The Union Budget for 2020 offers various measures to help our country reach the ambitious target of a $5 trillion-dollar economy by 2022. Nirmala Sitharaman, the Honourable Finance Minister of India, presented the Union Budget for 2020 – 21 on 1st February this year. The Finance Minister, in her budget speech, stated this budget aims to boost the income of the common people of the country and to enhance their purchasing power. 

Here, in this article, we share with you the various highlights of this year’s budget separated sector-wise. 

Sector-wise Highlights of the Union Budget for 2020 – 21 

1.Income Taxes (Direct Taxation)

This is a much-awaited category in every budget. All taxpayers are eager to see what the latest budget offers them as tax relief. Here are the taxation changes introduced by this budget.

  • New Tax Regime Introduced

The budget introduces a new tax regime under Section 115BAC of the ITA. Taxpayers have the option to move to the new income tax regime or stay with the old regime. However, note that taxpayers will not be able to switch back to the old system, once they opt for the new one.

The new tax regime introduces significant changes to the income tax slabs. Another noteworthy change is that the new tax regime does not offer any existing exemptions and deductions. It aims to simplify income tax calculations. 

Income Tax Slabs under the New Tax Regime 

Income Levels Taxation
Up to Rs. 5 lakhs NIL
Rs. 5 lakhs to Rs. 7.5 lakhs 10% (reduced from 20%)
Rs. 7.5 lakhs to Rs. 10 lakhs 15% (reduced from 20%)
Rs. 10 lakhs to Rs. 12.5 lakhs 20% (reduced from 30%)
Rs. 12.5 lakhs to Rs. 15 lakhs 25% (reduced from 30%)
Above Rs. 15 lakhs 30%

 

*However note that individuals opting for the new tax regime will not be able to claim any exemptions or deductions that were previously available. 

  • Reduction of TDS from 10% to 2% for technical services under Section 194J 

  • Increase in the tax audit threshold to Rs.5 crores from Rs. 1 crore. This is applicable for taxpayers whose gross receipts do not exceed 5% in cash for the previous years. For these taxpayers, the date for tax audits has been extended to 31st October from 30th September. 

  • Taxpayers can claim an additional deduction of Rs. 1.5 lakhs for interest paid for home loans. This is allowed for loans sanctioned until 31st March, 2021. 

  • DDT (Dividend Distribution Tax) will no longer be applicable. Instead, recipients of dividends have to pay tax for it, at the appropriate rate.

  • Quick issuance of PAN cards to be available using Aadhaar-verification. Additionally, the government plans to introduce Aadhaar-verification for GST compliance. 

  • Employees working in startups who possess ESOPs (Employee Stock Option Plans) can defer paying taxes on it for:

    • Up to five years

    • Till the time they sell the shares

    • Till the time they leave the startup (whichever is earlier). 

  • As per previous rules, eligible startups with a turnover of less than Rs. 25 crores can deduct 100% of their profits for three consecutive assessment years (in seven years). Now the limit has been increased to Rs. 100 crores and the eligibility period has been increased to 10 years from the previous 7 years.

  • Section 194 and 194K – Dividends paid by Indian companies to shareholders and mutual funds to investors are subject to TDS at 10% if the dividend amount exceeds Rs. 5000 for the fiscal year.

  • Section 194-O – Payments made by e-commerce operators are subject to a TDS deduction of 1% if the amount paid exceeds Rs. 5 lakhs in a fiscal year. If the payment receiver has not furnished the PAN, the TDS is 5% instead of the previous 20%.

  • A new section (Section 234G) was introduced relating to payments of fees of Rs. 200 per day for furnishing certificates by educational institutions, companies, research associations, etc. 

  • The stamp duty under Section 43CA and the transfer of capital asset under Section 50C was raised from 105% to 110%. 

2.Changes in Residential Status (Under Section 6) 

  • An individual who is a citizen of India will be considered as a resident of India for the previous fiscal year if he/she is not liable to pay taxes in any other country.

  • An Indian citizen or PIO (person of Indian origin) residing outside the country, shall be considered a resident of India for the previous years if he/she lives in the country for more than 120 days.

  • An Indian citizen is termed as “not ordinarily resident,” for the previous fiscal year, if:

    • The individual has been residing outside the country for seven of the last ten years. 

    • The manager of a HUF (Hindu Undivided Family) has been residing out of the country for seven of the last ten years. 

3.Indirect Taxes (GST, Customs, etc.)

  • Ladakh has been classified as a UT (Union Territory), and Jammu and Kashmir have a separate appellate tribunal.  

  • Any person who benefitted or was involved in fake ITCs will be liable to pay 100% of the taxes as a penalty.

  • The inter-state supply of services and supplies under the composition scheme is not subject to GST if the TCS is deductible by the e-commerce operator.

  • For availing input tax credits, the date of the debit note is only considered. It has been delinked from the invoice date. 

  • A new provision was inserted, allowing for the cancellation of voluntary GST registration for distinct individuals.

4.MSMEs (Micro, Small and Medium Enterprises) 

The Union Budget makes the following provisions for MSMEs:

  • Amendments will be made to allow NBFCs (Non-Banking Financial Corporations) to offer invoice financing to MSMEs. 

  • The Factor Regulation Act of 2011 will be amended during this year. 

  • Banks can offer subordinated debt to MSME under the Credit Guarantee Trust. This debt will be considered as quasi-equity. 

  • Financing of loans for MSMEs will be made easy with the launch of app-based lending.

5.Public Sector Banks 

The Union Budget makes the following provisions for public sector banks:

  • Robust mechanisms will be introduced to monitor the health of all commercial banks to ensure that the money of depositors is safe.

6.Agriculture 

The Union Budget of 2020 aims to double the income of farmers by 2022. A budget of Rs. 2.83 lakh crores were allocated to the agriculture and allied activities sectors. It has proposed various steps, including:

  • Helping over 15 lakh farmers solarise their pump systems by connecting to solar grids. The government plans to provide 20 lakh farmers with solar water pumps. 

  • A target of raising the export of fisheries to Rs. 1 lakh crore by 2024 – 2025. 

  • Introduction of “KrishiUdaan” and “KisanRail” for seamless transportation of farm goods to the consumers. Indian Railways will have special refrigerated coaches for the transport of perishable foods and milk.

  • Increase in the coverage of artificial insemination up to 70%. 

  • Comprehensive measures to be introduced for 100-water stressed districts in the country. 

  • Agri-credit facility of Rs. 15 lakh crores is available for farmers for the FY 2020 – 21. 

  • SHGs (Self-help groups comprising women) to monitor village-level food storage schemes. 

  • The Krishi UDAN scheme will be made available on all national and international routes. 

7.Education 

  • Nearly 150 universities and other higher educational institutes in the country will start embedded courses that offer apprenticeship. Young engineers can intern at urban local bodies for up to a year. 

  • Specialized bridge courses to be introduced to enhance the skill sets of students looking to be employed overseas.

  • A total sum of Rs. 99,300 crores are earmarked for the education sector for the fiscal year 2020 – 21. An additional Rs. 3000 crores are allocated for enhancing the skills of students.

  • Ind-SAT will be conducted in various parts of Asia and Africa to attract students to study in India.

  • The top 100 higher education institutes in the country will offer fully-fledged online education programmes to benefit students from the lower strata of the economy.

  • A national forensic science university and a national police university is proposed to be set up. 

8.Finances 

  • The deposit insurance coverage has been increased to Rs. 5 lakh per depositor. It was previously Rs. 1 lakh for every depositor. 

  • A proposal was announced for selling the balance holding of the government in IDBI bank. 

  • The NPS Trust will be separated from PRFDAI. 

  • The eligibility cut-off for NBFCs to qualify for debt recovery under the SARFAESI Act to be reduced to loans of Rs. 50 lakhs or asset size of Rs. 100 crores. 

  • The government proposes to sell a percentage of its stake in LIC via public offerings. 

  • An amendment proposed to the Companies Act to decriminalise civil offences. 

9.Health and Sanitation 

  • Funds worth Rs. 69,000 crores were allocated to the health sector under this budget. Additionally, funds worth Rs. 12,300 crores were earmarked for Swachh Bharat. 

  • The PM Jan Arogya Yojana will include over 20,000 empanelled hospitals. 

  • The Jan AushadhiKendra will be expanded to all districts nation-wide by 2024. A plan to cover all hospitals under Ayushman Bharat by 2025. 

  • Besides waste management, the concerned departments will also focus on greywater and liquid water management. 

  • The “TB Harega Desh Jeetega” campaign to come to a conclusion by 2025. 

  • A proposal was introduced to set up multi-specialty hospitals in Tier-II and Tier-III cities under the PPP model (Public-Private-Partnership). 

10.Infrastructure 

The Union Budget of 2020 has earmarked Rs. 1.7 lakh crores to enhance transport infrastructure by 2021. Other announcements under this sector include:

  • The work on the Chennai-Bengaluru Expressway will commence soon. 

  • A national logistics policy will be introduced. 

  • Indian Railways will have a large solar power capacity. Nearly 27,000 km of rail lines will achieve electrification. 

  • The UDAN scheme will see the development of nearly 100 more airports across the country by 2024. 

  • The government plans to monetize 12 national highway lots by 2024.

  • A suburban rail project was proposed for Bengaluru at the cost of Rs. 18,600 crores.

EndNote

The Union Budget of 2020 aims to boost the slump in the economy 

The major highlight of the Union Budget 2020 for the fiscal year 2020 – 21 is the optional new tax regime, aimed at simplifying income taxes. Besides, this budget has announced several revival packages for critical sectors like agriculture, infrastructure, education, healthcare, etc.