The Union Budget 2020-2021 was presented today at 11 am, the 1st of February 2020, by the Finance Minister Niramala Sitharaman amidst a struggling economy with a six year low GDP growth. The budget comes in between a falling market situation in India with real estate, agriculture, manufacturing and automobile sectors being hit worst.India's GDP growth rate was recently revised downwards to 6.1 per cent from 6.8 per cent estimated earlier for fiscal year 2018-2019. The Economic Survey report for 2019-2020 was released on January 31, 2020, just a day before the release of Union Budget 2020-21. The Survey 2019-20 has projected India’s GDP growth to be 6-6.5% in the next fiscal year [2020-2021].
The new budget is primarily focused on reforms aimed at the revival of the downfall of economy and stimulating the consumer demand. It is expected to ease the market fear and raise spending, enabling a revival in Indian economic growth. There are hopes that the government will allocate more funds for infrastructure development, address the major employment crisis, ease farmer distress and income tax pressure and boost public spending. According to the economic survey 2020 in November 2019, India launched its biggest privatisation drive in more than a decade. Given that unemployment and lack of jobs remains one of the big failings of the government, the Economic Survey 2019-20 has set out a framework using a Chinese model on how India can create four crore well-paid jobs by 2025 and 8 crore jobs by 2030.
“This Budget aims to put your hopes and aspirations to rest. The dreaded Inspector Raj has vanished. Have added 60 lakh new tax payers in a year... Our government brought a paradigm shift in governance - structural reform and inclusive growth. Fundamentals are strong, ensuring macroeconomic stability. Inflation was contained, banks cleaned up and recapitalised. Companies provided exit through IBC. Steps for formalisation of economy were taken up. GST has been the most historic.” Sitharaman said.
The budget is based on three prominent themes: "Aspirational India, Economic development for all, and Creation of a caring society."
The top highlights from the budget session are:
Part A - GST:
- An average household now spends four percent less of its monthly expenditure on account of GST.
- Rs. 1 lakh crore benefit extended to consumers because of reduced GST rates ; simplified returns from April 2020.
- GST bring synergy in logistics sector (20% time reduction).
- 60 lakhs new taxpayers added via GST introduction.
- India’s FDI elevated to $284 billion from $192 billion between 2014 to 2019.
- The government's debt has reduced to 47 percent of GDP from over 52 percent.
Part-B: Tax Proposals
- Personal income tax - proposed to bring new income-tax regime for individual Taxpayer's Income upto Rs. 5 lakhs no tax, says FM, if individual earns income of Rs. 15 lakhs then tax would be 1.95 lakh vis-a-vis 2.73 lakhs as earlier.
- Taxpayer's need to pay only disputed amount of tax (no penalty be charged) by March 2020; scheme will be available till June 2020 but some additional payment to made in-addition to tax.
- Reviewed all existing income tax exemptions, removed 70% of them in new regime, will review remaining and rationalize it.
- 100% tax exemption on new investment by foreign funds in infrastructure sector by 2024 with a minimum lock in period of 3 years.
- Tax audit turnover threshold limit increased from Rs. 1 crore to Rs. 5 crores.
- Concessional 5% withholding tax has been extended to municipal bonds. Cooperatives are taxed at 30% now. Cooperatives can choose a 22% tax with 10 percent surcharge and 4% cess with no exemptions.
- Faceless appeals on the line of faceless assessment.
- Vivad se Vishwas Scheme introduced - New direct tax dispute settlement scheme.
Entrepreneurship and New Economy:
- Indian government is looking at new technologies for DBT (Direct Benefit Transfer) High speed broadband connection to be linked to 100,000 gram panchayats, an outlay of Rs. 6000 crores to connect Optical fibre to these networks.
- A digital platform will be set up for seamless application submission for Internet service provider (ISPs).
- Outlay of Rs. 5000 crores for five years for quantum-technology related computing and other applications.
- MSMEs (Ministry of Micro, Small & Medium Enterprises) & Manufacturing: National Technical Textiles Mission to be introduced, with a four-year implementation period, with an outlay Rs. 1,480 crores.
- To achieve higher export credit, a new scheme being launched which provides higher insurance cover, reduced premium for small exporters and simplified procedure for claim settlements.
The minister mentioned creating a unified procurement system on public procurement government portal e-marketplace. “This will create a great opportunity for MSMEs.
- "There are 3.24 lakh vendors already on the government e-market place platform and we are targetting Rs. 3 lakh crores turnover," Sitharaman said.
- Employee Stock Ownership Plan (ESOPs) given by startups to employees currently taxed as perquisites; deffering of tax payment by employees to 5 years.
- Increase in turnover limit from Rs. 25 crores to Rs. 100 crores for startups.
- Deduction can be claimed by startups upto 10 years.
- Universal pension coverage with auto enrollment to be introduced Pension Fund Regulatory and Development Authority (through PFRDA) to every person.
- Invoice financing by NBFCs to MSME sector - Amendments to be made in Factories Act, 1948.
- Certain amendments to be made in SARFESI Act, 2002.
- Liquidity constraints of Non Banking Financial Company (NBFCs) & Housing Finance Company (HFCs) will be addressed - Government has taken steps from last year.
Agriculture, Fisheries & Allied Activities:
- Rs. 2.83 lakh crores allocated for agriculture and allied activities, irrigation, and rural development.
- Water stress related issues are a serious concern across the country. Government is proposing comprehensive measures for 100 water-stressed districts.
- Agricultural credit target for 2020-21 has been set at Rs. 15 lakh crores. Announces an additional Rs. 69,000 crores for the health sector, Rs. 3.6 lakh crores for Jai Jeevan Mission.
- Promotion of artificial intelligence (AI) and machine learning (ML) in healthcare to help acquire data on chronic illnesses and help in diagnosis of diseases like Tuberculosis.
- 16-point action plan for agricultural & irrigation sector under aspirational India.
- Insurance cover for deposits increased from Rs. 1 lakh to Rs. 5 lakhs.
- Announces Rs. 99,300 crores outlay for education sector in 2020-2021 and Rs. 3,000 crores for skill development.
- Rs. 27,300 crores for development of industry and commerce.
- New Education Policy will be announced soon.
- ECB and FDI will open in education sector.
- Degree level full fledged online programs to be started.
- National Police University & Forensic University is proposed to be set up.
Total allocation for Swachh Bharat is around Rs. 12,300 crores for this year, Rs. 1.7 lakh crores to be provided for transport infrastructure in the coming financial year, Rs. 9,000 crores for senior citizens, Rs. 53,700 crores fordevelopment and welfare of Scheduled Tribes, Rs. 85,000 crores in 2020-21 for welfare of SC and other backward classes, Rs. 28,600 crore proposed in this budget specific to women
Energy and Renewable Sector:
- Rs. 22,000 crores to be provided to power and renewable energy sector in 2020-2021.
[Read Finance Bill]
Author: Dyuti Pandya