Amidst nationwide anticipation, India’s
Finance Minister Nirmala Sitharaman presented her 2nd union budget
today. Dubbed budget 2020 in keeping with tradition, the announcement contained
a detailed account of the government’s income and expenditure for the upcoming
fiscal year, running from April 1 to March 31.
If Sitharaman’s maiden budget last year was
considered critical for the Indian economy, budget 2020 is even more so. With
consumption dipping to new lows, with a job crisis looming in closer, and with
several industries facing real and potential losses due to slowing demand among
the general public, this is the budget that could make or break the country’s
economy.
Expectations around this year’s union budget
included income tax relief, several sector-specific reforms, infrastructure
investments, and GST rate cuts. Now that it has been presented, here’s looking
at some of the highlights of budget 2020.
Fiscal
deficit target
The fiscal deficit projections were raised
to 3.8% of the GDP for 2019-20, as opposed to the initially budgeted 3.3%.
For 2020-21, the fiscal deficit target has
been set at 3.5% of the GDP.
Personal
income tax amendments
Income tax relief for individual taxpayers
has been long overdue. Budget 2020 has finally touched upon this fundamental
area. The salient points with regard to income tax relief are listed here.
A new
scheme of personal income taxation shall be introduced, with revised tax rates.
This
new scheme shall be optional.
Taxpayers
opting for the new scheme of taxation shall be eligible to pay tax at reduced
rates, provided they do not claim any deductions or exemptions.
Here’s how the new income tax rates proposed
in this budget compare with the earlier rates of tax.
Income
slab(in
rupees)
Rate
of tax as per old scheme
Rate
of tax as per new scheme
5,00,001 to 7,50,000
20%
10%
7,50,001 to 10,00,000
20%
15%
10,00,001 to 12,50,000
30%
20%
12,50,001 to 15,00,000
30%
25%
Above 15,00,000
30%
30%
For income up to Rs. 5 lakhs, no tax shall
need to be paid under the old and the new scheme. Furthermore, the Finance
Minister also proposed that around 70 of the 100+ deductions and exemptions
provided in the Income Tax Act, 1961, are to be scrapped in an attempt to
simplify the tax regime.
Corporate
relief and tax rate cuts
Budget 2020 also gave some tax relief
measures for the corporate sector. Some highlights are lister here.
New
companies in the power generation sector shall be taxed at a nominal rate of
15%.
The
turnover threshold limit for mandatory audit has been raised from Rs. 1 crore
to Rs. 5 crores.
To
tackle the increasing incidence of building criminal liabilities for civil
offences, the Companies’ Act is to be amended in an effort to decriminalize
civil offences.
GST
rate cuts
While the highlights of budget 2020 included
no specific references to GST rate cuts, Sitharaman did hint at possible relief
in the near future, once the government has had some time to look into the
areas where GST rates can be lowered.
Dividend
Distribution Tax (DDT)
As expected before the budget was presented,
the government has abolished Dividend Distribution Tax. Salient points in this
regard are as follows.
Companies
shall no longer be required to pay DDT.
Instead,
dividend income shall be taxed in the hands of the shareholders as part of the
income slab applicable to them.
Ease
in Compliance
In an attempt to simplify compliance and
make the process of tax assessment and payments easier, the Finance Minister
proposed several measures. Some of the main highlights in this regard follow.
Taking
inspiration from faceless assessment, the Income Tax Act shall be amended to
include faceless appeals as well.
GST
returns shall be simplified, with features to support SMS-based filing and
improved input tax credit flow.
There
shall be an option to prefill the tax return to make filing easier.
Healthcare
Mission
Indradhanush is to be extended to cover new diseases and support the
development of 5 new vaccines.
New hospitals
shall be set up under viability gap funding to look at areas where there are no
medical care. This will be done via a public-private partnership.
The TB Harega, Desh Jeetega campaign will be
given prominence, so the government can end the incidence of TB in the country
by 2025.
Tourism
Five
archaeological sites are to be developed with on-site museums on site in the
following areas: Rakhi Gadi in Haryana, Hastinapur in UP, Dholavira in Gujarat,
Shivsagar in Assam and Adichanallur in Tamil Nadu.
A tribal
museum is to be set up in Ranchi, Jharkhand.
A
maritime site is proposed to be set up in Lothal.
The FM
announced that 100 more airports will be developed under UDAN by 2024.
Agriculture
The
Finance Minister hopes to double the income of farmers by the year 2022.
A
16-point action plan was unveiled to promote farm-based activities in
conjunction with the state governments. The plan touched upon measures for
solving various water-related issues, setting up of solar pumps, use of organic
fertilizers, and storage and logistic requirements.
The
budget also focused on setting up of Kisan Rail by the Indian Railways under
the Public-Private-Partnership (PPP) model. The scheme is likely to help
farmers safely transport perishable goods without risking spoilage.
The Budget
proposes to expand the NABARD Refinance scheme by increasing the agricultural
credit availability to up to 15 lakh crores.
Education
The
Finance Minister stated that discussions are underway with the various states
with respect to the introduction of New Education Policy (NEP), and that the
policy shall be announced soon.
The
Government is likely to enable FDI in education to boost the sector.
By
March 2021, 150 higher education institutes to have various apprentice
programmes.
Urban
local bodies in various states to provide newly qualified engineers with a job
opportunity for a year.
The
Government will work to promote ‘Study in India’ by conducting INDSAT exams for
Asian and African students to provide scholarships.
Budgetary
allocations
Purpose
Amount of Budget Allocation
Agriculture, Irrigation, and
Allied Activities
Rs. 2.83 lakh crores
Jan Aushadhi Scheme
Rs. 69,000 crores
Swachh Bharat Scheme
Rs. 12,300 crores
Jal Jeevan Mission
Rs. 11,500 crores
Education
Rs. 99,300 crores
Skill Development
Rs. 3,000 crores
Development of Industry and
Commerce
Rs. 27,300 crores
Power and Renewable Energy
Sector
Rs. 22,000 crores
BharatNet
Rs. 6,000 crores
National Mission on Quantum
Computing and Technology
Rs. 8,000 crores
Nutrition-related programs
Rs. 35,600 crores
Women-linked programs
Rs. 28,600 crores
Senior Citizens
Rs. 9,500 crores
Promotion of Tourism
Rs. 2,500 crores
Plans for Clean Air
Rs. 4,400 crores
Hosting G-20 residency in the
year 2022
Rs. 100 crores
TOTAL
Rs.
6,22,100 crores
The
Takeaway
Budget 2020 focused greatly on public-private partnerships. The FM divided her speech into three primary themes, namely Aspirational India (dealing with agriculture, healthcare, and rural development), Economic Development (focusing on yielding more space for private sector), and Caring Society (centered on a society that’s humane and compassionate).
Budget 2020 also delivered some landmark announcements that were anticipated greatly, particularly with regard to personal tax rate cuts and corporate relief. It remains to be seen if the measures introduced succeed in pulling India’s economy upward.
01 February 2020
6 mins read
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