The Budget Myth-buster
With the current condition of the Indian economy in general, there were certain expectations from the budget for provisions that could lead to a better condition in the future. As the budget was revealed, a lot of these expectations were crushed and the things that came up were unexpected. This makes it imperative to understand how the expectations from the budget could not translate into reality and what actually transcended.
BY SIRJAN KAUR KOHLI | 3Mins Read
The government presented this budget as an all rounder budget which had the objective of allay the concerns over the economic slowdown, while simultaneously boosting demand and investment. thus it was intentioned to be a "Please All" budget The budget at first glance seems to have something for every sector but are the expectation from this budget really met?
Expectations-
Considering the current scenario in India with massive problems arising out of loopholes or illegibility of the operating authorities, people started developing a lot of expectations to combat these problems. There were a lot of predetermined ideas as to what the budget should bring on table and how the problematic conditions can change from that. The most common expectations that arose from the this year's upcoming budget were -
- Enhancement of section 80C of the limit of Income Tax Act. The overall exemption limit under section 80C should be increased to Rs. 3 lakh, from the current Rs. 1.5 lakh. Similarly, while increasing the limits under 80C, also the limit of investment under PPF may also be increased for better effects.
- Tweaks in long-term capital gains tax on equity. This is to encourage small taxpayers to make Investments in the stock market. The government may contemplate on increasing the limit of Rs 1 lakh for taxing capital gains in the long term from the transfer of such shares. Also, the government may announce a specific holding period (say 5 years) and if such shares are transferred after the said holding period, the long-term capital gains might even be exempted.
- Removal of dividend distribution tax (DDT). Another big change expected in the Budget 2020 was the removal of dividend distribution tax. Before the budget, any dividend distributed by companies attracted an effective tax rate of 20.56 percent. Further, shareholders received dividends above Rs 10 lakh a year and we're required to pay an additional 10 percent tax.
- Tangible solutions to combat the rising problems of unemployment and recession.
Reality-
When this year's budget was announced, it garnered a lot of shocking reactions. Everyone including analysts were perplexed by the addition of a few things and some imperative things being left off. The mixed reactions to the budget were because of the perplexity in a lot of decisions made.
- No improvement in Section 80C of the Income Tax Act has been introduced in the Budget for this year.
- There have been no alterations in the Long-term capital gains tax on equity as opposed to what was expected earlier.
- Dividend distribution tax (DDT) to be now taxed in the hands of the recipients alone after the declaration of the budget. Companies no longer need to pay dividend distribution tax as opposed to earlier.
- In reality, no positive progress was made towards dealing with existing problems and coming up with better solutions. A lot of decisions seemed problematic in the sense that there was a propensity for some divisions to add fuel to the problems instead of solving them or finding solutions to them.