Budget 2020 Highlights: Important Points, key Changes In Income Tax Slab 2020-21

In the Union Budget 2020 presented by the Finance Minister, Nirmala Sitharaman on February 1 in the Lok Sabha for the fiscal year 2020-21, a new optional personal income tax system has been introduced and many other prospective plans have been announced such as a multi-billion dollar farm, infra and a number of new projects in many more sectors. The Finance Minister said that the Budget 2020 shall boost the income and purchasing power of the people. This year, the budget centered around 3 concepts: ‘Aspirational India’, ‘Economic Development’ and ‘A Caring Society’.

1. Economy and Finance Budget 2020:

A.  Tax
a.   New Tax Slab 2020

A new Income tax slab 2020-21 has been announced and 70 exemptions from personal income tax have been removed. However, people who want to continue with the old regime will have to continue paying tax at the old rates.

Total Income (INR)	Tax Rates
Up to INR 5 lakhs	Nil
INR 2.5 lakhs to INR 5 lakhs	5%
INR 5 lakhs to INR 7.5 lakhs	10%
INR 7.5 lakhs to INR 10 lakhs	15%
INR 10 lakhs to INR 12.5 lakhs	20%
INR 12.5 lakhs to INR 15 lakhs	25%
INR 15 lakhs and above	30%

b. Comparison of old and New Income Tax Slab 2020-21:

Total Income (INR)	Income Tax Rates 2020-21	Earlier  Income Tax Rates 2019-20
Up to INR 5 lakhs	Nil	Nil
INR 2.5 lakhs to INR 5 lakhs	5%	5%
INR 5 lakhs to INR 7.5 lakhs	10%	20%
INR 7.5 lakhs to INR 10 lakhs	15%	20%
INR 10 lakhs to INR 12.5 lakhs	20%	30%
INR 12.5 lakhs to INR 15 lakhs	25%	30%
INR 15 lakhs and above	30%	30%

c. Taxation of Dividends from Domestic Companies and Mutual Funds:

Dividend Distribution Tax (DDT) has been removed in Budget 2020. So, companies will not have to pay DDT, the dividend shall be taxed only at the hands of the recipients at proper rates.

B.    Housing:

The timeline to take a loan to buy home under an affordable housing scheme has been extended till 31st March 2021. The tax holiday aims to provide people with an additional deduction of up to INR 1.5 lakhs for the interest paid on Home loans taken to buy an affordable house.

C.   Investment:

• The Government has decided to sell parts of its shares in the Life Insurance Corporation (LIC) via Initial Public Offering.
• Some of the specific categories of the government securities shall remain fully open for NRIs other than being open for domestic investors.
• The FPI limit in the corporate bonds shall be raised to 15% from 9%.
• The Government has doubled its divestment target for the next financial year to INR 2.1 lakh crores.
• The Exchange Traded Fund shall be expanded by floating a Debt ETF which would primarily consist of government securities.

D.    Indirect Tax:

• The customs duty has been raised on footwear from 25% to 35% and that on furniture goods from 20% to 25%.
• The excise duty would be raised on cigarettes and other tobacco products but no change shall be made in the duty rates of bidis.
• The basic customs duty on the import of newsprint and light-weight coated paper has been reduced from 10% to 5%.
• Customs duty rates have been revised for electric vehicles and mobile parts.
• The import of medical devices shall be imposed with a 5% health cess save those exempted from BCD.
• Customs duty on certain inputs and raw materials such as fuse, plastics and chemicals shall be lowered.
• Customs duty on certain goods like auto-parts, chemicals and many other items made domestically shall be increased.

E.      Startups and MSME:

• The tax burden on employees due to tax on Employee Stock Options (ESOPs) shall be deferred by five years or until they leave the company or sell it, whichever comes earlier.
• There will be a new and simplified return for GST from April 2020.
• The start-ups with a turnover of up to INR 100 crores will get 100% profit deduction for 3 consecutive assessment years out of 10.
• The audit threshold for MSMEs shall be raised to INR 5 crores from INR 1 crore.
• Apps for invoice financing loans shall be launched to solve the issue of delayed payments and cash flow irregularities in the MSMEs.
• Amendments will be made to enable the NBFCs to extend invoice financing to MSMEs.

F.    Banking:

• The government has increased deposit insurance from INR 1 lakh to INR 5 lakhs to help bank depositors in Budget 2020.
• PSBs have been encouraged to approach the capital market to raise more
• The Banking Regulation Act shall be amended to strengthen the Cooperative Banks.

2. Defense:

The defence sector shall receive INR 3.37 lakh crores as its budget 2020 getting an overall increase of 5.8% from its current budget.

3.  Agriculture Budget 2020:

• The budget allocated for the agricultural sector for the fiscal year 2021 shall be INR 1.38 lakh crores.
• The agriculture credit target has been set to INR 15 lakh crores.
• PM KUSUM scheme shall be expanded to help 20 lakh farmers.
• There will be a change in the incentive scheme for chemical fertilisers.
• Krishi UDAN scheme will take effect for agricultural exports on international and national routes. This shall improve value realization in the tribal districts of India, especially in the North East.
• The government will now focus on Zero Budget farming and promote organic farming methods.
• Theonline National Organic Products market shall be strengthened via Jaivik Kheti Portal.

4.  Education Budget 2020:

• INR 99,300 crores will be allocated for the education sector for the financial year 2021 in budget 2020.
• The external commercial borrowings and FDI will be leveraged to improve the education
• One medical college would be attached toeach already existing district hospital in PPP mode and a viability gap funding shall be set up in these medical colleges.
• A US-like SAT exam shall be held in African and Asian countries in order to set a benchmark for foreign candidates who want to study in India.
• Full-fledged online education programmes at a degree level are to be offered by the top 100 institutes in the National Institutional Ranking framework.
• The New Education Policy shall be announced soon.
• It has been planned to bring equivalence in the skill sets of the employers’ and the workforce’s standards.
• 150 higher educational institutions will start apprenticeship embedded diplomas/degree courses by March of 2021.
• 2 new National Science Schemes shall be launched.
• The setting up of the National Police University and the National Forensic Science University has been proposed for policing science, forensic science and cyber forensics.

 5.  Infrastructure:

• 5 new smart cities are to be set up using the PPP model.
• 100 airports shall be built by 2024 in order to support the UDAN scheme.
• The development of highways shall be accelerated and the Delhi-Mumbai Expressway and two other projects which are to be completed by 2023 will be given speedy attention. The building of the Chennai-Bengaluru Expressway shall also start soon.
• NHAI shall monetize 12 lots of highway bundles of more than 6,000 kms by 2024.
• INR 100 lakh crores will be invested in infrastructure in the upcoming 5 years.
• The budget allocated for transport infrastructure is INR 1.7 lakh crores for the fiscal year 2021.
• AProject Preparation Facility will be created for the infrastructure projects proposed.
• Infrastructure agencies of the government will involve youth power in various start-ups.
• INR 1.7 lakh crores have been proposed for the transport infrastructure in budget 2020-21.

National Infrastructure Pipeline:

• INR 103 lakh crores have already been invested in the projects that had begun under the programme launched on 31^st
• Over 6500 projects are to be classified according to their size and developmental stage, across various sectors.
• A single window e-logistics market will also be created under this programme

6.  Railway Budget 2020:

• Large solar power plants shall be set up beside rail tracks.
• There will be more of Tejas-like trains for tourists.
• 150 new trains are to be introduced on the basis of Public-Private Partnership (PPP) and 4 stations will be redeveloped with its help.
• Bengaluru suburban transport project, worth INR 18,600 crores has been launched and 20% of the equities will be provided by the Centre.

 7.  Jobs:

• Emphasis has been placed in the budget on the generation of employment, skills and making the MSMEs more competitive.
• National Skill Development Agency will give special thrust to the infrastructure-focused skill development opportunities.

8.  Telecom:

• Schemes aimed at encouraging the manufacture of mobile phones, electronic devices and semiconductor packaging facility will be introduced.
• INR 6000 crore shall be invested in the BharatNet programme; the Fibre to Home connections under BharatNet shall link 1 lakh gram panchayats this year.
• The private sector shall be encouraged to develop Data Centre Parks throughout the country.
• A forthcoming policy will allow the private sector to develop these Data Center Parks which would potentially benefit all the IT firms, including TCS, Wipro, Infosys, HCL Technologies and so on.

9.  Tourism:

• These 5 archaeological sites will be developed to house world-class museums:

1. Rakhigarhi in Haryana
2. Hastinapur in Uttar Pradesh
3. Shivsagar in Assam
4. Dholavira in Gujarat
5. Adichanallur in Tamil Nadu

• INR 2,500 crores will be invested to promote tourism.
• A deemed university called the Indian Institute of Heritage and Conservation under the Ministry of Culture has been proposed.
• 4 more museums shall be proposed to be taken up for renovation and re-curation.
• A budget of INR 3150 crores has been proposed for the Ministry of Culture for FY 20-21.
• A maritime museum is to be set up at Lothal near Ahmedabad by the Ministry of Shipping.

10.  Energy:

• The National Gas Grid shall be expanded from 16,200 km to 27,000 km along with reforms for deepening gas markets, enabling easy transactions and transparent pricing.
• INR 22,000 crores have been allocated to promote power and renewable energy.
• The firms involved in running old thermal power plants have been advised to shut their units if the emission norms are not up to the mark.
• FM has urged all states and UTs to replace conventional energy meters by pre-paid smart meters in the next 3 years.
• INR 44 billion ($619.11 million) is to be allocated by India for the clean air incentives in the cities housing more than 1 million people.
• INR 80 billion ($1.13 billion) shall be invested over the next five years for the quantum technologies and applications.

11.  Livestock:

• Milk processing capacity would be doubled by 2025.
• Artificial insemination shall be increased to 70% from 30%.
• MNREGS will be dovetailed to build fodder farms.
• Foot and mouth disease, Brucellosis in cattle and Peste Des Petits Ruminants (PPR) shall be eliminated by 2025.
• For poverty alleviation, 0.5 crore households shall be mobilized with 58 lakh SHGs via Deen Dayal Antyodaya Yojana.

12.   Village Storage Scheme:

• Expansion on SHGs will take place for the alleviation of poverty.
• These Self Help Groups shall be run to provide farmers with a good holding capacity so that their logistics cost is reduced.
• The scheme aims to empower ruralwomen and help them regain their position of Dhaanya Lakshmi.
• NABARD shall map and geo-tag agricultural-warehouses, storages, etc.
• The fund allocated for rural development is INR 1.23 lakh crores for the fiscal year 2021.
• Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) will take up efficient warehouse building and viability gap funding shall be set up for the same.
• e-NWR shall be integrated with e-NAM.

13.  Fisheries:

• Fish production shall be increased to 200 lakh tonnes by 2022-23.
• The youth and fishery extension work shall be enabled by rural youth.

14.   Sanitation:

• INR 3.6 lakh crores have been allotted to water sanitation and pipeline project, and INR 12,300 crores have been allocated for Swachh Bharat Abhiyan.

15.   Healthcare:

• The healthcare allocation for the fiscal year 2021 is INR 69,000 crores.
• INR 6400 crores have been reserved for PM Jan Arogya Yojana.
• Indradhanush immunization plan has been expanded to cover 12 new diseases.
• INR 35,600 crores nutrition-related plans have been proposed.

16.   Other Announcements in Budget 2020

Three Prominent themes of budget 2020 are:
1 Aspirational India: It has three components to provide build up better standards of living:

1. Agriculture, Irrigation and Rural Development
2. Wellness, Water along with Sanitation
3. Education with skills.

2 Economic Development: “Sabka Saath, Sabka Vikas, Sabka Vishwas”.
3. Caring Society: Antyodaya Yojana shall be followed as an article of faith to build up a humane and compassionate society.