This article is written by Dev Agarwal, a 3rd year student of Heritage Law College (Calcutta University).


The Finance Bill 2021 or the Union Budget 2021-22 was presented in the Parliament on 1st February 2021. This Budget comes during the time when the economy has cramped down due to COVID-19 pandemic and this Budget was largely seen as the Budget to boost the economy through various packages and to steady the government’s agenda of a Self-Reliant India or Aatmanirbhar Bharat. The Government in order to keep the economy afloat brought some legislation amendments in the Companies Act 2013 and Income Tax Act, 1961 during the lockdown phase, so that individuals and business do not feel the heat.


  • The first proposal which was made by the Hon’ble Finance Minister on the floor of the Parliament was that Senior citizens aged 75 years or more will no longer require to file their Income Tax returns who only have pension and/or interest income in Union Budget. The respective bank from which they are incurring the interest income or pension will directly deduct the tax on their income.
  • The time limit of re-opening of assessment which was 6 years has been reduced to 3 years and for serious tax evasion cases, the time period is kept the same but two new conditions have been imposed which are
    • Where there is an evidence of concealment of income of Rs. 50 lakh or more in a year, the assessment can be re-opened up to 10 years and
    • The re-opening can be done only after the Principal Chief Commissioner of Income Tax Department approves to do so.
  • With the view to reduce litigation for small taxpayers, it has been proposed that a Dispute Resolution Committee is created for such taxpayers, the characteristics of this Committee would be faceless to ensure efficiency, transparency and accountability. Tax payers having a taxable income up to Rs. 50 lakh and disputed income up to Rs. 10 lakh would be eligible to reach out to this committee.
  • The Government came up with faceless assessment and appeal in 2020, in this Budget, it has been proposed that a National Faceless Income Tax Appellate Tribunal Centre is established, the salient features of this proposed Tribunal would be that all the communications made between the Tribunal and an assessee would be made electronically and hearing shall be done via video conferencing, if needed.
  • Clause 13 of the Bill seeks to amend section 44DB of the Income-tax Act relating to special provision for computing deductions in the case of business reorganisation of co­operative banks. This has been done to encourage co-operative banks to re-organize itself as a banking company.
  • It has been also proposed to allow a new tax exemption for the notified Affordable Rental Housing Projects, in order to promote supply of Affordable Rental Housing for the migrant workers.
  • The Start-Up culture has been again promoted as it has been proposed that tax holiday period for start-ups have been further extended to one more year to 31st March,2022 in this Union Budget. A tax holiday is a period during which a person or company is allowed to pay no tax or less tax than usual rate. The eligibility period of claiming capital gains exemption for investment made in the start-ups has been increased by 31st March 2022, so that people at large are encouraged to invest in Indian start-ups. Moreover, the entrepreneurs and innovators who wish to open a company are allowed to form One Person Company without any restrictions, paid-up capital or turnover norms.
  • The time limit for completion of assessment proceedings has been reduced to 9 months (previously 12 months) from the end of the assessment year in which the income was first assessable.
  • The Government has also inserted a new section, Section 206AB in the Income Tax Act, 1961 which proposes for a higher rate of TDS or Tax Deductible at Source for non filers of Income Tax Returns
  • It has been also proposed by the government that there will be rationalization of tax for ULIPs (Unit Linked Insurance Plan). ULIPs allows an individual to both invest and do insurance, a small amount of money in ULIP goes for insurance while the remaining is invested generally in Capital Markets. Investors earning up to Rs. 2.5 Lakhs from the maturity proceeds have been exempted from paying tax, but those investors, whose earning from such proceeds exceeds Rs.2.5 Lakhs will have to pay tax on the proceeds.
  • The government also aims to reduce compliance burden on the small charitable trusts who are running educational institutions and hospitals. Earlier, such charitable trusts having annual receipts of Rs. 1 Crore were exempted from various compliances, now the limit has been increased to Rs. 5 Crore
  • IFSCs or International Financial Service Centre caters to the financial needs of international businesses investing in India, the government aims to promote IFSC by providing more tax incentives like increasing the tax holiday period for capital gains income of aircraft leasing company, tax exemptions for aircraft lease rent paid to foreign lessor and tax exemptions to investment division of the foreign banks located in IFSC.
  • A safe harbour is a legal provision to sidestep or eliminate legal or regulatory liability in certain situations, provided that certain conditions are met. The Government in order to incentivize the real estate developers and home buyers has increased the safe harbour limit from 10 percent to 20 percent for specified primary sale of residential units.
  • Previously the condition to avail additional tax benefits of Rs 1.5 lakh under Section 80EEA of the Income Tax Act, 196 (i.e., deduction for interest paid on home loan for affordable housing) stated that the loan to buy house should have been sanctioned between April 1, 2019 and March 31, 2021. Now, it is proposed to extend the time limit given under Section 80EEA ibid by 1 year i.e., from March 31, 2021 to March 31, 2022. This amendment will take effect from April 1, 2022 proposed Union Budget.
  • The Government of India in Union Budget aims at facilitating strategic disinvestment of public sector company by relaxing the provisions of Section 2(19AA) (i.e. demerger) and Section 72A of the Income Tax Act (i.e., provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.) for the public sector companies in order to facilitate strategic divestment by the Government.


This Budget has been regarded as one of the most important budgets for India in the recent decades because of the fact that India and the entire world has been hit by a pandemic which has crippled down every nation’s economy. There were rumours that the Government may increase the corporate tax and bring on an additional cess, surcharge or impose a “COVID” tax, thankfully, it has not been done. Countries like Spain and Saudi Arabia have raised their tax rates to fight the pandemic. It is a welcome step that in India chose to have the same tax rates in order to keep the business afloat. However, the Middle Class wanted a bit tax relaxation which was not given owing to the fiscal deficit rate which India is having. This Budget focuses on recovery and all the proposals made by Honorable Finance Minister, Nirmala Sitharaman in her budget speech sound to be good but we have to wait and observe that how many proposals are getting converted and executed well.


  1. THE BUDGET 2021-22,Vinod K Singhania and Vinay Jain (2021)
  2. Bimal Jain, Key Highlights of Union Budget 2021- Income Tax Changes, TaxGuru