2020 was a tough year for a lot of people. Millions were left jobless, homeless, got sick, and faced sudden deaths. The lockdown due to the pandemic could be categorized as one of the worst things to happen to India in the recent past. Our economy was hit hard.
February 1st will see eyes being glued to smartphones and computers with the Finance Minister Nirmala Sitharaman presenting the Budget and hoping that there’s a positive change in the economy since the pandemic.
This presentation comes at a difficult time, and shall reveal what it will bring with it.
The advance estimates of 2020-21 projects India’s economy to contract by 7.7 per cent. After two successive quarters of decline, the Indian economy was seen slipping into a technical recession. But with the festivities and pent-up push the contraction seemed to be slowing down in the second quarter of FY21.
According to experts, the economy may rebound come the next fiscal, considering the continued recovery and low base effect. The Budget is being considered the key driver of the growth for now.
About the IT Sector in India
There’s no doubt that India was left out of the benefits that came with the first two industrial revolutions, while due to its own fault missing out on being a part of the third. This time around, it is India’s time to shine and lead this industrial revolution with the help of artificial intelligence and data science.
Ideally, this Budget should be flooding the productivity and employment multiplier by providing a lavish funding to data science, passed onto research and commercial data centres.
It can be said that data science is the newest form of wealth. This includes Big data – the use of online platforms and the Internet of Things (IoT) by the masses that generates huge volumes of information. The interconnected gadgets collect information related to the people using them, and the activities that are being carried out. After this, Artificial Intelligence is used to analyse this information to predict future trends and patterns that help businesses and science flourish.
The benefits of investing in the data-based economic world can only be reaped with the quality of digital infrastructure and human resources. With the Budget financing this field and creating regulatory policies, a national data pool can be created to increase the productivity of the economy and generate employment.
About the Tax Disputes in India
The Budget is presumed to unveil a framework for quicker resolution of the disputes held over direct taxes. The government might be exploring options like permanent dispute resolution or mediation systems that have certain pre-specified benchmarks. These will be based on the ‘Vivad Se Vishwas’ scheme.
The idea is to reduce litigation which could potentially free Rs. 8 lakh crore that is stuck in direct tax disputes. The current faceless assessment along with another settlement mechanism, the disputes can be contained. The settlement mechanism offers a one-time opportunity only to resolve disputes and there are only a handful of cases that can be resolved using this mechanism.
Here, a taxpayer shall only be able to file an application if their case is already pending with the assessing officer and it has not been time-barred. Furthermore, the disposal of settlement applications usually sees a considerable delay. Through the alternate dispute mechanism, it is expected that the disputes shall be settled at earlier stages.
About the Industry Expectations
A Deloitte survey shows that about 50 per cent of the respondents from the industry have shown faith towards the upcoming Union Budget. Their hopes are that this time around, their businesses shall be revived and the economy shall recover.
Others have talked about how raising the tax exemption limit for individuals may provide a boost to private investment and consumption. The consumption was largely affected due to restrictions in movement and precautions many were taking to remain healthy.
The survey talks about how the industry expects the government to pull their focus towards creating jobs so that the demand and income can get the push it requires. The survey includes industries like the sciences, infrastructure and power, automobile, telecommunication, etc. All of these have made sure to talk about the need to increase the investment in research and development.
The Government’s Efforts
There is no doubt that the government intends on spending the required amounts to ensure that the country’s economy is revived. The push on infrastructure is expected to have a multiplier effect on the economy. According to the Finance Minister, the deficit concerns won’t be holding her back from pumping the economy.
An individual claiming tax deduction Under Section 80C, is expected to now be able to do so with the limit increasing from ₹1.5 lakh to ₹2.5-3 lakh. This includes payments like principal payment of home loan, provident funds, life insurance premiums, etc.
The government is also trying to boost the affordable housing scheme for the common man by introducing more tax exemptions.
Furthermore, the new work from home environment is becoming the norm which is why the Union Budget is expected to look into the deduction of expenses incurred by a salaried professional by working from home.
The government is currently also struggling with the revenue situation which makes it tough to look into further tax SOPs. The ideal situation would have the Budget focusing on ensuring that the generation of non-tax revenue is increased. Another expectation could be of a large scale asset sale programme.
According to reports, the Halwa ceremony was completed and expects the Budget to be paperless, owing to the COVID-19 pandemic situation. The Parliamentarians shall receive soft copies of The Budget.