Summary of Union Budget 2020-21
Finance Minister unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term, and long term measures.
Key highlights of Union Budget
The theme- The Union Budget has been structured on the overall theme of ‘Ease of Living’.
- This has been achieved by farmer friendly initiatives such as Agriculture credit target of Rs 15 lakh crore for 2020-21;
- Schemes of “Kisan Rail” and “Krishi Udaan” for a seamless national cold supply chain for perishables; and
- Expansion of PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps.
- The Budget proposes more than 20,000 empanelled hospitals under PM Jan Arogya Yojana for poor people;
- Expansion of Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024.
- 100 more airports by 2024 to support Udaan scheme; and
- Operation of 150 passenger trains to be done through PPP mode.
Aim of the Budget
The Finance Minister said that the Union Budget Aims:
- To achieve seamless delivery of services through Digital governance
- To improve physical quality of life through National Infrastructure Pipeline
- Risk mitigation through Disaster Resilience
- Social security through Pension and Insurance penetration.
Themes of the Budget
The budget is woven around three prominent themes:
- Aspirational India in which all sections of the society seek better standards of living, with access to health, education and better jobs.
- Economic development for all, indicated in the Prime Minister’s exhortation of “SabkaSaath, SabkaVikas, SabkaVishwas”.
- Caring Society that is both humane and compassionate, where Antyodaya is an article of faith.
The three components of Aspirational India are- a) Agriculture, Irrigation and Rural Development, b) Wellness, Water and Sanitation and c) Education and Skills
Agriculture, Irrigation and Rural Development
- More than Rs 2.83 lakh crore would be spent on Agriculture, Rural Development, Irrigation and allied activities as farmers and rural poor continue to remain the key focus of the Government.
- Agriculture credit target for the year 2020-21 has set at Rs 15 lakh crore.
- All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme.
- Proposal to expand PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps.
- Foot and Mouth disease, brucellosis in cattle and also peste des petits ruminants(PPR) in sheep and goat to be eliminated by 2025,
- On the Blue Economy, raising of fish production to 200 lakh tonnes is proposed by 2022-23.
- Youth to be involved in fishery extension through 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations.
- DeenDayal Antyodaya Yojana- for alleviation of poverty, half a crore households are mobilized with 58 lakh SHGs and it will be further expanded.
Wellness, Water and Sanitation
- Rs 69,000 crore is being provided for Health care including Rs 6400 crores for Prime Minister Jan ArogyaYojana (PMJAY).
- Under PM Jan ArogyaYojana (PMJAY), there are more than 20,000 empanelled hospitals more in Tier-2 and Tier-3 cities for poorer people.
- Setting up hospitals in the PPP mode mainly in Aspirational Districts,
- Using machine learning and AI,
- In the Ayushman Bharat scheme, “TB Harega Desh Jeetega” campaign to end Tuberculosis by 2025,
- Expansion of Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024 are some of the other wellness measures in the Budget.
On sanitation front,
- Government is committed to ODF Plus in order to sustain ODF behaviour and the total allocation for Swachh Bharat Mission is Rs.12,300 crore in 2020-21.
Education and Skills
- Rs 99,300 crore is being allocated in 2020-21 and Rs 3000 crores for skill development.
- New Education Policy will be announced soon.
- About 150 higher educational institutions will start apprenticeship embedded degree/diploma courses by March 2021.
- Degree level full-fledged online education programme to be started.
- Under its “Study in India” programme, an Ind-SAT is proposed to be held in Asian and African countries.
- A National Police University and a National Forensic Science University are being proposed in the domain of policing science, forensic science, cyber-forensics etc.
Industry, Commerce and Investment
- Rs 27300 crore would be allocated for development and promotion of Industry and Commerce for the year 2020-21.
- An Investment Clearance Cell will be set up to provide “end to end” facilitation.
- It is proposed to develop five new smart cities in collaboration with States in PPP mode.
- To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched to support mainly small exporters.
- Government e-Marketplace (GeM) is moving ahead for creating a Unified Procurement System in the country for providing a single platform for procurement of goods, services and works.
- Rs 100 lakh crore would be invested over the next 5 years.
- National Infrastructure Pipeline was launched on 31st December 2019 of Rs 103 lakh crore.
- Accelerated development of highways will be undertaken.
- This will include development of 2500 Km access control highways, 9000 Km of economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic highways.
- Delhi-Mumbai Expressway and two other packages to be completed by 2023.
- Chennai-Bengaluru Expressway also be started.
- Indian Railways aims to achieve electrification of 27000 Km of tracks.
- The process of inviting private participation is underway.
- More Tejas type trains will connect iconic tourist destinations.
- 100 more airports would be developed by 2024 to support Udaan scheme.
- Allocation of Rs 22,000 crore proposed for power and renewable energy sector in 2020-21.
- Expansion of the national gas grid from the present 16,200 km to 27,000 km proposed.
- A policy to enable private sector to build Data Centre parks throughout the country will be brought out soon.
- Fibre to the Home (FTTH) connections through Bharatnet will link 100,000 gram panchayats this year.
- Knowledge Translation Clusters to be set up across different technology sectors including new and emerging areas.
- It is proposed to provide an outlay of Rs 8000 crore over a period five years for the National Mission on Quantum Technologies and Applications.
Women and Child, Social Welfare
- Rs 35,600 crore proposed for nutrition-related programmes for the financial year 2020-21.
- Rs 28,600 crore proposed for programs that are specific to women.
- Moreover, Rs 85000 crore would be allocated towards the welfare of Scheduled Castes and Other Backward classes for 2020-21.
- Similarly, for furthering development and welfare of Scheduled tribes, Rs 53,700 crore is proposed for 2020-21.
- An enhanced allocation of Rs 9,500 crore is being provided for 2020-21 for concerns of senior citizens and Divyang.
Culture and Tourism
- Establishment of an Indian Institute of Heritage and Conservation under Ministry of Culture proposed with the status of a deemed University.
- 5 archaeological sites to be developed as iconic sites with on-site Museums –
- Rakhigarhi (Haryana),
- Hastinapur (Uttar Pradesh)
- Shivsagar (Assam),
- Dholavira (Gujarat) and
- Adichanallur (Tamil Nadu).
- Re-curation of the Indian Museum in Kolkata,
- Museum on Numismatics and Trade to be located in the historic Old Mint building Kolkata.
- 4 more museums from across the country to be taken up for renovation and re-curation.
- Support for setting up of a Tribal Museum in Ranchi (Jharkhand).
- Maritime museum to be set up at Lothal– the Harrapan age maritime site near Ahmedabad, by Ministry of Shipping.
Environment and Climate Change
- States that are formulating and implementing plans for ensuring cleaner air in cities above one million to be encouraged.
- Parameters for the incentives to be notified by the Ministry of Environment, Forests and Climate change and the allocation for this purpose is Rs 4,400 crore for 2020-21.
- National Recruitment Agency (NRA) will be set up as an independent, professional, specialist organisation for conduct of a computer-based online Common Eligibility Test for recruitment to Non-Gazetted posts.
- It is also proposed to evolve a robust mechanism for appointment including direct recruitment to various Tribunals and specialised bodies to attract best talents and professional experts.
- Deliberation to strengthen the Contract Act is also on.
- Governance reforms would be carried out in these banks, so that they become more competitive.
- Government has already approved consolidation of 10 banks into four.
- Further, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a depositor, which is now Rs one lakh to Rs five lakh per depositor.
- The limit for NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 is proposed to be reduced from Rs. 500 crore to asset size of Rs 100 crore or loan size from existing Rs 1 crore to Rs 50 lakh.
- To meet the need for greater private capital, it is proposed to sell the balance holding of Government of India IDBI Bank to private, retail and institutional investors through the stock exchange.
- To help easy mobility while in jobs, Govt. wish to infuse into the Universal Pension coverage with auto enrolment. .
- For selected sectors such as pharmaceuticals, auto components and others, it is proposed to extend handholding support – for technology upgradations, R&D, business strategy etc.
- A scheme of Rs 1000 crore will be anchored by EXIM Bank together with SIDBI.
- About deepening of the bond market, certain specified categories of Government securities would be opened fully for non-resident investors, apart from being available to domestic investors as well.
- Government also proposes to expand by floating a new Debt-ETF consisting primarily of government securities.
- This will give retail investors access to government securities as much as giving an attractive investment for pension funds and long-term investors.
- To address the liquidity constraints of the NBFCs/HFCs, post the Union budget 2019-20, the government formulated a Partial Credit Guarantee scheme for the NBFCs.
- On Disinvestment, the listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value.
- It also gives opportunity for retail investors to participate in the wealth so created.
- The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO).
- The XV Finance Commission has given its first report pertaining to Financial Year 2020-21.
- The commission would submit its final report to the President during the latter part of the year, for five years beginning 2021-22.
- Transfer to the GST Compensation Fund balances due out of collection of the years 2016-17 and 2017-18, in two installments.
- Hereinafter, transfers to the fund would be limited only to collection by way of GST compensation cess.
- The Revised Estimates of Expenditure for the Financial Year 2019-20 are at a level of Rs 26.99 lakh Crore and the receipts are estimated at Rs.19.32 lakh crore.
- Government has estimated nominal growth of GDP for year 2020-21, on the basis of trends available, at 10%.
- A good part of the borrowings for the financial year 2020-21 would go towards Capital expenditure of the Government that has been scaled up by more than 21%.
PART-B of Union Budget
Personal Income Tax and Simplification of Taxation
- In order to provide significant relief to the individual taxpayers and to simplify the Income-Tax law, a new and simplified personal income tax regime has been proposed.
- The proposed changes in tax slabs are listed in the following:
- The tax rate for income between ₹5 lakh to ₹7. 5 lakh has been lowered from 20% to 10%,
- For incomes between ₹7.5 lakh to ₹10 lakh to 15% from 20%.
- For those earning between ₹10 lakh to ₹12.5 lakh tax rates have been lowered from 30% to 20%,
- For those with incomes from ₹12.5 lakh to ₹15 lakh to 25%.
- In the new tax regime, substantial tax benefit will accrue to a taxpayer depending upon exemptions and deductions claimed by him.
- The new tax regime shall be optional for taxpayers.
- An individual who is currently availing more deductions and exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime.
Dividend Distribution Tax
- Currently, companies are required to pay Dividend Distribution Tax (DDT) on the dividend paid to its shareholders at the rate of 15% plus applicable surcharge and cess, in addition to the tax payable by the company on its profits.
- In order to increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors, the Finance Minister has proposed to remove DDT.
- To adopt the classical system of dividend taxation, under which the companies would not be required to pay DDT.
- The dividend shall be taxed only in the hands of the recipients at their applicable rate.
- In order to remove the cascading effect, the Finance Minister has proposed to allow deduction for the dividend received by holding company from its subsidiary.
- The removal of DDT will lead to estimated annual revenue foregone of Rs. 25,000 crore.
Tax Concession for Foreign Investments
- To incentivize investment by Sovereign Wealth Fund of foreign governments, the Finance Minister has proposed to grant 100% tax exemption to their interest, dividend and capital gains income in respect of the investment made in infrastructure and other notified sectors before 31st March, 2024 and with a minimum lock-in period of 3 years.
- Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain highly talented employees.
- Currently, ESOPs are taxable as perquisites at the time of exercise.
- An eligible Start-up having turnover upto 25 crore is allowed deduction of 100% on its profits for three consecutive assessment years out of seven years if the total turnover does not exceed 25 crore rupees.
- The Finance Minister has proposed to increase this limit to Rs. 100 crore.
- She has also proposed to extend the period of eligibility for claim of deduction from the existing 7 years to 10 years.
Concessional Tax Rate for Cooperatives
- Cooperative societies are currently taxed at a rate of 30% with surcharge and cess.
- The Finance Minister has proposed to provide an option to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess with no exemptions/deductions.
Medium, Small and Micro Enterprises
In order to reduce the compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector, the Finance Minister has proposed to raise by five times, the turnover threshold for audit from the existing Rs. 1 crore to Rs. 5 crore.
‘Vivad se Vishwas’ scheme
- Under the proposed ‘Vivad se Vishwas’ scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty, provided he pays by 31st March, 2020.
- Those who will avail the scheme after 31st March, 2020 will have to pay some additional amount. The scheme will remain open till 30th June 2020.
- A simplified GST return shall be implemented from the 1st April, 2020.
- It will make return filing simple with features like SMS based filing for nil return, return pre-filling, improved input tax credit flow and overall simplification.
- Dynamic QR-code is proposed for consumer invoices.
- GST parameters will be captured when payment for purchases is made through the QR-code.
- On the Customs side, India has taken a quantum leap in the “Trading Across Border” parameter of Ease of Doing Business rankings by the World Bank.
- India’s rank has improved from 146 to 68.
- Imports under Free Trade Agreements are on the rise.
- Undue claims of FTA benefits have posed threat to domestic industry.
- To give impetus to domestic industry, and to generate resource for health services, it is proposed to impose a nominal health cess of 5% on imports of specified medical equipment.
- Basic customs duty on imports of newsprint and light-weight coated paper is being reduced from 10% to 5%.
- An increase is proposed in National Calamity Contingent Duty (NCCD) on Cigarettes and Tobacco products.