Budget Highlights 2020 at a Glance

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Financial Minister Nirmala Sitharaman presented the Union Budget 2020 in Lok Sabha on 1st February 2020. The new budget proposes significant changes in the personal income tax regime (that is optional in case you choose to forgo exemptions) in addition to multi-billion dollar infrastructure, and a healthcare package to boost growth in the country. Emphasizing structural reforms, the digital revolution and inclusive growth structural reforms the finance minister said this Union Budget is likely to give a boost to income as well as the purchasing power of the people. Moreover, this budget also raised the bank depositor’s insurance coverage from Rs. 1 lakh to Rs. 5 lakh.

Below are Some of the Key Highlights from the Finance Minister’s Budget speech:

Direct Taxation Proposals

The new income tax regime with changed tax slab rates has been proposed u/s 115BAC. The new regime is optional for those who want to forgo exemptions and deductions and want to avail of the reduced income tax rates. However, a business tax payer won’t be able to switch to the tax regime once opted.

New Optional Tax Slabs

  •  Along with the reduced tax rates the new tax regime removes 70 out of 100 available exemptions and deductions
  • The TDS has been reduced from 10% to 2% u/s 194J
  • Dividend Distribution Tax (DDT) has been discontinued and the recipients of the dividend will be required to pay taxes as per the applicable rate.
  • Additional deduction of Rs.1.5 lakh u/s 80EEA on the home loan interest is extendible till the 31.03.2021.
  • The new budget has increased the Tax Audit threshold to Rs. 5 Crore from Rs. 1 crore. This is applicable to if the gross/ turnover receipts in cash are not more than 5% during the previous year. Additionally, the payment made in the P.Y should not exceed 5%. Also, the tax audit due date has been extended from September 30 to October 31.
  • For new power generation companies, 15% concessional tax rate is provided
  • Tax on Cooperative societies reduced from 30% to 22% plus surcharge and cess
  • A new tax payer charter to be instituted to end tax harassment
  • Vivaad se Vishwaas scheme a new direct tax dispute settlement scheme to be launched
  • It further proposes Aadhaar-based verification of taxpayers and immediate allotment of PANon the basis of Aadhaar.
  • Unique Registration Number for Charity Institutions and IT return the form to be pre-filled to claim exemptions available on donations.
  • Tax Benefits to Start-ups are proposed

Read:   Budget 2020 Speech

Indirect Taxation

  • 5% health cess on the import of medical devices that are manufactured in India
  • Customs duty on furniture raised from 20% to 25% and on footwear from 25% to 35%
  • Excise duty  to be raised on Cigarettes and other tobacco products
  • Revision of customs duty rates levied on electric vehicles and mobile parts
  • Basic customs duty on imports of light-weight coated paper and news print reduced to 5% from 10%
  • Lower customs duty on raw materials like plastics and chemicals
  • Higher customs duty on certain goods like chemicals, auto-parts, etc. that are produced domestically.

Allocation

The Union budget 2020-2021 allocates:

  • Construction of new lines: ₹12,000 crore
  • Gauge conversion: ₹2,250 crore
  • Doubling: ₹700 crore
  • Rolling stock: ₹5,786.97 crore 
  • Signaling and telecom: ₹1,650 crore

Manufacturing

  • ₹8000 Crores allocated for quantum technologies and applications (over a period of five years)
  • By 2025 milk processing capacity will be doubled
  • Introduction of schemes to encourage manufacturing of electronic equipment’s, mobile phones, and semiconductor packaging
  • Encouraging the private sector to construct Data Centre Parks across India

Education Sector

  • Apprenticeship Embedded Courses to be started by 150 higher educational institutions
  • Introduction of Special bridge courses to enhance skill sets for those seeking jobs abroad
  • Urban local bodies to provide internship opportunities for fresh engineers
  • Allocation of funds towards the educational sector to be increased significantly in 2020-21

Financial Sector

  • Deposit Insurance Coverage increased to Rs. 5 lakh from Rs. 1 lakh
  • NBFCs for debt recovery limit under the SARFAESI Act to be reduced to asset size of Rs. 100 Crore or loan size of Rs. 50 lakh.
  • Proposal to sell balance holding of government in IDBI Bank
  • NPS Trust to be separated from PFRDAI for government employees

Ayushman Bharat Scheme

  • Out of ₹69,000 Crores allotted towards the healthcare sector, ₹6,400 Crores will be allotted to Ayushman Bharat Yojna.

Subsidy in 2020/21

  • Food subsidy: 1.15 trillion
  • Petroleum subsidy: ₹409.15 billion
  • Fertilizer subsidy: ₹713.09 billion

Power Sector

  • Allocation of ₹273 billion for promotion of industry and commerce
  • Old thermal power plants advised shutting if emission norms are not met
  • ₹44 billion to be allocated for clean air incentives in cities with a population of more than 1 million people

Infrastructure Sector

  • ₹100 lakh crore allocated to infrastructure development over the next 5 years
  • For transport infrastructure in 2020-21, the government has proposed ₹7 lakh crore
  • Government to launch National Logistics policy
  • India to get 100 more airports under UDAAN
  • Development of Roads Highways to be accelerated
  • ₹103 lakh crore National infrastructure Pipeline projects announced
  • 150 passenger trains through PPP mode, four station redevelopment projects and tourist destinations to have more Tejas type trains
  • Corporatizing at least one major port

Investment

  • Government’s divestment target doubled to ₹1 lakh crore for the next fiscal year
  • Government plans to sell part of its holding in Life Insurance Corporation (LIC) through IPO
  • Certain government securities will be open to NRIs in addition to the domestic investors
  • FPI limit in corporate bonds to be increased from 9% to 15%
  • Expand ETF by floating a Debt ETF, consisting mainly of govt. securities

Ministry of Micro, Small & Medium Enterprises (MSMEs)

  • Amendments are proposed to Factor Regulation Act, 2011
  • Amendments to enable MSMEs to receive invoice financing from NBFCs
  • Banks to offer Subordinated debt for MSMEs that is guaranteed by Credit Guarantee Trust. The debt will be counted as quasi-equity
  • MSMEs will be able to benefit from App-based financing loans
  • To avoid delayed payments and cash flow mismatches, App-based invoice financing loans product to be launched

Public Sector Banks (PSBs):

  • Robust mechanism to monitor financial transactions of all scheduled commercial banks and ensure the safety of depositors’ money

Agriculture

  • By 2022 the government plans to double the farmers’ income
  • Agriculture and allied activities, Irrigation and Rural Development an allocation of about ₹83 lakh crore has been made for the year 2020-21
  • Coverage of artificial insemination to be increased to 70%
  • Help 15 lakh farmers solarize their grid-connected pump sets
  • KrishiUdaan and KisanRail for seamless transportation of perishable farm goods
  • by 2024-25 fishery exports to be raised by ₹ 1 lakh crore

Railways

  • ₹70,000 Crores have been allocated to Railways
  • Large solar power capacity set-ups alongside the rail tracks on land that is owned by the railways.

Water, Wellness, and Sanitation Goals

  • PM Jan Arogya Yojana to launch more than 20,000 empanelled hospitals
  • by 2024 Jan AushadhiKendra Scheme to be expanded to all districts
  • Focus on waste management, liquid, and greywater management in India

Skill India Initiative

  • Sitaraman’s Union Budget FY20 proposes ₹3,000 Crores towards skill development for Youth in India
  • During the 90th Budget presentation, the FM mentioned the increasing demand for paramedical staff, teachers, and caregivers in foreign countries. To ensure that their skills match up with the employer’s demand the ₹3,000 Crores  has been allocated towards skill development
  • Private investors to have a stake in IDBI Bank

Connecting India

  • The budget allocates ₹6,000 Crores for BharatNet programme
  • BharatNet to link nearly 1 lakh gram panchayats in a year

Fiscal Numbers & Allocations

  • The nominal GDP growth for 2020-21 is estimated at 10%
  • From 3.3% in the current fiscal the FY20 fiscal deficitrevised to 8%. The fiscal target for FY21 is seen to be around 3.5%
  • Net market borrowing stood at ₹99 lakh crore for FY20 and for FY21 it is pegged at ₹5.36 lakh Crores
  • ₹37 lakh crore is allocated towards the defence budget

Here's a list of Key Budgetary Allocations for FY 21

  • Agriculture: ₹1.38 lakh crore
  • Education Sector: ₹99,300 crore
  • Agriculture and Rural Development: ₹2.83 lakh crore
  • Rural Development: ₹1.23 lakh crore
  • Agriculture Credit Target: ₹15 lakh crore
  • Healthcare: ₹69,000 crore
  • Transport Infrastructure: ₹1.7 lakh crore

These were the highlights and takeaways of the budget of the fifth largest economy of the world-India.

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