Finance Minister Nirmala Sitharaman presented the Union Budget 2020-21 on 01-02-2020 in the Lok Sabha. This is the second budget after Narendra Modi led National Democratic Alliance returned to power for a second term. This year’s Union Budget centres around three ideas — Aspirational India, Economic development, A Caring Society.
Here are the highlights of Budget 2020
Economic Indicators
- GST bring synergy in logistics sector (20% time reduction)
- 60 lakhs new taxpayers added via GST introduction
- FDI has grown during period 2014-2019 to $284bn
- Central government debt reduced to 48.7% of GDP in 2019
- Nominal GDP growth in 2020/21 estimated at 10%
- Fiscal deficit for 2019/20 seen at 3.8% of GDP
- Fiscal deficit for 2020/21 seen at 3.5% of GDP
- Fiscal deficit for 2021/22 seen at 3.3% of GDP
- Fiscal deficit for 2022/23 seen at 3.1% of GDP
- Revenue deficit seen 2.7% of GDP in FY21
Economy and Finance:
- Bank deposit insurance cover had been increased from ₹1 lakh to ₹5 lakh per depositor.
- Government plans to amend the Companies Act to decriminalise civil offences.
- Govt plans to sell part of its holding in Life Insurance Corporation (LIC) by way of Initial Public Offering.
- Certain specified categories of government securities will be open fully for NRIs, apart from being open to domestic investors
- FPI limit in corporate bonds raised to 15% from 9%.
- Government doubles divestment target for the next fiscal year at 2.1 lakh crore.
- Expand Exchange Traded Fund by floating a Debt ETF, consisting primarily of govt. securities.
Direct tax
A New Income Tax regime has been announced. Those who want to be in the old regime with exemptions, can continue to pay at the old rates. Tax payers can switch between old regime and new regime.
| Income | Tax |
|---|---|
| Between ₹5 lakh and ₹7.5 lakh | Reduced to 10% from the current 20% |
| Between ₹7.5 lakh to ₹10 lakh | Reduced to 15% from the current 20% |
| Between ₹10 lakh to ₹12.5 lakh | Reduced to 20% from the current 30% |
| Between ₹12.5 lakh to ₹15 lakh | Reduced to 25% from the current 30% |
| Above ₹15 lakh | Continue at 30%, but without exemptions |
- Over 70 deductions have been removed.
- The clarification has come after the Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India.
- In order to avoid any misinterpretation,it is clarified that income earned outside India by him/her shall not be taxed in India unless it is derived from an Indian business or profession.
- Companies will no longer be required to pay Dividend Distribution Tax (DDT). Now dividend will be taxed in the hands of the recepient.
- Aadhaar-based verification for GST compliance to be introduced.
- Aadhaar-based quick issuance of PAN announced.
- 15% concessional tax rate for new power generation companies.
- 100% tax concession to sovereign wealth funds on investment in infrastructure projects.
- Tax on Cooperative societies to be reduced to 22% plus surcharge and cess ,as against 30 per cent at present.
- To end tax harassment, new taxpayer charter to be instituted by removal of criminal liability for offences which are civil in nature.
- To amend I-T Act to allow faceless appeals.
- To launch new direct tax dispute settlement scheme – Vivaad se Vishwaas scheme. Interest and penalty will be waived for those who wish to pay the disputed amount till March 31.
- Government to look at ensuring that contracts are honoured.
- Proposes new National Policy on Official Statistics to improve data collection and dissemination with the help of technology.
Indirect Tax :
- Customs duty raised on footwear to 35% from 25% and on furniture goods to 25% from 20%.
- Excise duty proposed to be raised on Cigarettes and other tobacco products, no change made in the duty rates of bidis.
- Basic customs duty on imports of news print and light-weight coated paper reduced from 10% to 5%.
- Customs duty rates revised on electric vehicles and parts of mobile.5% health cess to be imposed on the imports of medical devices, except those exempt from BCD.
- Lower customs duty on certain inputs and raw materials like fuse, chemicals, and plastics.
- Higher customs duty on certain goods like auto-parts, chemicals, etc. which are also being made domestically.
Startups & MSME:
- Tax burden on employees due to tax on ESOPs to be deferred by five years or till they leave the company or when they sell, whichever is earliest.
- New Simplified return for GST from April 2020
- Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.
- Turnover threshold for audit of MSMEs to be increased from Rs 1 crore to Rs 5 crore, to those businesses which carry put less than 5% of business in cash.
- App-based invoice financing loans product to be launched, to obviate problem of delayed payments and cash flow mismatches for MSMEs.
- Amendments to be made to enable NBFCs to extend invoice financing to MSMEs
Infrastructure:
- Budget proposes to provide ₹1.7 lakh crore for transport infrastructure in 2021
- National Logistics Policy to be released soon.
- Chennai-Bengaluru Expressway to be started.
- Aim to achieve electrification of 27,000 km of lines.
- Plan to have a large solar power capacity for Indian Railways.
- The government also proposes a Bengaluru suburban rail project at a cost of ₹18,600 crore.
- Govt to monetise 12 lots of national highways by 2024.
- 100 more airports will be developed by 2024 to support UDAN.
Railways
- The railways got a budgetary allocation of ₹70,000 crore and an outlay for capital expenditure amounting to ₹1.61 lakh crore
- The budget also proposed setting up of a large solar power capacity alongside the rail tracks on land owned by the railways.
- Redevelopment of four stations and operation of 150 passenger trains would be done through the public-private-partnership (PPP) mode.
- It also announced introduction of more Tejas type trains which will connect iconic tourist destinations.
Agriculture:
- A budget allocation of ₹2.83 lakh crore for the sector comprising agriculture and allied activities.
- Doubling farmers incomes by 2022.
- Agri-credit availability set at ₹15 lakh crore for 2020-21.
- Comprehensive measures for 100 water stressed districts.
- Provide 20 lakh farmers to set up standalone solar pumps. Help another 15 lakh farmers to solarise their power grid.
- Village storage scheme proposed to be run by women SHGs.
- Indian Railways to have refrigerated coaches capability in “Kisan Train” to carry perishables and milk.
- Krishi UDAN on international and national routes.
Health and Sanitation:
- An allocation of ₹69,000 crore for the health sector.
- ₹12,300 crore for Swachh Bharat this year.
- Proposal to set up hospitals in Tier-II and Tier-III cities with the private sector using PPP.
- Expand Jan Aushadhi scheme to provide for all hospitals under Ayushman Bharat by 2025.
Education:
- ₹99,300 crore for education sector in 2021 and about ₹3,000 crore for skill development.
- Urban local bodies to provide internship to young engineers for a year.
- Degree-level full fledged online education programmes by institutions ranked in top 100 in NIRF rankings, especially to benefit underprivileged students.
- A national police university and a national forensic science university is proposed to be setup.
- IND SAT exam for students of Asia and Africa to promote “study in India” programme.
Housing:
Tax holiday for affordable housing extended by 1 year. Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021.
