Booster Budget 2022: Who got what

Nirmala Sitharaman presented her shortest budget ever yesterday in the Parliament, and well, seems like the idea was to give the best in the smallest time possible. As always, there were a lot of expectations from the Annual Budget (which you can read here), but here is how the budget actually fared in terms of sectors' expectations.

Illustration: Seemon, DailyO

THE BIG PICTURE

Termed by many as the Booster Budget that would help India progress from the 75th to the 100th year of Independence, the Budget focused on moves that would create a long-term growth during the Amrit Kal (i.e, the next 25 years) over short-term relief.

There were no major dhamakedar announcements for the populace as such except for a few ones that stood out. Though the salaried employees, who were waiting for better tax rates and more deductions; MSMEs, and retail sectors, got nothing new, here is everything you need to know about the Budget 2022.

THE CAPEX EXPENDITURE

A country’s growth can come from either capital expenditure (Capex) or relief expenditure (Revex) or both. Revexes are a one-time solution and are often temporary, while Capexes are sustainable and long-term measures. Revexes often put money in the hands of people and encourage direct consumption to increase production. Capex facilitates production, self-reliance and self-sufficiency by creating infrastructure which would generate employment, which in turn will stimulate consumption. Both lead to increase in consumption, but Capex ensures a much needed ripple effect that lasts longer. 

The Booster Budget of 2022 completely focuses on Capex in every aspect and sector of the economy. This is in line with PM Modi’s ‘Make In India’ scheme which has focused on self-production and innovation in the past few years, and the momentum for which has continued this year.  

This means that the capital expenditure that the country allocates is the most influential factor for growth. This year the government plans to spend about Rs 7.5 lakh crore versus previous year’s Rs 5.54 lakh crore to stimulate indirect growth, which is good as it shows the government's seriousness in creating a self-reliant country.

Here’s a sector-wise look at the budget and how it might impact YOU:

Illustration: Seemon, DailyO

1. FOCUS ON THE NORTH EAST

Probably for the first time, a budget has specific mention of benefits for North East India, which will support their overall growth. Rs 1,500 crore will be allocated additionally towards developmental projects in the North East, which will be over and above the existing operational schemes of the Centre and State. This project called PM's Development Initiative for North East, PM-DevINE, will not be a substitute but another benefit for the youth and women of North East India.

While the central ministries can pose their candidate projects, priority will be given to those posed by the states. The villages on the country's northern border would be covered under a new vibrant village program to enhance the development of the northeastern states of Assam, Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Sikkim, Nagaland and Tripura.

2. IMPORTS AND EXPORTS

Entrepreneurs often need post-production support to compete in the domestic and global market. The government has done its bit to support Indian entrepreneurs by encouraging value-added manufacturing and reducing unnecessary imports. This will be done by reducing duties on essential raw materials, enhancing duties on imported finished products and phasing out exemptions for products that can be produced in India. For items that heavily rely on imports, custom duty on raw materials has been reduced. This way, Indian products can be cheaper than imported products, thus making Indian products preferable. 

IMPORTS

1. The government wants India to produce certain agricultural produce, chemicals, fabrics, medical devices and drugs and medicines. Since we were dependent on imports all this while, there were many cost exemptions that were allowed for import of these items. These cost exemptions will now be removed in a phased manner to make imported goods more costly. But duties for methanol, acetic acid that are needed for petrol refining will be reduced.
2. Custom duty rates will be raised for sodium cyanide and imitation jewellery as both can be produced in India. The budget announcement will now see no incentives to import imitation jewellery as customs duty of Rs 400/kg of import will be levied.
3. Anti-dumping duty and countervailing duty on steel imports, bars of alloy steel and high speed steel will be revoked in public interest, especially because they increase the high prices of metals. But custom duty exemption on steel scrap will be maintained to relieve steel producers.
4. Certain advanced machinery will have exemptions and new exemptions will be levied on import of specialised castings, ball screw and linear motion guide to encourage production of better products which can then be exported.
5. These will help companies achieve Production linked Incentive (PLI) benefits.
6. Duty concessions have been levied on parts of mobile phone chargers and camera lens to enable manufacturing in India. Imported wearable and hearable devices will become cheap too. But if you import umbrellas, duty will be raised to 20% and exemptions will be removed, thus making your imports costlier by more than 20%.

EXPORTS

1. Exemptions will be created on certain items that are generally used by exporters. Items include embellishments, trimmers, buttons, zippers, specified leather, packaging boxes which are required to export goods.
2. Customs duty on cut and polished diamonds, gems will be reduced to 5% while Simply Sawn diamond will have NIL custom duty. This will be complemented with a simple regulatory framework.
3. Export duty on shrimp exports will be reduced to promote exports of shrimp aquaculture.
4. Several duty exemptions for sectors like power, fertilisers, textiles, leather, footwear and food processing have hindered domestic production and hence these too will be cut.

3. DEFENCE

Thanks to the Chinese tactics and armed forces' focus on modernising equipment, the defence budget (including defence pensions) has received a boost with a Rs 5.25 lakh crore allocation. For 2022-23, the total allocation under Capital Outlay of the Defence Services has gone up from Rs 86,740 crore in 2013-14 to 1.52 lakh crore. 

Around 25% of the defence R&D budget has been earmarked for start-ups and the private sector, which has been welcomed by all. To reduce import dependency and promote self-reliance, 68% of the capital procurement budget has been earmarked for domestic industry in line with "Vocal for Local" push. The Indian Navy and The Indian Air Force see larger allocations as compared to last year, while that of Indian Army has gone down. 

The private industry will be encouraged to take up design and development of military platforms and equipment “in collaboration with DRDO and other organisations” by creating Special Purpose Vehicles. To promote testing and certification from private entities, there will be “an independent nodal umbrella body'' set up for meeting wide-ranging testing and certification requirements.

4. LAND REGISTRATION

In a much needed move, the government aims to transit from the long, tedious hard copy era into a digital ecosystem for land records.

This will support management of land records by online modes and since all states will be encouraged to adopt one central system, the system can be great to consolidate all records in one place. It's similar to how GST became the ultimate indirect tax when it subsumed other indirect taxes. 

This online system will be called the 'National Generic Document Registration System' and the land records will be marked by a 'unique land parcel identification number'. This system will enable a uniform process for 'anywhere registration' of deeds and documents. The system will have facilities to transliterate the land records (access records in multiple languages) in 8 languages. This will also make the process transparent and land transfers litigation-free. This is expected to work wonders for the warehousing and logistics industry. 

DESIGNING THE LAND 

A high-level panel will help in urban planning along with institutes, who will frame policies for sustainable urban development. To increase the urban living capacity, states will be supported and the following will be modernised: building bylaws, town planning schemes (TPS), and transit-oriented development (TOD).

To develop an India-specific urban planning, design and provide certified training, up to 5 existing academic institutions will be designated as Centres of Excellence. Endowment funds of Rs 250 crore each will be allocated to these institutes and the AICTE will improve the syllabi, quality and access of urban planning courses.

Since land is a ‘state subject’ and fast track reforms are required, a special interest-free loan for 50 years will be provided to incentivise the state government so that both the state and Centre can work together. 

Photo: Getty Images 

5. STARTUPS AND TAXATION 

1. Startups that are formed between April 1, 2016 and March 31, 2022 enjoy a tax-free policy for any 3 years of their choice out of 10 years. The government has extended this policy for another year, thus allowing startups incorporated before March 31, 2023 to enjoy this benefit.
2. Certain newly incorporated, domestic manufacturing companies will enjoy a concessional tax rate of 15% under section 115 BAB.
3. Startups will be promoted to initiate 'Drones as a Service' and facilitate drone services. 
4. Since there was no mention of change in personal tax slabs, the same tax regimes continue as last year.
5. When it comes to return filing, taxpayers can file updated returns within 2 years from the end of relevant assessment year. Meaning when a tax payer files tax for the year 2021-22 in July 2022, the end of relevant assessment year is March 31, 2023. Going forward, the taxpayer can file revised returns till March 31, 2025.
6. The government announced Rs 900-crore allocation for the newly set up Ministry of Cooperation for the 2022-23 fiscal year and slashed the AMT rates to 15%.  Cooperative societies, like other companies, have separate tax computation mechanisms and have to compute something called as Alternate Minimum Tax. The tax rates for companies were reduced to 15% last year, but not for cooperative societies. This year, the tax rate for cooperatives has also been reduced to 15% from 18.5%.
7. Surcharge on cooperative societies have been brought down from 12% to 7% for societies having total income between Rs 1 crore to Rs 10 crore. This is to support rural and farming communities. 
8. The government plans to cap the surcharge applicable to ‘Associations of Persons’ (AOP) that are related to consortiums or joint development agreements (JDA) at 15%. This is expected to provide tax relief to real estate and infrastructure projects who have global deals. Global deals mostly require consortiums to be mandatorily formed and since most members of the consortiums are companies, they end up paying higher surcharge rates of about 37%. Joint Development Agreements are not covered under any provisions as of yet, and courts have announced these agreements to be taxed as per AOPs. This 15% cap is expected to provide huge relief.
9. Any earning from the transfer of any Virtual Digital Asset (like bitcoin and dodge coin) will now be taxed at 30%. This is interesting because there are neither any laws on crypto currency, nor any information on regulatory bodies. Seems like crypto is relevant enough to be taxed without any setoffs against any other incomes from other heads or deductions. (You can read answers to the 5 hot cryptocurrency questions here, and some of the best Twitter reactions on Crypto Tax here.)
10. The surcharge on tax on long term capital gains from capital assets (property, unlisted shares, artifacts) will be capped at 15%. This is in sync with surcharge on such gains that come from equity funds and listed stocks that are already capped at 15%. However, the gains from other assets are charged as per the income tax slab of the taxpayer.
11. When it comes to Income Tax deductions, there is a new deduction for the parent/guardian of a disabled person. If the parent/guardian of a disabled person buys a savings life insurance policy with the latter as beneficiary, then the parent/guardian would be eligible to deduction from gross income before tax subject to certain conditions. Earlier, the deduction under 80D would be available only if the disabled person received lump sum money on death of guardian/parent. But as per this section, the policy payouts can be available while the guardian is alive and has attained 60 years.
12. Employees of the state government earlier received 14% contribution to their pension fund but were only allowed a deduction of 10% of salary, thus increasing their income by a marginal 4%. Going forward, state government employees will receive a deduction of 14%, thus giving them more benefits which will bring them on par with that of Central government employees, who already receive a deduction of 14%.
13. An effort to reduce the tareekh pe tareekh sentiments of the country will be made by creating a sound litigation management system. The countless court cases consist of cases on new matters and cases on old matters still in appeals, on which no judgements have yet been made. A litigation system will identify identical issues in cases which are lodged by new assesses and on these cases, the IT department will defer its appeals to fight the case. The department will defer the appeal till the time the Supreme Court or High Court issues an order on the identical matter. 

6. BUSINESS

Th budget indicates more policies to help investors who are pouring foreign capital into Indian companies, and will also look to deal with taxes that are levied on foreign investors who pay a higher rate of tax than domestic investors.

The government is gearing up to form an expert panel to encourage venture capital and private equity investments. 

This panel will help the government to examine "appropriate measures" to scale up investments. Venture capital and private equity investments have been more than Rs 5.5 lakh crore last year, and everybody would love a boost in this figure. Also more funds will be managed by private fund managers where the government will contribute about 20% of capital to boost investments. 

The government also plans to speed up the voluntary winding up process for companies and bring it down from the historical 2 years to 6 months. 

7. NON RESIDENTS/INTERNATIONAL TAX

Photo: Getty Images

The International Financial Services Centre (IFSC) was launched in 2015 and is situated in Gujarat International Finance Tec-City, hence known as the “GIFT City” Special Economic Zone. Since then, the Annual Budget has been providing small gifts to stimulate the growth of IFSC.

An International Arbitration Centre in the GIFT City would be set up for timely settlement of disputes under international jurisprudence. There will also be services in the GIFT City for global capital to support sustainable and climate finance in the country.  

For non residents, the budget has proposed to provide tax exemption on the income from offshore derivative instruments, royalty and interest on leasing ship, and portfolio management services. 

8. TECHNOLOGY

1. The government plans to roll out 5G services in 2022-23, and also aims to take optical fibre networks to remote corners of the country to enhance access to e-services.
2. To further boost the digital environment, digital rupee will be issued by the Reserve Bank of India in 2022 using blockchain and other technologies.
3. To encode digital banking in every corner of country, the Budget proposed to set up 75 Digital Banking Units in 75 districts. 

Photo: Getty Images 

9. EDUCATION

1. The best public universities and institutions in the country will collaborate as a network of hub-spokes and digital infrastructure in rural areas will be improved through Vibrant Villages Programme by which Doordarshan will get DTH access. The BharatNet project of optic fibres and 5G technology mentioned above, will support this programme.
2. The PM E-Vidya scheme was launched to protect education amongst children during the Covid-19 pandemic in 2020 and under this programme, the top 100 universities automatically started online courses. The pandemic had closed approximately 1.5 million schools and 1.4 million Anganwadi centres, which is why the budget has announced the 'one class, one TV channel' programme. This programme will be expanded from 12 to 200 TV channels and will help provide supplementary education in regional languages for Classes 1 to 12.
3. A mental health programme called 'National Tele-Mental Health Programme' will take care of emotional well-being and will include a network of 23 tele-mental health centres of excellence.

10. JOBS 

Since India’s national unemployment rate climbed back to pre-pandemic levels of around 7%, a booster budget for jobs was definitely anticipated. But the budget focussed on jobs in gaming, visual effects, comic and animation. Acknowledging the growing global and domestic interest in the Animation, Visual Effects, Gaming and Comics (AVGC) sector, the budget offers immense potential to employ youth. An AVGC task force will recommend ways to build the sector further. 

The government also pins its hopes on the Production Linked Incentive (PLI) Schemes for achieving Aatmanirbhar Bharat, which can create 60 lakh new jobs in the coming years.

11. FARMING 

The budget focussed on ensuring assured income to the farming community with an announcement of Rs 2.37 lakh crore as direct payments for minimum support price (MSP) to wheat and paddy growers for the fiscal year 2022-23. This announcement comes after a year-long farmers’ protest demanding guaranteed MSP for farm produce. 

The government plans to promote chemical-free natural farming throughout the country to boost sustainable agricultural productivity and income of the farmers. The use of Kisan drones for crop assessment and spraying of pesticides along with digitisation of land records would help bring more transparency in the agriculture sector. 

The Ken-Betwa river linking project would be undertaken at a cost of Rs 44,000 crore which would benefit 9,00,000 farmers. 

12. CLEAN ENERGY

The government is set to launch sovereign government bonds, increase the funding for solar equipment, and take more progressive steps to encourage electric vehicles to indicate that clean energy financing will be a serious topic to meet India’s ambitious renewable energy targets.

The government's commitment includes installing 500 gigawatts (GW) of non-fossil energy capacity by 2030, reduction in emission intensity of GDP by 45 percent over 2005 levels, sourcing 50 percent of the electricity from non-fossil sources by 2030, reduction in carbon emission by 1 billion tonnes till 2030 and achieving net-zero by 2070.

The government intends to increase the funding under the production-linked investment (PLI) scheme for domestic solar cells and module manufacturing to Rs 24,000 crore from Rs 4,500 crore.

As a part of the government’s market borrowings, sovereign Green Bonds will be issued for mobilising resources for green infrastructure. The proceeds will then be used in public sector projects to help in reducing the carbon intensity of the economy. 

The government has stressed on a battery swapping policy to be brought in and interoperability standards to be formulated. The private sector will be encouraged to develop sustainable and innovative business models for 'Battery or Energy as a Service' to improve efficiency in the EV ecosystem.

The government is also resolved to reduce dependency on coal and has promised to promote a shift in the use of public transport in urban areas. This would be complemented by clean-tech and governance solutions, special mobility zones with zero fossil-fuel policy, and EV vehicles.

This concludes our detailed impact of the budget. What did you expect from this budget?