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Union Budget 2021: How the post-COVID Budget will Impact the Corporates & Common Taxpayers?

union budget-2021
Union Budget 2021-22 | Representational Image

With the economy slowly gaining momentum from the pandemic, a lot of hopes are riding on the Union Budget 2021. Finance Minister Nirmala Sitharaman, who is supposed to announce the first post-COVID Budget 2021 on February 1, is ready to steer the Indian economy back on the growth track.

Due to the global pandemic, almost all the sectors of the economy were knocked-off in 2020. However, there have been few indications that some of them are showing a quick recovery.

The major challenge for the Finance Minister is to hit the perfect balance between managing the fiscal deficit considerations and reviving broad-based growth.

While the auto and real estate sectors are still struggling, MSMEs across several sectors are still facing the financial crunch, resulting in little or no job creation. In the wake of the pandemic-induced economic shock, the government is expected to provide more tax breaks to netizens, so that they can have higher disposable incomes.

Now that the end of the pandemic is in sight, all eyes are on Union Budget 2021 in the hope of some much-awaited reliefs and incentives. The corporates and individual taxpayers are all expecting the tax concessions in this year`s budget.

Let us look at some of the most crucial expectations that the taxpayers have from the upcoming Union Budget 2021:

Tax Reliefs for Corporates

Before the pandemic struck the world, the corporate taxes in India were reduced to 22% for companies and 15% for manufacturing firms. So, any further reduction in corporate tax seems unlikely. However, to support the companies to cope up with the losses suffered during the lockdown, investment-based reliefs and flexible adjustment of the previous year`s losses could be in the pipeline.

Insurance Awareness

The importance of insurance in India has been low for many decades. In 2020, people became more aware due to the pandemic and the high medical costs related to it. Perhaps, this is an excellent time for the insurance sector to increase its foothold in the country.

Worst Hit Industries & Sectors

Several industries like aviation, food & beverages, tourism, etc., have suffered major losses due to the COVID-19 pandemic. The recovery time for these sectors will also be longer as compared to the other industries that are already on their path to recovery.

To provide relief to worst-hit sectors, the government may extend their 8-year-loss-carrying forward window. These industries will have minimal income levels in this as well as in the upcoming financial year until they recover completely.

Vivad se Vishwas Scheme

The introduction of Vivad se Vishwas Scheme was one of the highlights of the 2020 Budget. The government aimed to increase their tax revenues by offering to settle cases upon 100% payment of disputed taxes. This would result in the saving of interest as well as the penalty.

However, there were fewer takers of the scheme due to the pandemic. Thus, the government might consider extending this scheme so that more taxpayers can avail the benefit of this scheme in the upcoming Union Budget 2021.

While there are numerous expectations from Budget 2021, the government has announced various relief policies to keep the economy afloat.

The Budget 2021 will be announced on February 1. Finance Minister Sitharaman will deliver the longest ever budget speech last year. This year the Union Budget 2021 will be paperless.

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Finance

Union Budget 2021 Should Focus More on Growth Recovery; Fiscal Deficit May Fall to 6.2 Percent in FY22, Says Report

Mumbai, January 28: The annual Union Budget is round the corner. The Union Budget is slated to be presented on Monday, February 1, 2021 while the Economic Survey will be tabled on Friday, January 29, 2021. All eyes will be on the forthcoming Union Budget as it is expected to focus more on putting the economy back on track. According to a report by India Ratings, the focus of the budget will be to get back things to normalcy and not too much on arresting fiscal deficit, which is seen at 6.2 percent in 2021-22, down from 7 percent this year.

The Union Budget 2020-21 had estimated fiscal deficit at Rs 7.96 lakh crore or 3.5 percent of GDP but India Ratings sees it printing in at Rs 13.44 lakh crore or 7 percent if the government cleared its payables and roll over some portion of expenditure to 2021-22.

India Ratings Chief Economist Devendra Pant said that the 2021-22 budget is likely to project a fiscal deficit of 6.2 percent but that will be achievable if nominal growth comes in around 14 percent and real growth prints in at 9.5-10 percent. The study pegged growth at 9.6 per cent for 2021-22 and (-)7.8 per cent for the current financial year 2020-21.

The report said that the fiscal impact of the economic packages worked out to be about Rs 3.5 lakh, or 1.8 percent of GDP. Even without this package, Ind-Ra had estimated that FY21 will witness a revenue shortfall of Rs 60,000 crore due to aggressive estimation of revenue receipts, it added. The government adopted a lose fiscal policy due to the coronavirus pandemic and announced a number of policy measures under Atmanirbhar Bharat packages to support the economy. The report adds that as per the grant-wise expenditure trend, the report estimates revenue expenditure in 2020-21 to be Rs 26.65 lakh crore as against a Budget Estimate of Rs 26.30 lakh crore.

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Finance

Union Budget 2021: Healthcare, Infrastructure will remain in the limelight!

budget 2021

After the country`s economy has taken a deep blow due to the pandemic, all eyes are on Union Budget 2021. The Union Budget 2021 will be announced by Finance Minister Nirmala Sitharaman on February 1.

The country experts are expecting that the government will take corrective measures to support, revive and boost the economy. Amidst the ongoing pandemic and slowdown of the economy, various industry professionals are also expecting a reduction in GST rates.

The Union Budget is typically classified into Capital, Revenue, and Expenditure budget. The Budget also provides a blueprint of how much money the government is expecting to raise in the coming fiscal and where it is planning to spend it.

For 2021-22, Finance Minister Nirmala Sitharaman has said that the budget will be nothing-like-seen-before. The budget will also see massive investment and expenditure push for sectors like infrastructure and health sectors. Along with these two, other sectors like real estate, railways, and construction too, are expected to be in focus in the budget.

According to Rahul Singh, CIO-Equities, Tata Mutual Fund, “the government will focus on the economic recovery of the country as the upcoming budget will provide the acceleration”.

“The Government can plan its expenditure based on the strong recovery of the economy in nominal GDP growth in FY22, and tolerance for fiscal deficit, even though it will be materially lower than the FY21 levels”, he added.

“We are also expecting the focus to be on other sectors like healthcare, housing, and infrastructure. As the low-interest rates and stable real estate prices have improved affordability, the revival of the real estate sector is also on its way. Production linked incentive (PLI) scheme has been successful earlier, and a further momentum can be imparted by dedicated export zones with associated infra and easy approvals”, Singh further added.

“As there have been many significant changes to the tax structure in the last 2-3 years, hence the government will only make incremental changes. On the reform front, the Government might focus PSU reforms that will also include banks and privatization as one of the most important areas to raise capital over the medium term”, he said.

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Finance

8 Types of Working Capital & Everything you should know about them!

working capital

Wouldn`t it be easier to start and manage your business as an entrepreneur or a solopreneur had there been a problem-solving course on working capital management?

Wouldn`t it be wonderful to have a course that enables you to understand the concept of Working Capital Management in an easy-to-understand language? Fortunately, you can understand the basics of Working Capital Management and a lot more in this article.

What is Working Capital?

Considered as one of the most crucial components, working capital is vital for a smooth business operation. In simple words, it is the difference between the company`s current assets (cash, inventory, marketable securities, and receivables) and liabilities (rent, bills, and other expenses).

It represents a company`s operational activities and includes inventory, accounts receivable & payable, cash, and short-term debt.

How is it beneficial for a business?

Working capital is a vital factor for both business owners and financial professionals. An effective financial tool, the working capital gives an exact picture and a fair idea about a business` short-term financial standing. It also ensures the efficient use of all the components of current assets and liabilities to reduce the overall cost.

Types of Working Capital

Depending on the time, there are eight types of working capital in India:

  1. Permanent Working Capital

Also known as fixed working capital, the permanent working capital consists of minimum current assets that are required to run the business operations smoothly. However, the size of the WC depends on production scale and growth.

  1. Variable Working Capital

The amount that is invested in a business venture for a short period is considered as the variable working capital. In India, it is also used as temporary working capital and is used for changes in production and sales activities.

  1. Reserve Margin Working Capital

As the name suggests, this type of WC is reserved by the organizations for unforeseen expenses to sustain during a crisis.

  1. Seasonal Variable Working Capital

During the peak season of a business, a company requires more working capital to meet consumer demands. To fulfill the requirement the business owners opt for additional financial assistance which is known as seasonal working capital in India.

  1. Regular Working Capital

This type of WC is typically required by every organization under normal circumstances to ensure smooth business operations.

  1. Special Variable Working Capital

Special variable WC is the type of fund that is reserved by a business for its unique circumstances like the launch of new products, risk management, marketing campaigns, among others.

  1. Gross Working Capital

This type of fund is invested under a firm`s current assets. Its major components include cash, short-term investments, inventory,  marketable securities, and accounts receivables.

  1. Net Working Capital

NWC is an essential type of working capital that represents the amount by which a firm`s current assets surpass its liabilities.

The concept of Working Capital is vast and is extremely vital for a business. Thus, the understanding of this concept requires deeper knowledge from the industry experts who have faced and resolved the challenges with their experience and in-depth understanding of the concept.

Take our Working Capital course that will clear all your doubts and provide solutions to your burning problems. To know more about this course and how it will benefit you, click here: https://www.badabusiness.com/psc?ref_code=ArticlesLeads

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Finance

Kerala Becomes the 8th State in India To Complete Ease of Doing Business Reforms, Becomes Eligible for Additional Borrowing Limit of Rs 2,261 Cr

Business Tips | Representational Image Only (Photo Credits: Pexels)

Kerala has become the 8th State in India to successfully undertake ‘Ease of Doing Business’ reform stipulated by the Department of Expenditure, Ministry of Finance. The ease of doing business is an important indicator of the investment friendly business climate in the country. Improvements in the ease of doing business will enable faster future growth of the state economy. Therefore, the government of India had in May 2020, decided to link grant of additional borrowing permissions to States who undertake the reforms to facilitate ease of doing business. Kerala has become eligible to mobilise additional financial resources of Rs 2,261 crore through Open Market Borrowings.

An official release by the government stated that the permission for the same was issued to Kerala by the Department of Expenditure on January 12, 2021. Kerala has now joined the seven other States namely, Andhra Pradesh, Karnataka, Madhya Pradesh, Odisha, Rajasthan, Tamil Nadu and Telangana, who have completed this reform. On completion of reforms facilitating ease of doing business, these eight States have been granted additional borrowing permission of Rs 23,149 crore.

State wise amount of the additional borrowing permitted is as under:

Sr. No. State Amount (Rs in crore)
1. Andhra Pradesh 2,525
2. Karnataka 4,509
3. Kerala 2,261
4. Madhya Pradesh 2,373
5. Odisha 1,429
6. Rajasthan 2,731
7. Tamil Nadu 4,813
8. Telangana 2,508

 

The reforms stipulated in this category are:

(i)      Completion of first assessment of ‘District Level Business Reform Action Plan’

(ii)     Elimination of the requirements of renewal of registration certificates/approvals/licences obtained by businesses under various Acts.

(iii)    Implementation of computerized central random inspection system under the Acts wherein allocation of inspectors is done centrally, the same inspector is not assigned to the same unit in subsequent years, prior inspection notice is provided to the business owner, and inspection report is uploaded within 48 hours of inspection.

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Finance

5 Smart Solutions to get your Small Business out-of-debt

debt free business

The experience of being in debt can be scary as well as overwhelming. However, most entrepreneurs begin their start-up by arranging funds through debt funding, equity funding, loans, or through other less formal sources like friends & family.

If managed smartly, borrowing funds can help you accomplish your goals. On the other hand, mismanaged small business debt can not only affect your financial wellbeing but can also cause mental stress, especially to small business owners that are worse affected due to the Covid-19 pandemic.


In a bid to rescue the small business owners, the Indian government had offered relief to MSMEs in the form of subordinated debts, collateral-free loans, and equity infusion through its Fund of Funds (FoF) scheme in 2020. This scheme proposes to purchase up to 15% growth capital in high-credit MSMEs.

If you have a well-thought financial plan, you can solve the cumbersome process of taking your business out of debt, just like others. Here is how you can chart your way out of debt:

  1. Take Stock of your Debts

The first step that will take you closer to managing your debt is to organize all the details of exactly what you owe. Make a list of your debts with EMIs, interest rates, and tenures. This will help you recognize the costliest debts.

  1. Settle Urgent & Costliest Debts First!

After sorting out your debts, pick the costliest one! Costly debts, if not paid on time, will extract the highest interest. This can drain your finances. Hence, settle your costliest debts on a priority basis.

  1. Plan Monthly Budget

One of the most vital debt management techniques is to have a monthly budget, planned! Make a list of your income & expenses while deciding your monthly budget. This will give you a window to think about ways to reduce your daily expenditure. Having details of monthly cash-flow can help you save money that you can use to clear your debt.

  1. Consolidate Loans

Sometimes keeping a track of all the loans can be difficult. If you have too many loans, consolidating them into one can be a good idea. This will leave you with just one EMI. Business loans, personal loans, and credit cards provide you with this option. It will remove various debts and leave you with just one loan to track.

  1. Protect yourself Against Economic Shocks

The future is uncertain and it is wise to protect yourself from uncertainties that you might be exposed to. E.g. a loss of a job could lead to delayed EMIs. So, to avoid such situations, create an emergency fund to help you sustain during a bad phase. Ideally, this fund should be 3-6 times more than your current monthly income.

Repaying loans is a moral, legal, and also a financial obligation. With smart and effective debt management strategies, you too can get your business out of debt. Learn how to manage your debt with the top-industry leaders from our Problem Solving Courses. To know more, click here: https://www.badabusiness.com/psc?ref_code=ArticlesLeads 

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Finance

What is a Business Credit Score & Why is it Important? Here are Three Benefits of Having a Higher Credit Score

Business Credit Score| Representational image (Photo Credits: Pixabay)
Business Credit Score| Representational image (Photo Credits: Pixabay)

For firms to survive only on equity and owners’ fund is not possible. As a business grows, expands and diversify, more and more funds are required. Owing to the limited funds with the owner, businesses look for external sources and borrowed funds. Availing a loan is a tiresome and lengthy process; firms do not get the debt easily from the market. Lenders will be keen on allocating their money to the business, only when they are sure of uninterrupted growth and return. Here is when a firm’s credit score comes into the picture. Home Business Ideas: 4 Brilliant Work From Home Ideas That You Should Consider Taking Up.

In simple words, a business credit score is a number that indicates whether a company is a good candidate to receive a loan or become a business customer. This score is based on various parameters such as company’s credit obligations and repayment histories with lenders and suppliers; any legal filings such as tax liens, judgments, or bankruptcies; how long the company has operated; business type and size; and repayment performance relative to that of similar companies. Startups in India Bagged $9.3Bn Investments in 2020 Despite COVID-19 Challenges: Report.

Following the separate entity principle of accounting, the process of calculating the score only takes into consideration the financial position and performance of the business. However, in the case of a small business, the lender might check both the businesses’ and owners’ credit scores, since the personal and business finances of such firms are highly influenced by each other.

A good credit score helps businesses in more than one way. Here are three benefits of having a positive credit score –

 Quicker Approval of Loans

A good credit score is an evidence of the credit worthiness of an enterprise. If a firm has a positive credit score then it becomes easier for it to get loans, from small to large, without going through a time consuming and lengthy process. Higher credit score creates a credible identity for the business in the eyes of the lender and therefore gives your application a boost, giving quick approvals to loans.

Lower Interest Rate

Apart from the re-payment of the principal amount, a borrower needs to make regular interest payments as well. However, a good credit score allows the borrower to negotiate a lower interest rate. Businesses’ with higher credit scores are generally able to secure the lowest interest rates available at a given time, thereby reducing the repayment burden on the firm.

Easier Terms of Loans

One of the biggest benefits of having a good and high credit score is that it provides the businesses more bargaining power over terms of the loans, including the repayment period, repayment method, collateral requirements among others. Since a good credit score ensures that the business is capable of timely and full repayment, the lenders are comparatively lenient of the borrowers.

Hence a business should maintain a good and higher credit score to meet its funds requirement and avail quick loans at flexible terms of repayment. It highlights the creditworthiness of the business and attract private and institutional lenders.

 

 

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Finance

5 Tips for Young Entrepreneurs for Efficient Management of Funds

Tips for managing finance| Representational Image (Photo Credits: Pixabay)
Finance

Finance is the life line of any business. To start, sustain and succeed any organisation proper management of funds is important. For start-ups to establish themselves in the market and survive the stiff competitive environment, regular and steady stream of funds is a pre-requisite. The businesses need money to enter the market, undertake day to day operational activities, production, expand its activities, research and development activities. Several start-ups fail during the initial years of its establishment owing to the shortage of funds or irregularity of cash flows. 3 profit-making small businesses you can start under Rs 20,000.

Proper management of funds is important for long term survival of the business. Overfunding and underfunding are both harmful of the working on the enterprise. Lack of funds leads to interruption of business activities that leads to huge losses to the firm, while the excessive of funds leads to opportunity cost. So proper management of funds is crucial for success of the business. Here are few tips Young Entrepreneurs can follow to manage their finances –

Separate Your Personal and Professional Finances

The first and most important step of managing the funds is to keep the personal and professional money separate. Following the separate entity accounting principle, the entrepreneur should maintain separate accounts for the firm in its name and should not use funds received for the start-up for her personal expenditure. This will be helpful while calculating taxes and filing return as well.

Set-Up an Emergency Fund

The business environment is full of risks and uncertainties. There are continuous macro and micro environment threats that a start-up has to face. In order to cope up with the dynamic and ever changing ecosystem, an entrepreneur should make sure to establish an emergency fund or a reserve to meet such unexpected changes. Even if the business is earning huge profits, it is always advisable to keep aside some portion of money for contingencies.

Look for Diversified Sources of Funding

Though it is also easier to manage the equity funds, but the entrepreneur should not over look debt funding as well. Borrowed funds force the owner to make informed decision and wise investment choices. The capital structure of the enterprise should be a perfect mix of both owned and borrowed capital. Various capital structure theories have proved that a leveraged capital structure leads to higher valuation of the firm. 3 Futuristic Business Ideas for 2021 and Beyond!

Monitor the Expense

Another crucial aspect of managing the funds is to keep a tab on the expenditure. Though a firm has to undertake several expenditure in the initial stages of its life, an entrepreneur needs to make sure that no unnecessary expenditure is incurred. The focus should be on cost cutting and wastage reduction. Follow the principle of money saved is money earned.

Seek Professional Help

Not everyone understands the complexities of managing the finances. There are several financial analyst and advisors who will be able to provide a better guidance on the matters related to money and investment. They also help in ensuring regular and interrupted cash flows. An entrepreneur should not hesitate in seeking external professional help during the initial years of the business.

Finance is important to meet various capital requirements of the business at its different stages. Hence, an entrepreneur should follow ensure proper and efficient management of the funds to long term survival in the business environment.

 

 

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Finance

Mandatory 1% Cash Payment of GST Liability will Reduce Fake Invoicing & Tax Evasion

good and service tax
GST (Photo Credits: Wikimedia Commons)

To curb the menace of fake invoicing, the Central Board of Indirect Taxes and Customs has amended the GST rule. According to the new GST amendment, the taxpayers now will be required to pay 1% of GST liability in cash with effect from January 1, 2021.

This rule applies to registered taxpayers whose taxable income, other than exempt supply and export is more than Rs 50 lakh, monthly or the annual turnover is more than 6 crore. The rule, however, is not applicable in the cases where the registered person has deposited income tax more than Rs 1 Lakh in each of the last two years.

 

Also, the registered users who have received a fund of more than Rs 1 Lakh in the preceding FY on account of the export or inverted tax structure, are out of the purview of this rule. If the registered person belongs to a government body, PSU, from a local authority or any statutory body the rule will not apply to him/her. Small businesses including MSMEs and composition dealers are also exempted from the new rule.

 

Registered users who have paid output tax through cash over 1% of the total output tax liability, will be exempted from paying 1% of GST liability in cash. The mandatory requirement of 1% cash payment of GST liability will be applied to about 45,000 taxpayers, which only constitutes 0.37% of the total businesses registered in the Goods & Services Tax System.

 

The provision is meant to bring fraudsters or suspicious dealers who use a lot of fake credit to evade tax and make no cash payment under control. It would neither affect any genuine business dealer nor it will affect ‘ease of doing business’ in any manner. The new rule also restricts the use of Input Tax Credit for discharging GST liability to 99 percent.

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Finance

FY Budget 2021-22: FM Sitharaman Says the Upcoming Budget will be like Never Before!

The finance minister Nirmal Sitharaman on Wednesday concluded all the pre-budget consultations for the 2021-2022 Union Budget. 9 stakeholder groups and 170 invitees participated in the 15 meetings held between December 14 to December 23rd, 2020 online.

The Finance minister of India held a meeting with the sector experts related to infrastructure, energy, and climate change to sought suggestions regarding the upcoming budget. According to her recent statement, the upcoming budget will be completely different. The Union Budget for 2021-2022 will be presented under the shadow of the Covid-19 pandemic. The budget for the financial year 2021-2022 will be presented in the parliament on February 1, 2021.

 

The FY22 budget will focus mainly on the infrastructure, which is considered one of the most important parameters of growth. Many economists have predicted that the Indian economy will shrink by 7% to 9% in 2020-21. The finance ministry expects marginal growth in the economy from the December quarter. The Indian economy is also expected to bounce back in double digits on a low base.

 

Apart from the Finance Minister Nirmala Sitharaman, Union Minister of State for Finance and Corporate Affairs Anurag Singh Thakur, DIPAM Secretary Tuhin Kanta Pandey, Finance Secretary AB Pandey, Expenditure Secretary TV Somanathan, Chief Economic Advisor Krishnamurthy Subramanian, DEA Secretary Tarun Bajaj, and senior officers from the Ministry of Finance and other ministries also took part in the meeting.

 

Sitharaman had chaired all the pre-budget meetings that were held online with multiple stakeholders, industrialists, economists, and farmer bodies, etc. for their inputs and suggestions on how to revive the economy that has been severely affected by the coronavirus pandemic.

 

The stakeholder groups made multiple suggestions on various subjects that included Fiscal Policy (including taxation), Insurance, Bond Markets, Health & Education, Exports, Infrastructure Spending, Social Protection, Water Harvesting & Conservation, MGNREGA, Public Distribution System, Production-linked Investment Scheme, Ease of Doing Business, Branding of Made in India products, Public Sector Delivery Mechanisms, Innovation, Green Growth, and Non-Polluting sources of Energy and Vehicles, among others.

 

The stakeholders’ groups included representatives of the Health, Financial and Capital Markets, Education and Rural Development, Trade Unions and Labour Organisations, Water and Sanitation, Industry, and Trade, Services, Infrastructure Agriculture, Energy, and Climate Change sector, and Industrialists, Agro-Processing Industry, and Economists.

 

The Finance Ministry also said “the participants in the meeting lauded the efforts taken by the Indian government to flatten the COVID-19 curve a slow but strong recovery of the economy in the second quarter of 2020-21. They further stated that India is among very few countries whose economic activity has risen with declining pandemic induced fatalities”.