Budget 2020 Highlights : Union Budget Detailed Analysis

Catch the Budget 2020 Live Updates on the 1st of February 2020.

Highlights of Economic survey 2020

Finance Minister (FM) Nirmala Sitharaman has presented the Union Budget 2020 of India on the 1st of February, 2020. The government has taken some measures towards reaching the target of $5 trillion economy by the end of 2022.

Let’s find out in details about the sector-wise measures announced:

  1. Budget 2020 is woven around three prominent things – “Aspirational India” to boost the standard of living; economic development for all, and building a humane and compassionate society.
  2. FM encouraged the state governments to undertake the implementation of following model laws issued by the central government.

Under the first theme of “Aspirational India” –

  1. Farmers encouraged to set up solar pumps, solar power generation units on their fallow or barren lands.
  2. Government proposes plans to help farmers use proper manure and little water.
  3. NABARD to map and geo-tag warehouses and Food Corporation of India and Warehousing Corporation of India to build warehousing facility on their land.
  4. Proposal to help farmers for a balanced use of all kinds of fertilizers.
  5. Village storage scheme has been proposed by the FM.
  6. The government to build up the seamless national cold supply chain for perishables; logistics companies surged as FM proposes to build a seamless national cold storage chain.
  7. Indian Railways to set up a ‘Kisan Rail’ through Public-Private Partnership.
  8. The government has proposed the framework for development, management and conservation of marine fishery; raising fish production to 200 lakh tons; involve youth in fish farmer producer organisations.
  9. Horticulture projects at the district level will be given importance. Online portal on Jaivik Kheti to be strengthened.
  10. Milk processing capacity to be doubled by 2025.
  11. Integrated farming systems in rainfed areas shall be expanded.
  12. Farmers to be covered under the Kisaan Credit Card Scheme.
  13. The government to expand Mission Indradhanush and add hospitals to Ayushman Bharat.
  14. The government proposes Rs 3.6 lakh crore towards piped water supply to households, recharging existing sources, and harvesting rainwater during the current year.
  15. FM announces Rs 99,300 crore outlay for the education sector in 2020-21 and Rs 3,000 crore for skill development.
  16. The government intends to eliminate foot and mouth disease.
  17. Viability gap funding via PPP model funding for 112 districts where there are no empanelled hospitals under Ayushman Bharat; proceeds from taxes (direct and indirect) on medical devices to be used for funding the schemes.
  18. The government allocated Rs 12,3000 crores to Swaccha Bharath Mission.
  19. Rs 69,000 crores including funds for PM Jan Aarogya Yojana allocated by the government.
  20. FM proposes ODF+ scheme to sustain ODF behaviour and to ensure no one is left behind.
  21. For the working-age population, Project Preparation Facility to be set up for preparation of infrastructure projects, actively involving young engineers and management graduates.
  22. New education policy to be announced and FDI funds to be collected to boost education.
  23. Setting up of investment clearance cell for entrepreneurs; about 150 higher education to provide apprenticeship embedded degree courses; to start degree level full-fledged programmes

Under the Second theme “Economic development”

  1. Development of smart cities and the promotion of manufacturing to generate investment and employment opportunities.
  2. Focus on the manufacture of network products and encouraging the electronics manufacturing industry.
  3. All ministries to issue quality standards and government to focus on adoption of technical standard.
  4. For exporters, a new scheme Nirwik has been proposed that will digitally refund duties and taxes imposed locally; the scheme is to be launched from FY 2020-21.
  5. Development of districts as export hubs and promotion of government e-marketplace (GEM).
  6. A national logistics policy to be released with a single-window “e-logistics market.”
  7. Monetization of 12 lots of highway bundles of over 6,000km before 2024.
  8. Measures to set up large solar power capacity on land owned by railways.
  9. Proposal to bring in more TEJAS-like trains and Bengaluru suburban trains.
  10. Increase in the number of airports to 100 by 2022.
  11. For power discoms – Introduction of prepaid smart meters within the next 3 years in all states and UTs, freedom to choose the supplier of electricity and the rate as per requirement
  12. FM proposes Rs. 22,000 crore to power and renewable energy sector.
  13. FM proposes expansion of the national gas grid from 16,200 km to reach 27,000 km to deepen the gas markets in India.
  14. Digital India announcements: Government has adopted technology to directly transfer the finances with the beneficiaries. Policy to enable the private sector to build data centre parks to be launched soon. FTTH connections will link 100,000 gram panchayats within the year. Rs 6,000 crore allocated for Bharat Net Program this year. Knowledge translation clusters will be set up across different sectors. Quantum Technologies opening up new frontiers. 8,000 crores of outlay in the next 5 years. Soon, policy for the private sector to build Data Centre Parks throughout the country; our vision is that all public institutions be provided with digital connectivity.
  15. Women : Genetic mapping of Indian to be done through two new medical schemes. Beti Bachao, Beti Padhao has yielded tremendous results.

Under the third Theme – Caring society

  1. More than 600000 Anganwadi workers are equipped with a smartphone to upload the nutritional status of the students of India. Propose to provide Rs 35,600 crore for nutrition-related programmes in 2020-21. Have identified suitable technology to eliminate manual cleaning of sewer systems and septic tanks. 85,000 crores for the welfare of SC and OBC; 85,000 crore rupees for Scheduled Castes and Other Backward Classes in 2020-21, 53,700 crore rupees for Scheduled Tribes.
  2. Senior citizens: Enhanced allocation of 9,500 crore rupees for Senior citizens and Divyangs.
  3. Culture: 5 archaeological sites would be developed as iconic sites with on-site museum. A Tribal Museum to be set up in Ranchi, Jharkhand. New currency museum to be embedded in the Kolkata Mint – The oldest mint in India. Rs 3,150 crore allocated for the ministry of culture in 2020-21.
  4. Environment and climate change: India to make good on the promises made at Paris accord form Jan 1st, 2021.

The two hands that will hold all the above themes (1) government that is clean (2) trust in every citizen.

3. MSMEs:

Steps proposed by the government for the MSMEs:

  • Amendments will be made to Factor Regulation Act, 2011.
  • Amendments to be made to enable NBFCs to extend invoice financing to MSMEs
  • Provision of subordinated debt for MSMEs by Banks which is guaranteed by Credit Guarantee Trust. The debt will count as quasi-equity.
  • App-based financing loans will be introduced for MSMEsApp-based invoice financing loans product to be launched, to obviate the problem of delayed payments and cash flow mismatches for MSMEs.

4. Public sector bansk (PSBs):

  1. Robust mechanism is in place to monitor and ensure health of all scheduled commercial banks and depositors’ money is absolutely safe.
  2. Deposit Insurance Coverage to be increased from 1 lakh rupees to 5 lakh rupees

5. Direct Taxation:

Including a taxpayers charter in the statute as part of our law.

Government committed to taking measures against tax harassment. Criminal liability for acts which are civil in nature, amendments in companies Act to reexamine

Speedy disposal of disputes – direct recruitment in tribunals

In continuation of the reforms, simplified structure, ease of compliance and reduce litigation

Personal income-tax: to provide significant relief and simplify, we propose new simplified tax regime for individual taxpayers who forgo deductions and exemptions. 10% for Rs 5 to Rs 7.5 lakh, Rs 7.5 to Rs 10 lakh at 15%; above Rs 10 lakh to 12.5 lakh at 20%; Rs 12 to 15 lakh at 25%, From Rs 15 lakh at 30%. Basic exemption same. For example, person earning RS 15 lakh and not availing any deductions will have a reduced tax by Rs 78,000. Deduction of RS 1.5 lakh still allowed under both new and old regime. New regime is optional. Old regime still applicable to taxpayer choosing to claim all exemptions and deductions.

Removed 70 exemptions, to review more in due course.

DDT to facilitate tax credit to foreigners and large class of investors – remove DDT and dividend to be taxed in the hands of receipients at applicable rates. Removal of DDT between holding and subsidiary.

Corporate rate of 15% made available for power generation companies. Soverign wealth funds investing in infrastructure and other notified sectors (min lock in period of 3 years) – interest, dividends.

Interst paid to non resident upto 30 june 2023 – 194LD lower rate of 5%. Extend to bonds issued by government. TDS reduced

Startups:In case of startups, employees who are granted Employee Stock Option Plan (ESOPs) can defer the tax payment at the time of exercise by 5 years

Eligible startups (3 out of 7 years), if total turnover does not exceed 25 crore, to increase turnover to 100 crores. Extend period of eligibility for claim of deduction to

Option for cooperative at 22%.

Audit limit for turnover threshold to Rs 5 crores.

Incentivise affordable housing, the period for sanction of loan extended by 1 year.

Extend the date of approval for tax holiday for developers of affordable housing by one more year.

Capital gains on real estate

Charitable institutions –

Faceless appeal introduced

Financial Markets steps:For flow of capital in financial system

To expand scope of credit default swaps, laying a mechanism for netting off financial contracts;

Floating a debt ETF by government for access to retail investors

To address liquidity constraints of NBFC and HFC, to further support – government will guarantee securities floated.

For infrastructure pipeline: to create financing pipeline.

To set up bullion exchange

Fiscal deficit 3.8% 2019-20

Fiscal deficit 3.5% 2020-21