A point of concern is the proposal to scrap commercial vehicles after 15 years and private vehicles after 20 years. There are many senior citizens who do not have the wherewithal to change their old cars, which are necessities but are not much used on day to day basis. Such people would find their satisfactorily running cars scrapped by passage of time.

There are some disappointments in the Budget also. Not much attention has been paid to the cutting of wasteful expenditure. Centrally Sponsored Schemes and Central Sector Schemes that account for Rs 14.32 lakh crore of expenditure have not been reviwed. Perhaps, badly performing Schemes could have been axed or modified. Revenue shortfall of Rs 5.43 lakh crore in the year 2020-21, is a cause of concern. Budget Estimates for 2021-22 peg Revenue Receipts at Rs 22.17 lakh crores – an increase of 17 per cent over the Revised Estimates for 2020-21, which may not materialise, even after the steep hikes in the duties on petrol and diesel.The Budget has not fulfilled the expectations of many who were waiting for something revolutionary ~ provisions to enhance expenditure, to kickstart the economy. But what George Washington had said more than three centuries ago about the Budget still holds true: “We must consult our means rather than our wishes.”

In the ultimate analysis, the Finance minister has been wise in not going overboard and keeping expenditure within reasonable limits.

The writer is a retired Principal Chief Commissioner of Income-Tax