It was "due to the need to reduce costs and safeguard the sport in light of the Covid-19 pandemic", said a statement.
FIA said in a statement that the cap will be scaled down to $140 million in 2022 and $135 million for 2023-2025, based on a 21-race season.
The FIA's World Motorsport Council on Wednesday ratified a raft of new measures, including a budget cap, vehicle and engine development limits, and aero development handicap rules, following weeks of discussions between teams.
This new rule states that the lower the team finishes in the constructor's championship, the more time they will get more time in a wind tunnel to do aerodynamic testing to develop next year's auto.
Teams already face restrictions over the amount of aerodynamic work they can complete at their factories, but from 2021 the restrictions will be biased against the previous year's championship position on a sliding scale.
"It has been clear to everyone for some time that a budget cap would be applied and we pushed for a lower limit to support a financially sustainable sport", Seidl said.
The changes to the sporting, technical and financial regulations were passed by e-vote at Wednesday's world motorsport council meeting. At the moment, big teams like Mercedes, Ferrari and Red Bull have an estimated budget of over $400m each, as compared to smaller teams like Williams and Alfa Romeo, which have a budget of below $200m.
Amongst the technical changes approved this morning is confirmation the 2020 chassis will be used again in 2021, with a very limited number of modifications allowed. We've got to cut costs and have a reduction of the cost cap. - A limitation on the number of upgrades a power unit manufacturer can make over a season, beginning in 2021.
Minimum weight will increase by 3Kg to 749Kg for 2021.
Sweeping new regulations are due to come into effect in 2022 after being postponed from 2021.
For 2022, a number of key specific aspects of the regulations have been set out, including curfews, restricted number components (RNCs), scrutineering, and parc fermé prescriptions. The FIA has also made exemptions for employees' sick leave, costs of medical benefits, etc., to ensure that teams don't cut costs in these areas to stick to the cost cap.
McLaren's team principal says it will be a "massive and painful task" to meet new spending limits to be imposed on Formula One teams from 2021.
- Samsung Galaxy Fold 2 Rumoured To Launch In August This Year
- Derek Chauvin Charged with Murder of George Floyd
- Protests, looting erupt in Minneapolis over racially charged killing by police
- Twitter Hides Trump Tweet Threatening to Shoot George Floyd Protesters
- SpaceX launch: Historic Elon Musk mission on target for lift-off
- European Union unveils plan to borrow €750 billion to aid economic recovery
- Elon Musk's SpaceX Launches NASA Astronauts To ISS, Watch Live
- Father of Aston Villa manager Dean Smith dies after contracting coronavirus
- Taylor Swift Slams Trump's Response to Minneapolis Protests, Says She'll
- WHO's hydroxychloroquine trial suspended pending safety data