Union Finance Minister Ms. Nirmala Sitharaman presented Finance Bill 2020 on February 1 in the parliament. This year the FM delivered one of the longest budget speeches in the last six years of the NDA government. She announced a mix of short, medium and long term economic reforms in the Finance Bill 2020.
This year’s Budget Speech revolved around threefold theme:
- Aspirational India: All sections of society shall seek better standards of living, health, education and jobs.
- Economic development for all: SabkaSaath, SabkaVikas, SabkaVishwas.
- Caring Society: Society that is compassionate.
Here are the highlights from India’s Union Budget 2020:
The introduction of reduced tax slabs is one of the major highlights of Union Budget 2020. However, the new income tax slabs are optional and available if you are willing to forgo existing exemptions.
Here is a quick comparison of Old Tax Slabs Vs. New Tax Slabs:
|Income||New Tax Slab||Previous Tax|
Up to Rs 2.5 Lakh
2.5 Lakh to Rs 5 lakh
5 Lakh to 7.5 Lakh
7.5 Lakh to 10 Lakh
10 Lakh to 12.5 Lakh
12.5 Lakh to 15 Lakh
Above 15 Lakh
* The taxpayer is liable to pay surcharge & education cess as is.
* Also, those who earn taxable income up to Rs 5 Lakh continue to be exempted from tax liability under both regimes.
* Income tax deductions available in the new regime:
- Death-cum-retirement benefit
- Commutations of pensions
- Leave encashment on retirement
- Amount received on VRS (up to Rs 5 lakh)
- Employee Provident Fund
- Money received as scholarship for education
- Cash received as awards constituted in public interest
- Short-term withdrawals & maturity amount of National Pension Scheme (NPS)
While commonly used deductions that are proposed to be removed include, standard deduction, house rent allowance, under Article 80 of IT Act.
The proposed tax rate cut will help taxpayers save Rs. 1,820 to Rs. 20,300 per year on annual income above ₹10 lakh. However, you cannot use existing exemptions and deductions, including standard deduction of Rs. 50,000, Rs 1.5 Lakh deduction u/s 80C on kid’s tuition fee, insurance premium, provident fund, ELSS, etc.
The FM clearly said, the provision is made to simplify the existing tax system and reducing cluttered system of exemptions and deductions. Around 70 of more than 100 income tax deductions have been removed and further refinement in the IT Act is being considered.
The Dividend Distribution Tax (DDT) is abolished. That is, the companies no longer are required to pay DDT, however, dividend will be marginally taxed from individuals.
Bank Deposit insurance Hiked
FM assured robust health of banks and hiked the bank deposits insurance by Deposit Insurance and Credit Guarantee Corporation (DICGC)to Rs 5 lakh per depositor from the current Rs 1 lakh.
Concessional tax rate for electricity generating Cos.
Concessional tax rate of 15% for newly incorporated domestic companies generating electricity, or those starting operations by 31st March, 2023.
- Reduced tax on cooperative societies to 22% without exemptions.
- Proposal of new National Policy on Official Statistics: to improve data collection & dissemination with the help of IT.
- Customs Act’s rules of origin to be reviewed.
Instant Pans and verifications
Aadhaar-based instant verification of taxpayers will be done to rule out dummy or non-existent units. Instant PANs will be allotted online on the basis of Aadhaar to indivuduals.
Charity institutions will now onwards be registered online. Donations made must be pre-filled in IT return form to claim exemptions for donations easily.
Extended tax holiday for affordable housing
Tax holiday introduced last year for affordable housing u/s 80EEA is extended for 1 year. Thus, additional deduction for interest payout on loans taken for an affordable house extended till 31st March, 2021.
Sovereign Wealth Fund
To incentivize investment by Sovereign Wealth Fund of foreign governments, 100% tax exemption is offered. The exemption is available on their interest, dividend and capital gains income in respect of the investment made in infrastructure & other notified sectors before 31st March, 2024 and with a minimum lock-in period of 3 years.
Fees for technical services, TDS is reduced to 2% from 10% under section 194J.
Start Ups & MSMEs
- Tax audit threshold for start up companies is increased from Rs 1 crore to Rs 5 crore, provided turnover/ gross receipts in cash are not more than 5% during the previous year. The due date for audit is 31st of October instead of 30th September for such taxpayers.
- Employee Stock Option Plans (ESOPs) can defer paying taxes up to 5 years from the time of exercise or till they leave the company, or until they sell shares, whichever earlier.
- The turnover limit of eligible start-ups is increased to 100 crores from Rs 25 crore for deducting 100% of profits for three continuous assessment years of 10 years, instead of 7 years.
- Announcement of app-based invoice financing loans product to meet delayed payments and cash flow mismatches for MSMEs.
- Required amendments will be made to Factor Regulation Act, 2011 to enable NBFCs to extend invoice financing to MSMEs
Change in residential status: (Section 6)
- An individual shall be deemed to be resident in India in any previous year, if:
- Is a citizen of India & not liable to be taxed in any other country
- Is a citizen of India, or a person of Indian origin, & comes on a visit to India in any previous year and is in India for 120 or more days
- A person is not ordinarily resident in any previous year, if s/he be a non-resident in India in seven out of the ten previous years preceding the year in consideration;
a Hindu undivided family whose head is NRI in seven out of the ten previous years preceding that year.
- A new section is introduced section 234G which levies a fee of Rs 200 per day for default in furnishing statement or certificates under section 35 by research association, university, college, company or any other institution.
Other Financial Highlights:
- Under section 194, if the dividend amount exceeds Rs 5000 during the FY, TDS is calculated at 10% for dividend paid by Indian companies to Indian resident shareholders. Under section 194K, the same applies to dividend paid by MF owners of resident Indians. Under section 194-O any payment made by e-commerce operator to the participants over 5 lakhs, the operator have to deduct 1% TDS. In case the individual does not furnish the PAN, section 206AA makes liability at 5% instead of 20%.
- Under section 43CA & 50C, the cap on the value adopted for the purpose of stamp duty is extended to 110% from 105%.
Indirect Taxation (GST, Customs)
- Fake ITC will be liable for a penalty of 100% of tax involved.
- Composition scheme restricted to taxpayers making the inter-state supply of service, supplies not leviable to GST and supplies through e-commerce operator where TCS is deductible.
- The date of the debit note will be standalone considered for availing input tax credit, delinked from the date of invoice.
- The retrospective effect has been given for transition provisions from 01st July 2017, to nullify the decision of Gujarat High Court in case of Siddhartha Enterprises.
- Powers provided to notify the form of TDS certificate and late fee (200 per day, maximum of 5,000) for non-issuance of TDS certificate has been waived off.
- A provision inserted for cancellation of voluntary GST registration for distinct persons.
- Power to condone the delay in applying for revocation of cancellation has been provided to the additional commissioner and commissioner for a period of 30 days.
- Refund due to Inverted tax prevalent for tobacco products is barred with a retrospective effect from 1st July 2017.
- Applicability of 6% CGST rate (total of 12% IGST rate) for the supply of pulley, wheels and products used in Agri machinery between 1st July 2017 to 31st December 2018.
- Ladakh has been included in the definition of Union Territory. J&K will have its appellate tribunal.
- Supply of fishmeal provided a retrospective GST exemption from 1st July 2017 to 30th September 2019.
- Provision to issue the removal of difficulty order by CBIC extended from earlier three-year limit to five years w.e.f 1st July 2017.
- Order for determining expense in special audit will not require the Board’s approval.
- Provision to extend the time limit to return the inputs and capital goods from job worker.
- Powers provided to notify the time and manner of issuing an invoice for a specific category of supplies or services.
- The entry in Schedule II to the CGST Act on ‘Transfer of business assets’ will now exclude transactions done without consideration from it.
- 100 more airports by 2024 under Udaan scheme
- 150 passenger trains through PPP mode
- 150 higher educational institutions to offer apprenticeship embedded courses by March 2021
- Establishment of Indian Institute of Heritage and Conservation
- Seamless delivery of services through Digital governance
- Improvement of physical quality of life via National Infrastructure Pipeline
- Risk mitigation through Disaster Resilience
- Social security through Pension & Insurance penetration
- Corruption free – policy-driven good governance
- Clean and sound financial sector
Agriculture, Irrigation and Rural Development
- More than Rs 2.83 Lakh crore on Agriculture, Rural Development, Irrigation and allied activities.
- Agriculture credit target for the year 2020-21 is Rs 15 lakh crore.
- Eligible beneficiaries of PM-KISAN covered under the KCC scheme.
- Proposal to expand PM-KUSUM to 20 lakh farmers for setting up stand-alone solar pumps and 15 lakh other farmers to solarise grid-connected pump sets.
- Horticulture sector: Setting up of efficient warehouses at the block/ taluk level; and for better marketing and export, focus is on “one product one district.”
- Elimination of foot and Mouth disease, brucellosis in cattle and also peste des petits ruminants(PPR) in sheep & goats by 2025.
- Coverage of artificial insemination to be increased from the present 30% to 70%; MNREGS extended to fodder farms, doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025.
- Raising fish production to 200 lakh tonnes by 2022-23. Fishery expansion through 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations. Fishery projected to be raised to Rs 1 lakh crore by 2024-25.
- DeenDayalAntyodayaYojana to continue supporting in alleviation of poverty.
Wellness, Water and Sanitation
- Rs 69,000 crore for Health care: Rs 6400 crores for Prime Minister Jan ArogyaYojana (PMJAY); More than 20,000 empanelled hospitals in Tier-2 and Tier-3 cities under PM’s Jan Arogya Yojana.
- Setting up hospitals in PPP mode (esp in Aspirational Districts), using machine learning and AI, in the Ayushman Bharat scheme.
- Jan Aushadhi Kendra Scheme will be extended to all districts. FM assured provision of 2000 medicines and 300 surgicals by 2024 in these districts.
- “TB Harega Desh Jeetega” campaign to eradicate Tuberculosis by 2025.
- 12,300 crore for (Open Defecation Free) ODF Plus and Swachh Bharat Mission in 2020-21.
- Rs 3.60 Lakh Crore for Jal Jeevan Mission; Rs 11,500 crore to be used in in 2020-21.
Education and Skills
- Rs 99,300 crore is allocated in 2020-21 for education sector.
- Rs 3000 crores proposed for skill development.
- New Education Policy to be announced soon.
- By March 2021, about 150 higher educational institutions will start apprenticeship embedded degree and/ or diploma courses; and degree level online education programme will also be launched soon.
- A “Study in India” programme– Ind-SAT for Asian and African countries to be launched.
- A National Police University and a National Forensic Science University to be started for eductation in policing science, forensic science, cyber-forensics etc.
- Special bridge courses will also be designed by the Ministries of Health, Skill Development.
- Setting up of National Recruitment Agency (NRA) as an independent, professional, specialist organisation for conduct of a computer-based online Common Eligibility Test (CET) for recruitment to Non-Gazetted posts. A test-centre in every district, specially in Aspirational Districts will be set up.
Industry, Commerce and Investment
- Rs 27300 crore allocated for development & promotion of Industry and Commerce for the year 2020-21.
- Set up of Investment Clearance Cell to provide end-to-end facilitation.
- Proposal to develop 5 new smart cities in collaboration with States in PPP mode.
- To encourage manufacturing of mobile phones, electronic equipment & semi-conductor packaging.
- A National Technical Textiles Mission to be set up within 2020-21 to 2023-24 to position India as a global leader in Technical Textiles. The estimated outlay is Rs 1480 crore.
- Launch of a new scheme, NIRVIK for small exporters.
- Proposal to take turnover of GeM to Rs 3 lakh crores.
- Rs 100 lakh crore to be invested over the next 5 years.
- Launch of National Infrastructure Pipeline of Rs 103 lakh crore.
- Accelerated development of highways, including development of 2500 Km access control highways; 9000 Km economic corridors, 2000 Km coastal and land port roads and 2000 Km strategic highways.
- Delhi-Mumbai Expressway and two more packages to be completed by 2023.
- Chennai-Bengaluru Expressway to be started.
- Indian Railways to achieve electrification of 27000 Km of tracks.
- The process of inviting private participation is also underway.
- More Tejas type trains to connect defined “iconic” tourist destinations.
- High speed train between Mumbai to Ahmedabad are to be actively pursued.
- 100 more airports to be be developed by 2024.
- Allocation of Rs 1.70 lakh crore for transport Infrastructure in 2020-21.
- Rs 22,000 crore for power & renewable energy sector in 2020-21.
- Expansion of the national gas grid to 27,000 km.
- A policy to privatising building of Data Centre parks across the country.
- Fibre-to the Home (FTTH) connections through Bharatnet will link 100,000 gram panchayats this year.
- Allocation of Rs 6000 crore to Bharatnet programme in 2020-21.
- New digital platform to be set up. Further scaling up of Technology Clusters, harbouring test beds and small scale manufacturing facilities.
- Rs 8000 crore proposed for the National Mission on Quantum Technologies and Applications over a period five years.
Women and Child, Social Welfare
- Rs 35,600 crore proposed for nutrition-related programmes for FY 2020-21.
- Rs 28,600 crore proposed for programs specific to women.
- Rs 85000 crore allocated towards welfare of Scheduled Castes & Other backward classes for 2020-21.
- For development & welfare of Scheduled tribes, Rs 53,700 crore is proposed for 2020-21.
- Allocation of Rs 9,500 crore for senior citizens and divyang in 2020-21.
Culture and Tourism
- Proposal of establishment of an Indian Institute of Heritage and Conservation (IIHC) as a deemed University under Ministry of Culture.
- 5 archaeological sites would be developed as iconic sites. Here on-site Museums will be developed- Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh) Shivsagar (Assam), Dholavira (Gujarat) and Adichanallur (Tamil Nadu).
- Re-curation of Indian Museum in Kolkata & 4 more museums across the country.
- Museum on Numismatics and Trade to be located in the Old Mint building, Kolkata.
- Tribal Museum in Ranchi (Jharkhand) to be developed.
- Maritime museum at Lothal- the Harrapan age maritime site near Ahmedabad, to be developed Ministry of Shipping.
Environment and Climate Change
Rs 4,400 crore allocated to Ministry of Environment, and Forests and Climate change to support states formulating and implementing plans for cleaner air in cities having population above one million.