Union Budget 2021 to Stimulate the Business Ecosystem
- BY Jaspreet Kaur
Feature Writer, BusinessEx
- Feb 01,2021
- 12 Mins Read
In the latest Union Budget 2021, Finance Minister, Nirmala Sitharaman has made an array of proclamation, upholding and funding industries to withstand global calamity. The country's business ecosystem is primarily targeted in the recent budget thereby, taking various actions to strengthen it anew, which are as follows:
The government has planned to reserve INR 15,700 crore in the financial year 2022 for the MSME sector that is twice more than previous year’s allocation. In addition, it has proposed to decrease margin money requirement from 25 per cent to 15 per cent for startups.
To incentivise startups, the government to stimulate incorporation of one person companies, a move that will benefit startups and innovators.
Incorporation of one person companies will be stimulated by allowing such companies "to grow without restriction on paid up capital and turnover, allowing conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days, and allow also non-resident Indians to incorporate OPCs in India," Sitharaman, the Finance Minister of India, said in the budget speech.
To aid startups in adversity, the government has extended tax holiday for startups by 1 year and exempted capital gains on investment in startups extended by 1 year.
FDI and Investment
The government has proclaimed a surge in Foreign Direct Investment limit in insurance from 49 per cent to 74 per cent. Focusing on investors, a proposition to initiate investor charter was made as a right for all investors in financial products.
Sitharaman said, "We propose to amend the Insurance Act, 1938 and will launch a new investor charter for investor protection. (The government) will launch a securities market code which will include the SEBI Act, the government Securities Act and the Depositories Act."
The FM has said that decriminalisation of offences under the Companies Act is now complete. She proposed to complete the decriminalisation of the Limited Liability Partnership Act of 2008.
Financial and Infrastructure Sector
The government has concentrated on manufacturing, targeting a double digits growth for a sustained period. Therefore, a PLI scheme has been proclaimed for 13 sectors. INR 1.97 lakh crore has been earmarked for the period of 5 years.
The FM also proclaimed that 7 textile parks will be added in the coming three years.
"(The government) will introduce a bill to set up a Development Finance Institution, and have provided INR 20,000 crore for this. We should have a lending portfolio of INR 5 lakh crore in three years' time," Sitharaman added.
The National Infrastructure Pipeline was launched with 6,835 projects, which has now expanded to 7,400 projects. As per the budget, both the government and financial sector have to increase indfusion in the NIP.
In the recent budget, the government has not touched direct taxes; however, done variations in direct tax incentives to ease compliance for taxpayers. For small taxpayers, the government has introduced a faceless dispute resolution mechanism. It will notify regulations to remove double tax for NRIs on foreign retirement funds. For ease of compliance, the FM has waived dividend payment for REIT and InVIT from tax.
It is also proposed to increment the threshold for tax audit to INR 10 crore from INR 5 crore, for income taxpayers performing 95 per cent transactions digitally. Also, FPI will get a tax deduction on dividends at a lower treaty rate. A tax exemption will be rendered for relocating funds to IFSC.
The Indian business landscape is going to unveil changes led by the recent budget. It is believed that the economy will get stimulation with these moves.
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