Income Tax, Corporate Tax, Merger of More Banks: Key Expectations from a 'Never Before' Budget 2021
Income Tax, Corporate Tax, Merger of More Banks: Key Expectations from a 'Never Before' Budget 2021
One of the expectation is to reduce number of public sector banks from 12 to 4. It’s already reduced from 27 to 12 through mergers.

The countdown for the Union Budget 2021 has started with all eyes on Union Finance Minister Nirmala Sitharaman’s third budget, which she will be presenting on February 1, 2021.

Here are the major expectations from the annual fiscal exercise:

1. Capital gain provisions should not contain the reference of any particular year in respect of sovereign gold bonds (SGBs) scheme. There are several benefits of investing in SGBs. According to section 47 of the Income-tax Act, any transfer of SGB by the RBI under the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee being an individual shall not be treated as a transfer for the purpose of capital gain.

2. Tax deducted in the foreign country to be treated as income of assessee. Section 198 of the Income-tax Act, 1961 provides that the tax deducted at source should be included in the gross total income of the assessee. However, the computation of income is often disputed if taxes have been withheld outside India and the corresponding income is offered to tax in India. In absence of an explicit provision in this regard, the assessee includes the net income to his/her gross total income. Whereas the assessing officer assesses the gross amount.

3. Consequential amendment needed after the abolition of Dividend Distribution Tax (DDT). Section 234C provides for levy of interest in case an assessee has the liability to pay the advance tax but he/she fails to pay the same or the amount paid in each instalment is less than the amount he/she should have paid in such instalments. However, it is provided under the said section that if the shortfall in payment of tax happens on account of underestimating or failure to estimate the accrual of income referred under Section 115BBDA(1), then such shortfall shall be ignored while determining the chargeability of interest.

The Finance Minister has already set the expectations high by promising a budget like “never before” (and a paperless Budget) to address the biggest concern being likely contraction in GDP of 7.7 percent [as per advance estimates on the Indian economy by the National Statistical Office (NSO)] as uncertainties around a sustainable rebound of demand continue to weigh on economic activity.

The key would be to prioritise spending and take adequate measures to fill up the gaps created by pandemic. With the fortune of many multinational corporations (‘MNCs’) being affected by the pandemic, the expectation of India Inc in the form of government support through corporate tax reforms is widely anticipated. Union Budget 2020 expanded the scope of the hotly debated Equalisation Levy (‘EL’) to cover e-commerce supply or services provided by a non-resident e-commerce operator.

One of the expectation is to reduce number of public sector banks from 12 to 4. It’s already reduced from 27 to 12 through mergers.

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