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union budget 2020

Finance Minister Mrs. Nirmala Sitaram is presenting the union budget 2020 in the parliament of India centralized around the theme to restore economic growth and to set out a clear road map for achieving the ambitious target of a $ 5 trillion economy by 2025. Sitharaman on Friday had tabled the pre-budget Economic Survey for 2019-20, which projected GDP growth at 6 to 6.5 percent in 2020-21. Earlier today, the market benchmark Sensex slumped over 200 points in the opening session on Saturday ahead of the release of the Union Budget. Let’s check the sector-wise main highlights and provisions under union budget 2020.

Table of Content

Main highlights and provisions under Union Budget 2020

“The Union Budget is woven around three primary themes -- Aspirational India, Economic development for all and caring society,” says FM Nirmala Sitharaman. 

prominent themes of the budget

Let’s check the sector-wise main highlights and provisions under union budget 2020

GST and Income Tax Reforms - proposed under Budget 2020

GST

  • India to see a new GST filing process from April, says FM.
  • 1 Lakh crore of benefit to ultimate consumers.
  • Inspector Raj vanished
  • New GST return process will start from this April. ( Big push for ease of doing business
  • Cash reward system is introduced to incentivize customers to seek invoice
  • Aadhar based verification of taxpayers
  • Dynamic QR code capturing GST parameters to be implemented
  • Simplified return features like SMS based filing for Nil returns

Custom Duties

  • Duty on footwear raised to 35% from 25%
  • Duty on furniture goods raised to 25% from 20%
  • 5% health cess to be imposed on import of medical devices, except those from BCD
  • Duty on certain products like auto-parts, chemicals and others have been raised

Income Tax Reforms - proposed under Budget 2020

Income Tax simplified but remains optional

 New Tax slab (without exemptions):

union budget 2020 tax slab

  • Vivaad se Vishwas or ‘No dispute, but trust’ scheme - 4.83 Lakh direct tax cases are pending at various tribunals and courts. A scheme similar to the indirect tax scheme, for reducing the litigation in the direct tax scheme will be provided till 31st March 2020, now will be available by the end of June 2020. After the end of March people willing to settle cases can pay the tax amount and get relief. Taxpayers can make use of this opportunity and get free from litigations.
  • CBDT to adapt a taxpayer's charter, instant allotment of PAN through Aadhar, without any requirement to fill up detailed forms. The direct taxes are now the lowest, simplest and the smoothest.

Corporate Tax

  • Tax rate of 15% extended to companies working in new electricity generation
  • Indian corporate tax rates are now amongst the lowest in the world

Dividend Distribution Tax (DDT)

  • The tax has been removed completely making India a more attractive investment destination
  • Deduction to be allowed  for dividend received by the holding company from its subsidiary

Start-ups

  • Start-ups with turnover up to ₹100 Crore to enjoy a 100% deduction for 3 consecutive assessment years out of eligible 10 years in total.
  • Tax incurred on ESOPs is deferred. Now an employee holding their company’s stock is liable to pay tax only at the time of leaving the employer or while selling the stock.

MSME

  • The total turnover threshold for audit increased from ₹1 crore to ₹5 crores for all the businesses carrying out less than 5% business transactions in cash

Cooperatives

  • An option has been made available to the cooperatives with no exemptions, will be taxed at 22% + 10% surcharge and 4% cess
  • From now on, cooperative societies will be exempted from Alternate Minimum Tax (AMT) just like the companies are exempted from Minimum Alternate Tax (MAT)

Banking & Financial Sector Reforms - proposed under Budget 2020

Banking

  • IDBI Bank to be sold to a private investor.
  • Banking Regulation Act to be amended to strengthen co-op banks.

Financial Sector

  • Fiscal deficit crosses the target. Touches 3.8%.
  • Information about reforms accomplished in the PSBs:
  • 10 banks consolidated into 4 and over ₹ 3.5 Lakh crore of capital induced
  • Deposit Insurance and Credit Guarantee Corporation (DICGC) is permitted to increase Deposit insurance coverage to ₹ 5 Lakh which was ₹ 1 Lakh earlier
  • NBFCs eligible limit for debt recovery reduced from ₹ 500 crore to ₹ 100 crores according to asset size
  • New scheme to provide subordinated debt for entrepreneurs of MSMEs by the banks will now be counted as quasi-equity. All the debt will be serviced and guaranteed through Credit Guarantee Trust for Medium and Small Enterprises (CGTMSE)
  • An app-based invoice financing loan products will be launched specifically for NBFCs, would prevent the problem of delayed payments and cash-flow mismatches

Loans

  • Rules  to be softened to enable NBFCs to extend invoice financing to MSMEs
  • More Housing loans benefit up to 1.5 lakh tax benefits. The real estate sector will thrive.

Business loan policy changes

Business loan policies will be tweaked to enable NBFCs to offer invoice financing for MSMEs.

Read More: Budget 2020 And Its Impact on Investors, NRIs, and Salaried Taxpayers

Agricultural Reforms - proposed under Budget 2020

  • Shall help ₹15 lakh farmers solarize their grid-connected pump sets.
  • Comprehensive measures for 100 water-stressed districts being proposed.
  • Kisan rail to be set up under Krishi rail service so that perishable farm goods can be quickly transported across the country.
  • Pradhan Mantri Kisan Urja Suraksha even Utthan Mahabhiyan (PM KUSUM) to be expanded to provide ₹20 lakh farmers in setting up standalone solar pumps.
  • 35 Lakh farmers to get solar-powered pump sets. Subsidy for equipment running on solar power. Set-up of solar power units on the farmlands which are not suitable for farming, to generate additional income for farmers.
  • Agricultural credit target has been set at ₹15 lakh crore.
  • By 2022-23 proposal to raise fish production to 200 lakh tonnes.
  • Food Corporation of India and Warehousing Corporation of India to build warehousing facility on their land.
  • Village storage scheme for farmers.
  • Krishi Udaan scheme will be introduced to connect farmers from distant areas to bring their produce to urban areas.
  • To achieve 108 million metric ton milk production by 2021
  • To encourage the balanced use of all kinds of fertilizers in order to change the current incentive regimes
  • MUDRA and NABARD assistance for women in business. Especially the ones in the villages of India. Registration can be done through Self-help groups at panchayat level

Health Care Reforms - proposed under Budget 2020

  • Mission Indra Dhanush to be expanded ( currently provide immunization against 8 diseases). Implemented in 2014 by J . P. Nadda
  • Clean water for all: ₹3.6 lakh crore towards piped water supply to households
  • Swachh Bharat: ₹12,300 crore for 2020 - 2021
  • Govt aims to eradicate Foot and Mouth Disease

Government to improve Digital Governance measures, social security through online EPF and Pension services. As the world is moving online, so will the services for poor and elders.

Education & Skill Development Reforms - proposed under Budget 2020

Big Budget for education and skill development

  • ₹ 99,300 Crore for the education sector and ₹ 3,000 crores for skill development
  • National Police University and National Forensic University proposed for policing science, forensic science, and cyber forensics in the country
  • Degree level full-fledged online education program to be introduced by Top-100 institutions in the National Institutional Ranking Framework
  • Up to 1-year internship to fresher engineers to be provided by the Urban Local bodies
  • 150 higher educational institutions to start apprenticeship embedded degree/diploma courses by March 2021
  • Ind-SAT proposed for Asian and African countries as a part of Study in India program

Commerce & Industry Reforms - proposed under Budget 2020

  • ₹ 27,300 crore allotted for development and promotion of Industry and commerce.
  • Investment Clearance Cell proposed to be set-up to provide end-to-end facilitation and support.
  • Scheme to encourage manufacturing of mobile phones, electronic equipment, and semiconductor packaging.
  • National Technical Textiles Mission to be set-up with four year implementation period starting from 2020-21 to 2023-24
  • New scheme named NIRVIK to be launched to achieve higher export credit disbursement which will provide for Higher Insurance coverage, reduced premium for small exports and a simplified procedure for claim settlement,

National Logistics Policy for the improvement of MSMEs

National Logistics Policy will be introduced to improve the efficiency and competitiveness of MSMEs. 

Export:

  • Small exporters to get cheaper insurance cover under NIRVIK Scheme: Enhanced insurance covers and low premiums.
  • Previously cover was 60%. Now enhanced to 90%.

Infrastructure Reforms - proposed under Budget 2020

  • 5 new smart cities to be built.
  • Delhi-Mumbai Expressway to be built in 3 years.
  • 100 new airports by 2025
  • National Infra Pipeline scheme NIP- 6,500 new projects.
  • 6000 crore to be invested to boost internet connectivity.
  • Rs 4,400 cr to clean Delhi’s air
  • Allocation of Rs 30,757 crores for 2020-21 for Jammu and Kashmir and Rs 5,958 crores for Ladakh

Rural Development Reforms - proposed under Budget 2020

  • Allocation of Rs 6,000 crore for BharatNet for digital connectivity of gram panchayats
  • For the connectivity of public institutions in gram panchayats, data center parks will be set up throughout the country to link 100,000 Gram Panchayats in FY21 through BharatNet. 
  • FM Hints an income boost for ST, SC, Woman, and Minority section.
  • Union Budget 2020 is likely to provide a big boost to individuals across minority sections of the society including SC, ST, and women.   

Women and Nutritional Care Reforms - proposed under Budget 2020

  • The Government is focused on Women & Child, Social welfare and culture & tourism
  • ₹ 35,600 crores for various nutrition-related programs
  • ₹ 28,600 crores are proposed for women-specific programs
  • Financial support will be provided for wider acceptance of technologies, as identified by the Ministry of Housing & Urban Affairs to ensure no manual cleaning of septic tanks and sewers
  • ₹ 85,000 crore proposed for welfare schemes related to Scheduled Castes and Other Backward Classes
  • ₹ 85,000 crore proposed for welfare schemes related to Scheduled Tribes
  • Furthermore, enhanced allocation of ₹ 9,500 crores proposed for welfare schemes related to senior citizens and divyang

Culture & Tourism Reforms - proposed under Budget 2020

  • ₹ 2,500 crores are allocated separately for the promotion of tourism and services related to it
  • An Indian Institute of Heritage and Conservation to be built as a deemed university
  • 5 major archeological sites have been mentioned, which will be developed as iconic sites with the in-built museum:
    • RakhiGarhi (Haryana)
    • Hastinapur (Uttar Pradesh)
    • ShivSagar (Assam)
    • Dholavira (Gujarat)
    • Adichanallur (Tamil Nadu)
  • Maritime Museum will be set-up at Lothal (near Ahmedabad) - the place is known for its Harappan age maritime practices 
  • State governments are expected to develop a roadmap for certain identified destinations and accordingly formulate financial plans, for which grants will be provided from the Central Government

Investment Reforms - proposed under Budget 2020

  • DDT is gone. Govt will lose 25000 crore revenue. Major push for FDI.
  • No relaxation in Long Term Capital Gains (LTCG). Currently, taxed 10% if capital gains more than 1 lakh in a financial year.

Big relief for investors

Single-window clearance for projects may come into play to promote entrepreneurship, which will provide a big relief for the industry requesting for the same. 

Read More: Impact of Union Budget 2020 on Investors

DDT removed

Dividend Distribution Tax (DDT) has been removed to ease the flow of FDI (Foreign Direct Investment) and make Indian equities more attractive.