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Here's what Mantraa has to say about three key takeaways from Budget 2021-22: Start-ups, Income Tax and Reconstitution of Partnership

Resting on 6 pillars as the Finance Minister Nirmala Sitharaman said, Budget 2021-22 focuses on

  • Health and well-being 
  • Physical and financial capital and infrastructure
  • Inclusive development for aspirational India
  • Reinvigorating human capital
  • Innovation and R&D and 
  • Minimum government and maximum governance.

A whole lot has already been said about the key budget takeaways by industry experts from various fields. Economists too have critically evaluated the facts and figures pertaining to a slew of reforms introduced by Mrs. Sitharaman.

Not reiterating the discussions here, this blog talks of 3 specific and key highlights that Mantraa as India’s one of best financial planners examines.

1. On Start-ups: Economic Survey 2020-21 records 41, 061 startups in India as of 23rd December 2020.

This, according to Economic Times article dated 29th January 2021 makes India the ‘world’s third largest startup ecosystem’ boasting the generation of 4,70,000 jobs and chronicling the birth of 38 unicorns (firms valued at over $1 billion) already with 12 getting added during the pandemic!

Given this larger context, the startup ecosystem in India holds the promise of driving the future of our economy.

Efforts by Indian government since past few years to encourage and boost this system is only commendable. Right from simplifying regulatory norms, tax exemptions, making available funds worth Rs.10,000 crore from SIDBI and around Rs.945 crores from Startup India Seed Fund Scheme (SISFS) is worth an applaud.

Therefore, this Budget 2021-22’s extension to ‘eligible businesses’ 100% income tax exemption is only a fitting incentive in line with the years of support given to this promising field. The pre-conditions of claiming such exemption are these:

  • The entity should be a recognized Startup
  • Only Private limited Company or a Limited Liability Partnership is eligible for Tax exemption
  • The Startup should have been incorporated after 1st April, 2016 but before 31st March 2021
  • The total turnover should not exceed Rs.100.00 crores

 

Also, it is important to note that “Eligible business” here means a business which involves innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property. 

Clearly, such an incentive directly helps in consolidating pillar b, c, d and e (discussed at the start of this blog) simultaneously.

2. On Income tax: Something that every common man on the street has his first eye on – Income Tax rates remain the same as last year’s budget.

One possible reason for this continuation could be as Ajay Bhushan Pandey, Finance Secretary notes in an interview with Times of India dated 3rd February 2021, “…the personal income tax rates, they are at an appropriate level. Now further tinkering with rates creates instability in the minds of people, investors. The stability of the rate is very important.”
Thus, the key motive is stability as is clearly evinced.

3. On Reconstitution of Partnership: This year’s budget rightly plugs in a tax loophole by providing that when a retiring partner receives any amount which is represented by revaluation of any asset, such an amount will be taxable.

This is a welcome change because so far, if any partner in a business firm received an excess amount than the balance in capital account, such an excess amount (say any immovable property sold at revalued prices along with the sell out of the firm) was taxed only in the case of dissolution of partnership and not when a partner retires.

However, now, the retiring partner will be taxed on the revalued amount of the asset.

This makes for an efficient and transparent tax system – something that the tax system of the NDA vouches to strive for.

While, we have lots to say and analyze on various fronts highlighted in this year’s budget, we’ll only be too happy to have you sent our detailed report on your personal mail.

For a complete guide to such an in-depth analysis, feel free to drop us a mail and we’ll send out budget analytical report to you absolutely free! We look forward to have a better engagement with you!

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