The Please All Budget?

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This article examines the overall provisions introduced by Finance Minister Nirmala Sitharaman

BY HARDIK GOEL| 6 MIN READ

On 1 Feb 2020, Finance Minister Nirmala Sitharaman delivered the longest budget speech in six years of the Narendra Modi government.


She started her address within the Parliament by paying deference to her precursor, the late Arun Jaitley, and went on to announce key reforms that were aimed to deal with both economic and social aspects of the country.

The Union Budget 2020-21 is concentrated around three themes, namely Aspirational India, Economic development for all and caring society, she said.


Here’s a glance at the key highlights of Budget 2020:

1.      Income Tax

The Narendra Modi-led government offered an elective relief to individual taxpayers as it looked to boost consumption and falling economic growth.

Taxpayers can now be ready to avail a lower taxation rate on various slabs by foregoing bound deductions and exemptions, Sitharman proclaimed within the budget. The new regime are going to be optional and people who need to stick to claiming deductions are allowed to do so.

The new income tax slabs and rates are as under:

Rs 5-7.5 lakh p.a : 10 percent from 20 percent earlier.
Rs 7.5-10 lakh p.a : 15 percent from 20 percent earlier.
Rs 10-12.5 lakh p.a : 20 percent from 30 percent earlier.
Rs 12.5-15 lakh p.a : 25 percent from 30 percent earlier.
Above Rs 15 lakh p.a : 30 percent without any exemptions.
All income below Rs 5 lakh per annum will be tax-exempt in both the old and new regime. The changes will result in a loss of Rs 40,000 crore to the government.


2. Real Estate

In order to make affordable housing robust in India and further the government’s ‘Housing for All’ initiative, Budget 2020 has proposed to increase the date of loan sanction for availing additional reduction of Rs 1.5 lakh by one year to 31st March, 2020..

Property developers also will get a tax holiday on the profit earned on affordable housing projects approved by 31st March, 2020. The minister of finance also proposed to increase the date of approval for affordable housing projects for availing this tax holiday by a further year.

3. Dividend Distribution Tax Abolished

In a move which will offer some relief to India Inc., the Narendra Modi-led government eliminated the dividend distribution tax that’s levied on dividends issued by companies.

So far, companies were required to pay DDT at 15 percent, which including surcharge and cess totalled at 20.56 percent. DDT was introduced in 1997 at a 7.5 percent flat rate in an attempt towards efficient collection .

4. Fiscal Defict Target

India’s fiscal deficit settled at 3.8 percent in 2019-20 and is targeted at 3.5 percent in 2020-21, minister of finance Nirmala Sitharaman said. Importantly, the govt has decided to invoke the ‘escape clause’ provided for in 2018 amendments to the Fiscal Responsibility and Budget Management Act.

For 2019-20, the fiscal deficit was estimated at a lower rate i.e 3.3 percent.


5. LIC Listing

The government has proposed to sell a section of its stake in LIC India through an initial public offering, Sitharaman said in her budget speech. While she didn’t get into any details, the news of an LIC listing sent insurance stocks scurrying for a cover. The state-run insurer was established in 1956 and is fully owned by the govt of India.

6. PMC Bank aftermath

The government has proposed to hike the deposit insurance cover to Rs 5 lakh from the present Rs 1 lakh, to safeguard depositors from the event of a lender’s collapse.

“There is a robust mechanism to watch the health of all scheduled commercial banks and that we want to assure depositors that their deposits are absolutely safe,” Sitharaman said during her budget speech.

The decision comes after the collapse of PMC Bank that led to restrictions on deposit withdrawals. in line with RBI’s Financial Stability Report, the Deposit Insurance and Credit Guarantee Corporation has received total claims of about Rs 14,100 crore across defaulting cooperative banks.

7. Aim at an improved infrastructure

In her speech, the FM said that 5 new Smart cities are to be established via PPP model and Rs. 1.7 lakh crore are to be  allocated to transportation. 100 more airports to be started by 2024 to support UDAN scheme and accelerated development of highways are going to be undertaken; Delhi-Mumbai expressway and two other projects to be completed by 2023. Chennai-Bengaluru Expressway to be started.

NHAI to monetise 12 many highway bundles of over 6,000 km before 2024. Young engineers and management graduates are going to be roped certain infrastructure projects under Project Preparation Facility.

She also said that about Rs 22,000 crore has already been provided for supporting National Infrastructure Pipeline. Also, Investment Clearance Cell to line up through a portal, will provide end-to-end facilitation, support and knowledge ashore banks.

8. A 16 pointer for agricultural boost

Finance Minister, announced 16-point measures to revive the agricultural sector, in line with Prime Minister Narendra Modi's target of doubling farmer income by 2022. Sitaraman, said that the budget 2020 aims to robust the income of people and strengthen their purchasing power.
Announcing 16 action points plan for farmers, she said that these measures are underlined by the FM to boost agriculture sector. The key highlight of the 16-point action plan includes a plan to boost agricultural exports, increaed agricultural lending,focus on fisheries and alternative crops as well as zero budget farming.

9. Education
According to the speech, 150 higher educational institutions will start apprenticeship induced  courses.

Special bridge courses to improve skill sets of those seeking employment abroad will be started and Ind-SAT will be conducted in Africa and Asia under study in India programme.
Allocation of Rs 99,300 crore will be done for the educational sector in 2020-21 and allocation of Rs 3,000 crore for skill development

The bottom line
So this was Budget 2020-21 at a glance. Some people are in favour of the budget whereas some have seen it as another hinderance to the growth of the economy. However, we wish that this Budget may prove beneficial to the Indian citizens and may revive India from it’s present slowdown.


Budget: Expectations Vs Reality

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.