Union Budget 2021 India: The primary focus of Budget 2021 is on ease of doing business and reducing tax litigation in India by promoting a transparent, efficient and effective tax system.
By Gaurav Karnik,
Indian Union Budget 2021-22: India’s first Budget post the onset of Covid-19 was one of the most awaited budgets expected to bring in significant changes so as to boost recovery in the economy. The primary focus of Budget 2021 is on ease of doing business and reducing tax litigation in India by promoting a transparent, efficient and effective tax system. While the Budget speech didn’t suggest any major reform, the fine print of the Finance Bill provided significant amendments.
From a compliance and litigation perspective there have been major changes. It is proposed to bring income tax appellate tribunal (ITAT) proceedings under the faceless regime.
In order to ease litigation for small & medium taxpayers(with income up to Rs 50 lakh), a dispute resolution committee is proposed to be formed.
A board for advance rulings has been introduced comprising persons of level of Chief Commissioner of income tax and the orders passed by such authority being appealable to the High Court which was not the case earlier. At the same time, the Settlement Commission has been discontinued and an interim board for settlements shall be constituted which shall take over pending applications.
Digitisation being at its peak, further incentive has been announced in the form of exemption for tax audit for persons whose turnover upto Rs 10 crore from existing Rs 5 crore where at least 95% of transactions take place through banking channels.
Time limits & due dates for compliance have also been revised such as time limit for completion of regular & best judgement assessments have been reduced by 3 months, time limit for reopening of assessment has been reduced from 6 years to 3 years and due dates for filing of revised/ belated returns is reduced by 3 months.
Similar to tax collection at source provisions, tax deduction at source on purchase of goods @ 0.1% by buyer has been introduced. However, if such transaction is covered under both TDS and TCS provisions, TDS provisions shall prevail.
On equalisation levy provisions introduced last year, it has been clarified certain aspects related to definition of ‘online sale of goods/ provision of services’ and excluding the transactions which are already subject to tax as royalty or fee for technical services (FTS) from its ambit.
The exemption introduced last year for sovereign wealth fund and pension funds have been liberalised and rationalised which should help spur further investment in the infrastructure sector. A series of tax exemption have been given to aircraft leasing companies, relocation of funds to the IFSC and investment divisions of foreign banks located in the IFSC.
Keeping the privatisation and disinvestment plans in perspective, conditions related to carry forward of losses and tax neutral demerger for PSUs have been liberalised.
Overall, the Budget 2021 has not only clarified/ expanded the scope of various provisions under the income tax law but has also taken a step towards more stringent compliance timelines, thereby accelerating the litigation process and removing uncertainty for taxpayers.
The author is Partner & National Leader-Real Estate, EY India