Union Budget 2021-22: Key Highlights
Union Budget 2021-22: Just What Was Needed.
"This moment in history, when the political, economic, and strategic relations in the post-COVID world are changing, is the dawn of a new era - one in which India is well-poised to truly be the land of promise and hope". This opening remark by the Finance Minister (FM) clearly set the tone for the Budget of new India, presented on 1st of February.
To set the context, there were growth concerns given the impact of pandemic during which the economy had contracted. There were signs of weak private consumption and measured government spending coupled with a slowdown in private investment. Further, there was a limited fiscal space with lower tax collections and increased health and social expenditure. The expectations thus were for a growth-oriented budget with higher spending and focus on infrastructure. The FM finally seems to have ticked all the boxed in this Budget.
The Budget for FY 2021-22 had a bold, clear and decisive agenda and focused on boosting economic growth. It was simple and yet busted many things, right from being the first digital budget. It broke the shackles of fiscal prudence which was the undertone of many previous budgets. The fiscal deficit targets are left to fall as required. Next, there was no tinkering with taxed and no hidden additional taxes. Things were a lot transparent and the tax collections and other divestment targets were more realistic and achievable. Overall, the budget came as a positive surprise and a much-needed relief which has already boosted sentiments and has the promise of unleashing a growth wave. Here is an overview of the entire budget.
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Key Themes and highlights:
  • Sharp increase in Healthcare allocation to ~ ₹2.24 lakh crores, up 137%
  • PM AtmaNirbhar Swasth Bharat Yojana (₹64,180 crores over 6 years) to strengthen health systems
  • Supplementary Nutrition Programme and Poshan Abhiyan to be merged and launched as Mission Poshan 2.0
  • Jal Jeevan Mission (Urban) for universal water supply in all Urban Local Bodies
  • Urban Swachh Bharat Mission 2.0 with an outlay of ~ ₹1.42 lakh crores over 5 years
  • ₹35,000 crores for Covid-19 vaccine
  • Voluntary Vehicle Scrapping policy announced
  • AtmaNirbhar Bharat - Production Linked Incentive scheme (PLI) for 13 sectors to strengthen the manufacturing industry, ₹1.97 lakh crores committed over 5 years.
  • MITRA (Mega Investment Textiles Parks) Scheme to create world-class infrastructure, 7 such parks over 3 years
  • The National Infrastructure Pipeline (NIP) now covers 7,400 projects
  • Bill to set up a DFI (Development Financial Institution) - to act as a provider, enabler and catalyst for infrastructure financing. Ambition to have a lending portfolio of at least ₹5 lakh crores in 3 years
  • Debt Financing of InVITs and REITs by Foreign Portfolio Investors will be enabled
  • National Monetization Pipeline of potential brownfield infrastructure assets will be launched. The assets to be monetized will cover road projects, power transmission, Dedicated Freight Corridors (DFC) by railways, airports, oil & gas pipelines, warehousing assets, sports stadiums, etc.
  • A sharp increase in capital expenditure at ₹5.54 lakh crores, up 34.5%. Additional ₹2 lakh crores to States and Autonomous Bodies for their Capital Expenditure.
  • Over 13,000 km roads, at ₹3.3 lakh crores, already awarded under the ₹5.35 lakh crores Bharatmala Pariyojana project. By March 2022, another 8,500 km to be awarded and complete an additional 11,000 km of national highway corridors.
  • To further augment road infrastructure, more economic corridors are also being planned
  • Higher outlay of ₹1.18 lakh crores for Ministry of Road Transport and Highways (₹1.08 lakh crores for capital)
  • A higher outlay of ₹1.10 lakh crores for Railways (₹1.07 lakh crores for capital)
  • National Rail Plan for India - 2030 to create a ‘future-ready’ Railway system by 2030.
  • Western DFC and Eastern DFC to be commissioned by June 2022.
  • 100% electrification of Broad-Gauge routes by December 2023.
  • Public bus transport services to be augmented with PPP models, target 20,000 buses
  • MetroLite and MetroNeo technologies to provide metro rail systems at a lesser cost to smaller cities /towns
  • A revamped reforms-based result-linked power distribution sector scheme to be launched with ₹3.06 lakh crores over 5 years.
  • Ujjwala Scheme which has benefited 8 crores households, extended to cover 1 crore more beneficiaries.
  • Add 100 more districts in the next 3 years to the City Gas Distribution network.
  • Asset Reconstruction Company Ltd. and Asset Management Company to resolve stressed asset's problem of Public Sector Banks
  • Increase in FDI limit in Insurance Sector from 49% to 74%
  • Rationalized single Securities Markets Code by 2022
  • Development of a world-class Fin-Tech hub at the GIFT-IFSC.
  • Permanent institutional framework for Corporate Bond market
  • SEBI as the regulator for the development of Commodity Market ecosystem
  • ₹20,000 crores for the recapitalization of Public Sector Banks
  • Investor charter as a right of all financial investors across all financial products.
  • Take up decriminalization of the Limited Liability Partnership (LLP) Act, 2008.
  • A revised definition of Small Companies from ₹50 Lakhs to ₹2 crores of paid-up capital and turnover from ₹2 crores to ₹20 Crore. To benefit over two lakh companies.
  • Incentivize One Person Companies (OPCs) by allowing them to grow without any restrictions on paid-up capital and turnover and change form at any time. Reduce the residency limit for residents from 182 to 120 days and allow NRIs to incorporate OPCs.
  • Privatization of 2 Public Sector Banks and 1 General Insurance Co.
  • IPO of LIC in FY22
  • Agricultural credit target increased to ₹16.5 lakh crores, up 10%
  • Increase in allocation to Rural Infrastructure Development Fund
  • Development of modern fishing harbours and fish landing centres
  • 1,000 more mandis will be integrated with e-NAM.
  • One Nation One Ration Card scheme to help migrant workers.
  • Social security benefits will be extended to gig and platform workers.
  • Women will be allowed to work in all categories and also in the night-shifts.
  • Allocation of ₹15,700 crores for MSME Sector
  • 15,000 + schools to be qualitatively strengthened
  • 100 new Sainik schools.
  • To introduce legislation to set up the Higher Education Commission of India.
  • 750 Eklavya schools in tribal areas
  • Revamped Post Matric Scholarship Scheme for the welfare of scheduled castes.
  • Realigning National Apprenticeship Training scheme for graduates and diploma holders in Engineering
  • Partnership with the UAE and Japan in the area of skill development and recognition
  • Central University in Leh for accessible higher education
  • National Research Foundation with an outlay of ₹50,000 crores over 5 years
  • Financial incentive to promote digital modes of payment
  • National Language Translation Mission to boost internet access
  • An outlay of ₹4,000 crores spread over 5 years for Deep Ocean Mission for ocean exploration and biodiversity conservation
  • Introduction of National Commission for Allied Healthcare Professionals Bill
  • Setting up a Conciliation Mechanism for quick resolution of contractual disputes
  • ₹3,768 crores allocated for the first digital census
  • No change in the individual and corporate tax rates /structure
  • Exemption from filing income tax returns for senior citizens (75 years and above) having only pension and interest income. Banks to deduct tax on such senior citizens having a pension and interest income from the bank.
  • Tax exemption for the interest income earned on the employees’ contribution to various provident funds restricted to the annual contribution of ₹2.5 lakhs.
  • The maturity amount from unit-linked insurance plans (ULIPs) with an annual premium above ₹2.5 lakh will now be subject to capital gains tax
  • The limit for tax audits increased from ₹5 crores to ₹10 crores (only where 95% of payments are digitized), providing relief to many corporate houses.
  • Advance tax to be only dividend income declared.
  • Additional deduction of ₹1.5 lakh for loans for the purchase of affordable house extended to next year.
  • Dividend payment to REIT/InvIT exempted from TDS
  • Time limit for reopening of an income tax assessment to be reduced to 3 years from 6 years
  • The tax holiday for startups extended by one more year
  • The stamp duty value of residential unit can be up to 120% (earlier 110%) of consideration if sale made by 30th June 2021.
  • Employee’s PF contribution deducted but not deposited by the employer, it will not be allowed as a deduction for the employer.
  • Pre-filling of returns with details of salary, tax payments, TDS, capital gains, dividend and interest income, etc.
  • Proposal to notify rules for removing hardship for double taxation for NRIs.
  • Constitution of a Dispute Resolution Committee for small taxpayers with taxable income up to ₹50 lakhs and disputed income up to ₹10 lakhs
  • Income Tax Appellate Tribunal to be made faceless
The government has focused on growth while letting the fiscal deficit slip to 6.8%. Gross market borrowing for the next year is expected at ₹12 lakh crores. The pro-growth budget has a huge focus on health care, infrastructure, agriculture, education, disinvestment, simplification of tax laws, financial sector and restructuring of indirect taxes while there is a lower planned subsidy. The government also has focussed on improving the quality of life, by focussing on food, availability of drinking water, reducing pollution and promoting affordable housing.
The budget builds on the government’s focus on infrastructure and manufacturing led economic revival under the AtmaNirbhar Bharat. The quality of spending in this budget is much better with increased allocation for capital expenditure. No new taxes have also come as a big respite to the markets. The government is betting that the domestic demand will recover and further boost economic activities. There is also transparency and credibility in terms of assumptions. Overall, a budget is just what was needed at this time. The platform is now set for unleashing the animal spirits of the economy.
NJ E-wealth
Money Boxes: A smart, simple way to plan your finances
Money Boxes: A smart, simple way to plan your finances
Budgeting is simply creating a plan to spend your money. This plan is the “budget” which allows you to determine in advance how much will you spend, where will you spend, and if you will be left with enough money by the end of it all. In simple words, budgeting is simply balancing your expenses with your income or cash outflows with your cash inflows.
Needless to say, budgeting is the single biggest tool you have to take control of your money, achieve your financial goals, and set yourself up for long-term success. You must already have been advised many a time to follow a proper, detailed budget. But do you? It is very rare to find any person who religiously follows budgeting. Perhaps only one in hundred may do some sort of budgeting exercise on paper every month. Is there a better, much easier way? In this article, we will attempt to take a short-cut to the entire budgeting exercise to encourage you to start on the path...
The idea is to create simple money boxes to bifurcate your spendings. To begin with, keep the boxes simple and easy to understand and bifurcate. As you progress and enjoy the journey, you may go into details and increase the type or number of boxes.
You may ask, how to manage? Well, to begin with, you may simply allocate money to the boxes in your mind. "Mental Money Boxes" may not sound very attractive but it is what it is. You may also keep a rough track of the boxes on paper - just to ensure that you are not way off the mark. In the starting month, you may skip minor expenses and record only major ones. However, the proper way to do will be to put your expenses on paper, at least once a week under different boxes. In the first month, you may also skip pre-deciding the allocation into different boxes and simply observe your expenses and then decide allocation from the new month onwards.
Remember, it is not important how elaborate plans you have made. What is more important is what you can track religiously. It is like running a marathon, your timing, speed is not important, what is important is that you cross the finish line.
Let us start by making four simple boxes to account for all your cash outflows.
Perhaps the challenge for most households would be payments towards your monthly commitments. This is the box you cannot avoid and has to be accounted for anyhow. This would include your home rent, home /car /personal care EMIs, society maintenance, etc. Consider yourself lucky if such expenses are below 20% of your income. However, you are in the red zone if it is over 50%! If it is so, you will need to immediately start thinking of reducing your loan burden and/or look at increasing your income sources over time.
Next comes the living expenses which again one may not compromise. School fees, groceries, utility bills, medical care, maid salary, tuition fees, mobile/cable/internet recharges, etc are the expenses falling under this box. These expenses are relatively stagnant /fixed for the month and do not change often or by a big margin. This box should ideally not take more than 20-30% of your cash inflows. Again, if it is more, it would simply mean you are living beyond your means.
Next in priority would be all your cash outflows towards the non-expenses, ie., insurance and investment payments. Club all your yearly /monthly expenses together to arrive at a fixed allocation every month and save accordingly. This would include your life /health /motor insurance premiums, mutual fund SIPs, bank /post office recurring, PPF savings, etc.
Among investments and insurance, priority should go to insurance as protection is for today’s financial security and survival while wealth creation is for tomorrow’s financial well-being. Ideally, everything left after the first two boxes should fall into this last box. A minimum of 20% allocation should be made to this box and if it is over 50%, consider yourself fit for the next level of planning.
Now we have reached the most interesting question. How much is left in your pocket by the month-end?
Ideally, if you have allocated all your money smartly, less than 10% would have been left. If it is more, there is a clear indication that more allocation needs to go to the Savings box. Ideally, 5-10% would be sufficient for you to spend on entertainment and other things. Simply put, if you are earning a lakh rupees, not more than Rs.5,000 should be spent on food or movies or shopping, etc every month. You can stretch it to max 10,000 but only if your savings box is over 50%.
If you have exhausted all your cash flow and are in fact in the negative, it is a big red zone! You need to immediately sit with your financial guide /advisor and find out how you can plan your finances better.
Please note that anything you are spending on self-improvement/development like yoga /gym /books /healthy food /training /seminars, etc. can be considered in this box or in the living expenses box depending on whether you are really using and benefiting from these spending and the extent you have gone overboard on same. Mark them optional, if you are not taking the full advantage.
If you feel you are putting a good amount of money into this box, it should be interesting to peep inside and try to further define another set of boxes within this savings box. Why? Because the savings box is a very important box which is directly associated with your continued and future financial well-being. This box deserves a further breakup to ensure that you have covered all aspects of your financial well-being adequately.
The most import box comes first. Ideally, if you are saving over 20-30% of your income and out of that insurance premiums are over 30% (of savings) then perhaps your choice of insurance policies needs to be seen closely.
Traditional life insurance plans (like endowment /money-back /return of premium + bonus plans, etc) offer little in terms of protection cover /sum assured and but comes at a very heavy cost of low returns on the heavy premiums you pay. A good insurance portfolio would comprise of Pure Term plan + Health Cover + Personal Accident Cover + Critical Illness cover. You would be surprised that a good, comprehensive health portfolio may end up costing you way less than just having traditional life insurance plans. Sit with your financial advisor today sort out this box.
This is the box, where your ‘real savings’ for a better, secure future where you desire to spend towards your life goals like marriage for children, home purchase, second home and most importantly - towards your peaceful and financially secure retirement. Needless to say, the more you save, the better it is. Ideally, you should at least aim to save 20% of your income towards this box.
The best way to plan for this box is to go into reverse! Start by first identifying your life /financial goals and then by estimating how much of mutual fund SIP would you need to fulfil those goals? That should be your allocation to the box - it should be pre-decided and not left as the result or output after everything else. Ideally, it should be over 60% of your savings box.
Finally, we come to the box wherein you would like to keep some money handy. These would count your cash holdings at holding, bank balance, savings towards emergency fund (if planned), etc. This should also cover money you wish to keep aside for upcoming big expenses like purchase of electronics /holidays /festivals /family events and so on.
Instead of dipping into your long-term savings, which is a strict ‘no’, to meet such expenses, we highly recommended that you plan in advance and save in parts in the preceding months before the expense happens. This is help you do two things - (a) avoid cutting your long-term money tree when they are young and (b) avoid taking loans /credit. Ideally, 10-20% of your savings box may be allocated to this box.
Its’ fun time! Here is just a very simple fun exercise to help you get an idea of where you may fall. Calculate all your broad cashflows roughly on a piece of paper and find your category!
Please note that for simplicity, we have combined boxes one and two together as both are unavoidable. The most important share to look for is the savings share of your total income.
Category What you Owe and
Living Expenses		 Savings Discretionary
Ideal /Best <30% >50% <10%
On Track <40% >30% <10%
Challenged >50% <30% >10%
Challenged >75% <10% >15%
Please note that these are only indicative in nature and the figures may not add up to exactly 100.
Those who fail to plan, plan to fail. The money box approach is a good way to begin planning your finances in an interesting and easy fashion. Again, what is important is that you actually begin, do this consistently for a few months, develop the ‘budgeting’ habit and then move on to detailed plans, if required. We are confident that such an exercise will surely help you understand your own status and also help you set targets to achieve in the coming months.
NJ E-wealth
Annuity Plans: The Safest Bet For Your Retirement
Annuity Plans: The Safest Bet For Your Retirement
The pandemic has come as a wake-up call for many of us. People are now giving a lot more priority to the quality of life, living and not just working their entire life. Early retirement may be a recent phenomenon, but it would have crossed the minds of almost everyone today. However, retirement in India is not as easy as it looks. In absence of social security, lack of adequate savings towards retirement and the uncertainty of the finances makes retirement planning very challenging.

The most popular solutions for retirement solutions today are the schemes offered by government namely the NPS, the PPF, the Employees Provident Fund (EPF) and the Atal Pension Yojana (APY). However, being government schemes, they have their own set of advantages and disadvantages. A lot of investors do find they helpful but many also find them inflexible and constrained with limits on the maximum amount. Apart from this, many investors also invest in mutual fund schemes - both as a tool to create wealth and to manage retirement kitty. However, being market-driven investments, they are suited to a particular set of investors with the right risk appetite. Also, your retirement kitty, irrespective of where you save it, runs the risk of being exhausted in old age or you being emotionally pressured to share it with your children.

People are now increasingly attracted to lifetime incomes products which are less volatile and are not market-driven. Such products focused on retirement offered by life insurers are popularly known as Annuity or Pension Plans. Let us explore them.

Annuity plans are plans offering you a guaranteed income either for life or for a stipulated duration. By design, they protect an individual against the risk that he may live longer and exhaust his resources. Under an annuity plan, the investor normally pays either a lump sum or regular instalments in the accumulation period and then get regular payments as long as you are alive or for a pre-specified fixed period.

If you think about it, both an Annuity Plan and a Pure Term life insurance plans are complementing each other. Pure term insurance covers the financial risk of 'unexpected death' leaving the family without any financial support. An Annuity plan, on the other hand, covers you by providing adequate financial resources if you continue to live long! Imagine yourself at the age of say 80+ and living without adequate financial resources. Unless you have a caring, supporting family, or you are insanely rich, it is a dreadful situation which no one wants to be in. An annuity product protects you in such a situation.

Depending on when you buy them, annuity plans can be divided into two categories: Deferred Annuity and Immediate Annuity. An immediate annuity is one for which you pay a lump sum amount, rather than instalments over time, and then the plan pays you a regular guaranteed payout. An immediate annuity plan is mostly purchased by individuals who are about to retire and would like to receive a monthly income right away.
A deferred annuity plan, on the other hand, may allow you to either pay a lump sum or pay premiums /instalments and build a corpus over a specified period. Post this, your annuity will start which would give you fixed periodic payments for a chosen period or for life.
  • First, annuity plans, both - immediate and deferred - provide you with the assurance that you will continue to receive money each month for the rest of your life. The insurance company takes on the risk of paying you for a lifetime. There is no risk of living longer or exhausting your resources if you live longer.
  • Second, annuity plans eliminate reinvestment risk. Reinvestment risk is where you have to invest in future but the investment options/interest rates at that point of time may be very low compared to today. As you can imagine, there is a trend of falling interest rates in India which is causing a lot of trouble to the senior citizens today. However, by investing in annuity plan - immediate annuity policies specifically - you are guaranteed the same rate of payout for your entire life.
  • Third, while there are investment caps in many other retirement plans, especially the government-backed schemes, there is no such investment caps/limit on annuity plans.
  • Lastly, annuity plans offered by insurers offer a lot more in terms of features and payout flexibilities. There are insurers which allow you to add your other family members too (joint life) to the plan where your family member /spouse will receive the money after you. Some plans also offer you to receive lump-sum amounts, typically return of premium, after certain periods which can be chosen as required. There are plans which also offer the option to add death benefit, critical illness, permanent disability benefits, etc. You may also have the option to add top-ups to the plan, typically available in a deferred annuity plan during your premium paying term.

The ROI or return on investment on annuity plans often depends upon whether it is an immediate annuity plan or a deferred one and the duration of delay before the start of the annuity. Typically, insurers presently are offering between 5.1% to up to 5.9% for immediate annuity plans and up to 11.50% plus for those with deferment period depending upon if the return of purchase price /premium is chosen. Please note that these rates are dynamic and normally changes every quarter for the new buyers, subject to the market scenario. The longer the deferment period, the higher would be the promised returns. The simply put, it is a question of how the cashflows are planned. One can smartly create a smart ladder of multiple annuity plans too where your annuity income would increase /grow after every few years! It would be interesting to work that out...

Like any other financial product, the key parameters for selecting the right annuity plans are safety, returns, and liquidity. We strongly suggest that if you are planning for retirement or are having a requirement of annuity payouts, to explore the annuity /pension products offered by the insurers. Unlike traditional insurance plans which mix insurance benefits with investments, often compromising both, such plans are pure cash-flow oriented plans and hence cannot be looked at with the same lens. As a product, annuity plans also score over many traditional, government schemes for due to many factors.

Annuity plans, however, cannot be directly compared to mutual funds as both are very different in nature and have their own reasons to buy. A smart investor could club both of together - park a 'part' of the portfolio as a lump-sum in annuity while the remaining portfolio will continue to grow and will not be 'blocked'. You can even continue with your SIPs. While annuity will give the guaranteed cashflows, your mutual fund investments /SIPs would work at building your wealth - a different objective altogether.

Before buying an annuity plan, we recommend that you look at the track record of the annuity provider, their reputation, financial strength and not just product features. It would be best to consult your insurance advisor on the same. For us, the elimination of uncertainty and having a guarantee in your sunset years wins the argument for annuity plans.

Fund Manager INTERVIEW
FUND MANAGER INTERVIEW
Mr. Vetri Subramaniam
Group President & Head of Equity
at UTI Asset Management Company Ltd
Vetri Subramaniam is Group President & Head of Equity at UTI Asset Management Company Ltd. He has been in this role since January 2017. At UTI MF Vetri leads a team of 17 persons including analysts and fund managers.
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Kotak Deepak Amrutlal (ARN-127784)
AMFI REGISTERED MUTUAL FUND DISTRIBUTOR

Deepak A Kotak
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  • Portfolio Review
  • Mutual Fund:Debt / Equity / ELSS

"We have taken due care and caution in compilation of this E Newsletter. The information has been obtained from various reliable sources. However it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advise regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance."

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