Home / Budget / Opinion /  Ten key things to know about the budget

Finance minister Nirmala Sitharaman’s budget speech was all of 9,701 words. This was around 43% shorter than the 17,031-word speech she delivered last February. The shortness of the budget speech not-withstanding, here’s a one-stop shop for what the budget had to offer

What  are  the  changes  on the personal tax front?

The minimum taxable income continues to remain the same and so do the basic tax slabs. Nonetheless, the government proposes to tax capital gains made while selling cryptos, at the rate of 30%. Also, if a capital loss is suffered when selling cryptos, that loss cannot be set off against any other income. Further, taxpayers will be allowed to file an updated return in case they have committed mistakes in correctly estimating their income for tax payment.

Any goodies for the middle class?

It was widely being speculated that the government might increase the tax deduction available on the interest that is paid on a home loan from the current 200,000. But that hasn’t happened. Nonetheless, employees of state governments will be pleased. As of now, the central government contributes 14% of the salary of its employees to the National Pension System (NPS) Tier-I. This is allowed as a deduction when calculating the taxable income. When it comes to state government employees, such deduction is allowed only to the extent of 10%. The budget has proposed to increase this to 14%.

Where’s the fiscal deficit headed?

The revised fiscal deficit for 2021-22 is expected to be at 15.91 trillion, or 6.9% of the gross domestic product (GDP). It was budgeted to be at 6.8% of the GDP. Fiscal deficit is the difference between what a government earns and what it spends during a given year, expressed as a percentage of the GDP. The revised fiscal deficit is only marginally higher than the budgeted one, despite the government’s expenditure being revised to 37.70 trillion which is around 8.2% higher than the budgeted 34.83 trillion. This has happened on the back of surging tax collections.

How big is the surge in tax collections?

The revised gross tax revenue for 2021-22 is expected to be at 25.16 trillion against the budgeted 22.17 trillion. Gross tax revenue is the total tax that the central government earns. A portion of these taxes is shared with the state governments. What remains is the net tax revenue. The revised net tax revenue for 2021-22 is at 17.65 trillion against the budgeted 15.45 trillion. This increase has helped maintain the fiscal deficit at 6.9% despite the higher expenditure.

How are numbers for next year looking?

The jump in tax collections is expected to continue next year, with the government budgeting to earn a total gross tax revenue of 27.58 trillion. Due to this jump, the fiscal deficit is expected to come down to 6.4% of the GDP. Also, the government has planned to increase the capital expenditure in 2022-23 to 7.50 trillion against 6.03 trillion this year. This increase should help in creation of assets which will be beneficial in the future.

What about divestment of public sector units?

This year the government had hoped to earn 1.75 trillion through the disinvestment of its stake in public sector units. The revised estimates suggest the government now hopes to earn 78,000 crore. Between April and December 2021, the government has earned just 9,364 crore. With no other big disinvestment on the cards, the only conclusion one can draw is that the disinvestment of Life Insurance Corporation of India (LIC) is likely to happen before March. Finance minister Sitharaman said that “the public issue of the LIC is expected shortly." For 2022-23, disinvestment is expected to fetch 65,000 crore.

Any other steps that the Centre is planning?

In 2022-23, 80 lakh houses will be completed for the beneficiaries of PM Awas Yojana. The government has allocated 48,000 crore for this purpose. In the current financial year, the government plans to spend 47,390 crore under the scheme against the budgeted 27,500 crore. The construction of housing has a multiplier effect on the economy, with everything from cement demand to labour demand being positively impacted.

Any futuristic ideas in the budget?

The government plans the use of ‘Kisan Drones’ to be promoted for crop assessment, digitization of land records, spraying of insecticides, and nutrients. Over and above this, the government is also looking to raise money through the issuance of sovereign green bonds to fund green infrastructure. The money thus raised “will be deployed in public sector projects which help in reducing the carbon intensity". The government also plans to open up defence R&D for industry, startups and academia.

What are the plans to address  economic  woes?

Rural distress can be seen from the fact that the demand for work from households under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) from April 2021 to January 2022 has been around 40% higher than during the same period in 2019-20. The government had allocated 73,000 crore towards MGNREGS this year. This has been increased to 98,000 crore. The allocation for the next year continues to be at 73,000 crore. Hopefully, if the demand for work under MGNREGS continues to remain high, the government will increase the allocation.

What did the budget miss out on?

The government should have looked at putting more money in the hands of people. Adjusted for inflation, the private consumption expenditure in 2021-22 is expected to be at 97% of where it was in 2019-20. There had been some talk of a urban version of MGNREGS being introduced. But nothing of that sort has been proposed. Also, with the tax revenues surging, the government could have possibly looked at cutting the high excise duty on petrol and diesel and providing some relief. Of course, this isn’t contingent on the annual budget and can be done at any point of time.

Vivek Kaul is the author of Bad Money.

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