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Budget 2020 : Top 10 Tax proposals

 

1) Simplified and New Income Tax Regime as an option to the old regime the old regime.

Income

Bracket (lakh)

Below 5

5 - 7.5

7.5-10

10-12.5

12.5-15

Above 15

Tax Rate (per cent)

Exempt

10

15

20

25

30

 

2) Dividend Distribution Tax removed and classical system of dividend taxation adopted.

3) Concessional corporate tax rate of 15 per cent to new domestic companies in manufacturing and power sector.

4) Tax concession for sovereign wealth fund of foreign governments and other foreign investments.

5) Tax benefits to Start-ups by way of deduction of 100 per cent of their profits are enhanced by increasing turnover limit and period of eligibility.

6) Concessional tax rate for cooperatives proposed.

7) Turnover threshold for audit of MSMEs increased.

8) Extension of time limits pertaining to the tax benefits for affordable housing.

9) Issuance of Unique Registration Number to all charity institutions for easy tax compliance.

10) Health cess to be imposed on imports of medical equipment given these are made significantly in India.

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Busget 2020 - New tax regime to be optional for the Taxpayers

 

Ministry of Finance

New Personal Income Tax Regime heralds significant relief, especially for Middle Class Taxpayers

New tax regime to be optional for the taxpayers

New rates entail estimated revenue forgone of Rs 40,000 Crore per year

Dated: 01 FEB 2020

In order to provide significant relief to the individual taxpayers and to simplify the Income-Tax law, the Union Budget proposes to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions. While presenting the Union Budget 2020-21 in Parliament today, the Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman said, “The new tax regime shall be optional for the tax payers.” She further said that an individual who is currently availing more deductions and exemptions under the Income Tax Act may choose to avail them and continue to pay tax in the old regime.

The New personal Income tax regime proposes the following tax structure:

Taxable Income Slab (Rs.)

Existing tax rates

New tax rates

0-2.5 Lakh

Exempt

Exempt

2.5-5 Lakh

5%

5%

5-7.5 Lakh

20%

10%

7.5-10 Lakh

20%

15%

10-12.5 Lakh

30%

20%

12.5-15 Lakh

30%

25%

Above 15 Lakh

30%

30%

In the new tax regime, substantial tax benefit will accrue to a taxpayer depending upon exemptions and deductions claimed by him.  For example, a person earning Rs 15 lakh in a year and not availing any deductions etc. will pay only Rs, 1,95,000 as compared to Rs, 2,73,000 in the old regime. Thus his tax burden shall be reduced by 78,000 in the new regime. He would still be a gainer in the new regime even if he was taking deduction of Rs 1.5 lakh under various sections of Chapter VI –A of the Income Tax Act under the old regime.

The new tax regime will be optional for the taxpayers. As per the Memorandum explaining the provision in the Finance Bill, the option shall be exercised for every previous year where the individual or the HUF has no business income and in other cases the option once exercised for a previous year shall be valid for that previous year and all subsequent years. The option shall become invalid for a previous year or previous years as the case may be if the individual or HUF fails to satisfy the conditions and other provisions of the Act shall apply.

The new personal income tax rates will entail estimated revenue forgone of Rs 40,000 crore per year.  Smt Sitharaman said, “We have also initiated measures to prefill the income tax return so that an individual who opts for the new regime would need no assistance from an expert to file his return and pay income tax.” The Finance Minister said that in order to simplify the income tax system, she has reviewed all the exemptions and deductions incorporated over the past several decades.”

In the Budget, around 70 of the existing exemptions and deductions of different nature (more than 100) have been proposed to be removed.  Remaining exemptions and deductions will be reviewed and rationalised in the coming years with a view to further simplifying the tax system and lowering the tax rate.

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Summary of Union Budget 2020-21

 

Ministry of Finance

Summary of Union Budget 2020-21

Dated: 01 FEB 2020 

PART-A

Presenting the first Union Budget of the third decade of the 21st century, Finance Minister Smt. Nirmala Sitharaman, today unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term, and long term measures.

The Union Budget has been structured on the overall theme of “Ease of Living.” This has been achieved by farmer friendly initiatives such as Agriculture credit target of Rs 15 lakh crore for 2020-21; schemes of “Kisan Rail” and “Krishi Udaan” for a seamless national cold supply chain for perishables; and expansion of PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps.

In the health sector, the Budget proposes more than 20,000 empanelled hospitals under PM Jan Arogya Yojana for poor people; and expansion of  Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024.

Infrastructure receives a boost, with 100 more airports by 2024 to support Udaan scheme; and operation of 150 passenger trains to be done through PPP mode.

Starting apprenticeship embedded courses through 150 higher educational institutions by March 2021 and a proposal to establish Indian Institute of Heritage and Conservation are some of the other major highlights.

The Finance Minister said that the Union Budget Aims:

    • To achieve seamless delivery of services through Digital governance
    • To improve physical quality of life through National Infrastructure Pipeline
    • Risk mitigation through Disaster Resilience
    • Social security through Pension and Insurance penetration.

           The  budget is woven around three prominent themes:

    • Aspirational India in which all sections of the society seek better standards of living, with access to health, education and better jobs.
    • Economic development for all, indicated in the Prime Minister’s exhortation of “SabkaSaath, SabkaVikas, SabkaVishwas”.
    • Caring Society that is both humane and compassionate, where Antyodaya is an article of faith.

The three broad themes are held together by

    • Corruption free - policy-driven good governance
    • Clean and sound financial sector. 

The three components of Aspirational India are- a) Agriculture, Irrigation and Rural Development , b) Wellness, Water and Sanitation and c) Education and Skills

Agriculture, Irrigation  and Rural Development

The Finance Minister said that more than Rs 2.83 lakh crore would be spent on Agriculture, Rural Development, Irrigation and allied activities as farmers and rural poor continue to remain the key focus of the Government. Reiterating the commitment of doubling farmers’ income by 2022, She said, Government has already provided resilience for 6.11 crore farmers insured under PM Fasal Bima Yojana. Agriculture credit target for the year 2020-21 has be set at Rs 15 lakh crore. All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme. Moreover, comprehensive measures for one hundred water stressed districts, proposal to expand PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps and for another 15 lakh farmers to solarise their grid-connected pump sets, setting up of efficient warehouses at the block/taluk level and in Horticulture sector with focus on “one product one district” for better marketing and export are some of the steps in that direction. Foot and Mouth disease, brucellosis in cattle and also peste des petits ruminants(PPR) in sheep and goat to be eliminatated by 2025,  Coverage of artificial insemination to be increased from the present 30% to 70%, MNREGS to be dovetailed to develop fodder farms, doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025 to be facilitated. Similarly on the Blue Economy, raising of fish production to 200 lakh tonnes is proposed by  2022-23.  Youth to be involved in fishery extension through 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations. Fishery exports hoped to be raised to Rs 1 lakh crore by 2024-25. DeenDayalAntyodayaYojana- for alleviation of poverty, half a crore households are mobilized with 58 lakh SHGs and it will be further expanded.

Wellness, Water and Sanitation

Dwelling on the Wellness, Water and Sanitation theme, Smt Sitharaman said Rs 69,000 crore is being provided for Health care including Rs 6400 crores for Prime Minister Jan ArogyaYojana (PMJAY). She said, under PM Jan ArogyaYojana (PMJAY), there are more than 20,000 empanelled hospitals more in Tier-2 and Tier-3 cities for poorer people. Setting up hospitals in the PPP mode mainly in  Aspirational Districts, using machine learning and AI, in the Ayushman Bharat scheme, “TB Harega Desh Jeetega” campaign to end Tuberculosis by 2025, expansion of Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024 are some of the other wellness measures in the Budget.

On sanitation front, Government is committed to ODF Plus in order to sustain ODF behaviour and the total allocation for Swachh Bharat Mission is Rs.12,300 crore in 2020-21.  Similarly, Rs 3.60 lakh crore approved for Jal Jeevan Mission and Rs 11,500 crore in 2020-21.

Education and Skills

On Education and Skill front, the Finance Minister said Rs 99,300 crore is being allocated  in 2020-21 and Rs 3000 crores for skill development.  New Education Policy will be announced soon. About 150 higher educational institutions will start apprenticeship embedded degree/diploma courses by March 2021. Degree level full-fledged online education programme to be started.  Under its “Study in India” programme, an Ind-SAT is proposed to be held in Asian and African countries. A National Police University and a National Forensic Science University are being proposed in the domain of policing science, forensic science, cyber-forensics etc. It is proposed that special bridge courses be designed by the Ministries of Health, Skill Development.

Economic Development

Industry, Commerce and Investment

Referring to the theme of Economic Development, the Finance Minister said that Rs 27300 crore would be allocated for development and promotion of Industry and Commerce for the year 2020-21. An Investment Clearance Cell will be set up to provide “end to end” facilitation. It is proposed to develop five new smart cities in collaboration with States in PPP mode. A scheme to encourage manufacture of mobile phones, electronic equipment and semi-conductor packaging is also proposed. A National Technical Textiles Mission would be set up with a four-year implementation period from 2020-21 to 2023-24 at an estimated outlay of Rs 1480 crore to position India as a global leader in Technical Textiles. To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched to support mainly small exporters. Government e-Marketplace (GeM) is moving ahead for creating a Unified Procurement System in the country for providing a single platform for procurement of goods, services and works. It is proposed to take the turnover of GeM to Rs 3 lakh crores. 3.24 lakh vendors are already on this platform.

Infrastructure

On Infrastructure sector as highlighted by the Prime Minister that Rs 100 lakh crore would be invested  over the next 5 years, National Infrastructure Pipeline was launched on 31st December 2019 of Rs 103 lakh crore. It consists of more than 6500 projects across sectors and are classified as per their size and stage of development. She said that about Rs 22,000 crore has already been provided as support to Infrastructure Pipeline. Accelerated development of highways will be undertaken. This will include development of 2500 Km access control highways, 9000 Km of economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic highways. Delhi-Mumbai Expressway and two other packages to be completed by 2023. Chennai-Bengaluru Expressway also be started. It is proposed to monetise at least 12 lots of highway bundles of over 6000 Km before 2024. Indian Railways aims to achieve electrification of 27000 Km of tracks. She said that within 100 days of assumption of this government, it has commissioned 550 wi-fi facilities in as many stations. Four station re-development projects and operation of 150 passenger trains would be done through PPP mode. The process of inviting private participation is underway. More Tejas type trains will connect iconic tourist destinations. High speed train between Mumbai to Ahmedabad would be actively pursued. Similarly, 100 more airports would be developed by 2024 to support Udaan scheme. Air fleet number expected to go up from the present 600 to 1200 during this time. Allocation of Rs 1.70 lakh crore proposed for transport Infrastructure in 2020-21. Similarly, allocation of Rs 22,000 crore proposed for power and renewable energy sector in 2020-21.  Expansion of the national gas grid from the present 16,200 km to 27,000 km proposed.

New Economy

On New Economy, Smt Sitharaman said that a policy to enable private sector to build Data Centre parks throughout the country will be brought out soon.  Fibre to the Home (FTTH) connections through Bharatnet will link 100,000 gram panchayats this year. It is proposed to provide Rs 6000   crore to Bharatnet programme in 2020-21.  Measures proposed to benefit the Start-ups include a digital platform for seamless application and capture of IPRs, Knowledge Translation Clusters to be set up across different technology sectors including new and emerging areas. For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harbouring test beds and small scale manufacturing facilities to be established. It is proposed to provide an outlay of Rs 8000 crore over a period five years for the National Mission on Quantum Technologies and Applications.

Caring  society

Women and Child, Social Welfare

Harping on the theme of Caring Society, the Finance Minister  said that Rs 35,600 crore proposed for nutrition-related programmes for the financial year 2020-21. Rs 28,600 crore proposed  for programs that are specific to women. Moreover, Rs 85000 crore would be allocated towards the welfare of Scheduled Castes and Other Backward classes for 2020-21. Similarly, for furthering development and welfare of Scheduled tribes, Rs 53,700 crore is proposed for 2020-21. She said, the government is mindful of the concerns of senior citizens and Divyang. Accordingly, an enhanced allocation of Rs 9,500 crore is being provided for 2020-21.

Culture and Tourism

On Culture and Tourism, establishment of an Indian Institute of Heritage and Conservation under Ministry of Culture proposed with the status of a deemed University. 5 archaeological sites to be developed as iconic sites with on-site Museums - Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh) Shivsagar (Assam), Dholavira (Gujarat) and Adichanallur (Tamil Nadu). Re-curation of the Indian Museum in Kolkata, announced by Prime Minister in January 2020. Museum on Numismatics  and Trade to be located in the historic Old Mint building Kolkata. 4 more museums from across the country to be taken up for renovation and re-curation. Support for setting up of a Tribal Museum in Ranchi (Jharkhand). Maritime museum to be set up at Lothal- the Harrapan age maritime site near Ahmedabad, by Ministry of Shipping.

Environment and Climate Change

On Environment, States that are formulating and implementing plans for ensuring cleaner air in cities above one million to be encouraged. Parameters for the incentives to be notified by the Ministry of Environment, Forests and Climate change and the allocation for this purpose is Rs 4,400 crore for 2020-21.

Governance

Dwelling on the issue of Governance as clean, corruption-free, policy driven and good in intent and most importantly trusting in faith, the Finance Minister announced setting up of a National Recruitment Agency (NRA) as an independent, professional, specialist organisation for conduct of a computer-based online Common Eligibility Test for recruitment to Non-Gazetted posts. A test-centre in every district, particularly in the Aspirational Districts would also be set up.  It is also proposed to evolve a robust mechanism for appointment including direct recruitment to various Tribunals and specialised bodies to attract best talents and professional experts.  Deliberation to strengthen the Contract Act is also on.

Financial Sector

The Finance Minister said that In the last few years, Government of India has infused about Rs 3,50,000 crore by way of capital into Public Sector Banks for regulatory and growth purposes. Governance reforms would be carried out in these banks, so that they become more competitive. Government has already approved consolidation of 10 banks into four. Further, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a depositor, which is now Rs one lakh to Rs five lakh per depositor. The limit for NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 is proposed to be reduced from Rs. 500 crore to asset size of Rs 100 crore  or  loan size from existing Rs 1 crore to Rs 50 lakh. To meet the need for greater private capital, it is proposed to sell the balance holding of Government of India IDBI Bank to private, retail and institutional investors through the stock exchange. To help easy mobility while in jobs, we wish to infuse into the Universal Pension coverage with auto enrolment. More than five lakh MSMEs have benefitted from restructuring of debt permitted by RBI in the last year.  The restructuring window was to end on March 31, 2020. Government has asked RBI to consider extending this window till March 31, 2021. For selected sectors such as pharmaceuticals, auto components and others, it is proposed to extend handholding support – for technology upgradations, R&D, business strategy etc. A scheme of Rs 1000 crore will be anchored by EXIM Bank together with SIDBI.

Financial Markets

On Financial Markets, about deepening of the bond market, certain specified categories of Government securities would be opened fully for non-resident investors, apart from being available to domestic investors as well.            Government also proposes to expand by floating a new Debt-ETF consisting primarily of government securities. This will give retail investors access to government securities as much as giving an attractive investment for pension funds and long-term investors. To address the liquidity constraints of the NBFCs/HFCs, post the Union budget 2019-20, the government formulated a Partial Credit Guarantee scheme for the NBFCs. The Government and RBI has taken various measures to permit Rupee derivatives to be traded in the International Financial Services Centre at GIFT city, Gujarat.

Disinvestment

On Disinvestment, the Finance Minister said that listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value.  It also gives opportunity for retail investors to participate in the wealth so created. The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO).

Fiscal Management

On Fiscal Management, the Finance Minister said that XV Finance Commission has given its first report pertaining to Financial Year 2020-21.  In the spirit of co-operative federalism, Government in substantial measure, accepted the recommendations of the Commission. The commission would submit its final report to the President during the latter part of the year, for five years beginning 2021-22. She also announced to transfer to the GST Compensation Fund balances due out of collection of the years 2016-17 and 2017-18, in two instalments. Hereinafter, transfers to the fund would be limited only to collection by way of GST compensation cess. The Revised Estimates of Expenditure for the Financial Year 2019-20 are at a level of Rs 26.99 lakh Crore and the receipts are estimated at Rs.19.32 lakh crore.

 She said, Government has estimated nominal growth of GDP for year 2020-21, on the basis of trends available, at 10%. Accordingly, receipts for the year 2020-21 are estimated at Rs. 22.46 lakh cr and, keeping in mind commitment of the Government towards various schemes and need for improvement in quality of life, level of expenditure has been kept at Rs 30.42 lakh cr.  A good part of the borrowings for the financial year 2020-21 would go towards Capital expenditure of the Government that has been scaled up by more than 21%. She said that the measures would spur growth impulses in the economy.

PART-B

Finance Minister Smt Nirmala Sitharaman said that the Union Government has spearheaded radical fiscal measures to ensure that India’s economy continues to tread the path of high growth. She said that to make sure India stays globally competitive and a favoured destination for investment, a bold historic decision was taken to reduce the corporate tax rate for new companies in the manufacturing sector to an unprecedented level of 15%. For existing companies, the rate has been brought down to 22%. As a result, our corporate tax rates are now amongst the lowest in the world.

The Finance Minister said that in continuation of the reform measures already taken so far, the tax proposals in this budget introduce further reforms to stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations.

Personal Income Tax and Simplification of Taxation

In order to provide significant relief to the individual taxpayers and to simplify the Income-Tax law, the Finance Minister has proposed to bring a new and simplified personal income tax regime, wherein income tax rates will be significantly reduced for the individual taxpayers who forego certain deductions and exemptions.

The proposed changes in tax slabs are listed in the following table:

Taxable Income Slab (Rs.)

Existing Tax Rates

New Tax Rates

0-2.5 Lakh

Exempt

Exempt

2.5-5 Lakh

5%

5%

5-7.5 Lakh

20%

10%

7.5-10 Lakh

20%

15%

10-12.5 Lakh

30%

20%

12.5-15 Lakh

30%

25%

Above 15 Lakh

30%

30%

Surcharge and cess shall be continued to be levied at the existing rates.

In the new tax regime, substantial tax benefit will accrue to a taxpayer depending upon exemptions and deductions claimed by him. For example, a person earning Rs. 15 lakh in a year and not availing any deductions etc., will pay only Rs. 1,95,000 as compared to Rs. 2,73,000 in the old regime. Thus, his tax burden shall be reduced by Rs. 78,000 in the new regime. He would still be the gainer in the new regime, even if he was taking deduction of Rs. 1.5 Lakh under various sections of Chapter VI-A of the Income Tax Act under the old regime.

The new tax regime shall be optional for taxpayers. An individual who is currently availing more deductions and exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime.

The new personal income tax rates will entail estimated revenue foregone of Rs. 40,000 crore per year. Measures have been initiated to pre-fill the income tax return so that an individual who opts for the new regime would need no assistance from an expert to file his return and pay income tax.

The Finance Minister said she had reviewed all exemptions and deductions which got incorporated in the income tax legislation over the past several decades. Currently more than one hundred exemptions and deductions of different nature are provided in the Income Tax Act. She said that she has removed around 70 of them in the new simplified regime. She said that the remaining exemptions and deductions would also be reviewed and rationalized in the coming years, with a view to further simplifying the tax system and lowering the tax rate.

Dividend Distribution Tax

Currently, companies are required to pay Dividend Distribution Tax (DDT) on the dividend paid to its shareholders at the rate of 15% plus applicable surcharge and cess, in addition to the tax payable by the company on its profits. In order to increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors, the Finance Minister has proposed to remove DDT, and adopt the classical system of dividend taxation, under which the companies would not be required to pay DDT. The dividend shall be taxed only in the hands of the recipients at their applicable rate.

In order to remove the cascading effect, the Finance Minister has proposed to allow deduction for the dividend received by holding company from its subsidiary. The removal of DDT will lead to estimated annual revenue foregone of Rs. 25,000 crore. This will further make India an attractive destination for investment.

Concessional Tax Rate for Electricity Generation Companies

New provisions were introduced in September 2019, offering a concessional corporate tax rate of 15% to the newly incorporated domestic companies in the manufacturing sector which start manufacturing by 31st March, 2023.

In order to attract investment in the power sector, it has been proposed to extend the concessional corporate tax rate of 15% to new domestic companies engaged in the generation of electricity.

Tax Concession for Foreign Investments

To incentivize investment by Sovereign Wealth Fund of foreign governments, the Finance Minister has proposed to grant 100% tax exemption to their interest, dividend and capital gains income in respect of the investment made in infrastructure and other notified sectors before 31st March, 2024 and with a minimum lock-in period of 3 years.

Start-ups

The Finance Minister noted that during their formative years, Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain highly talented employees. Currently, ESOPs are taxable as perquisites at the time of exercise. In order to give a boost to the start-up ecosystem, the Finance Minister has proposed to ease the burden of taxation on the employees by deferring the tax payment for five years or till they leave the company or when they sell their shares, whichever is earliest.

An eligible Start-up having turnover upto 25 crore is allowed deduction of 100% on its profits for three consecutive assessment years out of seven years if the total turnover does not exceed 25 crore rupees. The Finance Minister has proposed to increase this limit to Rs. 100 crore. She has also proposed to extend the period of eligibility for claim of deduction from the existing 7 years to 10 years.

Concessional Tax Rate for Cooperatives

Cooperative societies are currently taxed at a rate of 30% with surcharge and cess. As a major concession, and in order to bring parity between the cooperative societies and corporates, the Finance Minister has proposed to provide an option to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess with no exemptions/deductions. She has also proposed to exempt these societies from Alternative Minimum Tax (AMT), just like companies under the new tax regime are exempted from the Minimum Alternate Tax (MAT).

Medium, Small and Micro Enterprises

In order to reduce the compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector, the Finance Minister has proposed to raise by five times, the turnover threshold for audit from the existing Rs. 1 crore to Rs. 5 crore. In order to boost less-cash economy, she has proposed that the increased limit shall apply only to those businesses which carry out less than 5% of their business transactions in cash.

Affordable Housing

In the last budget, the Finance Minister had announced an additional deduction of upto one lakh, fifty thousand rupees for interest paid on loans taken for purchase of an affordable house. The date of loan sanction for availing this additional deduction is proposed to be extended by one year, beyond 31st March, 2020.

Charity Institutions

Income of Charity Institutions is fully exempt from taxation. Donation made to these institutions is also allowed as deduction in computing the taxable income of the donor. It is proposed to pre-fill the donee’s information in taxpayer’s return on the basis of information of donations furnished by the donee.

In order to claim the tax exemption, charity institutions have to be registered with the Income Tax Department. It is proposed to make the registration completely electronic under a unique registration number (URN) to be issued to all new and existing charity institutions.

Faceless Appeals

In order to impart greater efficiency, transparency and accountability to the assessment process, a new faceless assessment scheme has already been introduced. It is proposed to amend the Income Tax Act so as to enable Faceless appeal on the lines of Faceless assessment.

‘Vivad se Vishwas’ scheme

Under the proposed ‘Vivad se Vishwas’ scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty, provided he pays by 31st March, 2020. Those who will avail the scheme after 31st March, 2020 will have to pay some additional amount. The scheme will remain open till 30th June 2020.

Instant PAN through Aadhaar

In order to further ease the process of allotment of PAN, a system will be launched under which PAN shall be instantly allotted online on the basis of Aadhaar, without any requirement for filling up of detailed application form.

Indirect Tax

GST

A simplified GST return shall be implemented from the 1st April, 2020. It will make return filing simple with features like SMS based filing for nil return, return pre-filling, improved input tax credit flow and overall simplification. Dynamic QR-code is proposed for consumer invoices. GST parameters will be captured when payment for purchases is made through the QR-code.

Customs

On the Customs side, India has taken a quantum leap in the “Trading Across Border” parameter of Ease of Doing Business rankings by the World Bank. India’s rank has improved from 146 to 68.

Imports under Free Trade Agreements are on the rise. Undue claims of FTA benefits have posed threat to domestic industry. In the coming months, Rules of Origin requirements shall be reviewed, particularly for certain sensitive items, so as to ensure that FTAs are aligned to the conscious direction of our policy.

Labour intensive sectors in MSME are critical for employment generation. Cheap and low-quality imports are an impediment to their growth. Keeping in view the need of this sector, customs duty is being raised on items like footwear and furniture. Rate of Duty for footwear is being raised from 25% to 35%; and for “parts of footwear” from 15% to 20%. Rate of Duty for specified Furniture goods is being raised from 20% to 25%.

To give impetus to domestic industry, and to generate resource for health services, it is proposed to impose a nominal health cess of 5% on imports of specified medical equipment. Basic customs duty on imports of newsprint and light-weight coated paper is being reduced from 10% to 5%.

An increase is proposed in National Calamity Contingent Duty (NCCD) on Cigarettes and Tobacco products. NCCD on Bidis remains unchanged.

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Budget 2020 : Significant tax relief to start-ups

 

Ministry of Finance

MSMEs turnover threshold for Audit increased 5 times to Rs 5 Crore
Increased limit to apply only to Businesses carring out less than 5% of their business transactions in cash
Significant tax relief to start-ups

Dated: 01 FEB 2020

In order to reduce the compliance burden on small retailers, traders, shop keepers who comprise the Medium, Small and Micro Enterprise (MSME) sector, the Union Budget proposed to raise by five times the turnover threshold for audit from the existing Rs. 1 crore to Rs. 5 crore. While presenting the Union Budget 2020-21 in Parliament today, the Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman said that in order to boost less cash economy, the increased limit shall apply only to those businesses which carry out less than 5% of their business transactions in cash.   Currently, businesses having turnover of more than Rs 1 crore are required to get their books of accounts audited by an accountant.

In order to give a boost to the start-up ecosystem, the Union Budget has proposed to ease the burden of taxation on the employees by deferring the tax payment on ESOPs by five years or till they leave the company or when they sell their shares, whichever is earlier.

The Finance Minister said that Start-ups have emerged as engines of growth for Indian economy. Over the past year, the Government has taken several measures to handhold them and support their growth. During their formative years, Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain highly talented employees. ESOP is a significant component of compensation for these employees. Currently, ESOPs are taxable as perquisites at the time of exercise. This leads to cash-flow problem for the employees who do not sell the shares immediately and continue to hold the same for the long-term.

Further, an eligible Start-up having turnover upto Rs 25 crores is allowed  deduction of 100% of its profits for three consecutive assessment years out of seven years if the total turnover  does not exceed Rs 25 crores. In order to extend this benefit to larger start-ups, the Budget has proposed to extend the turnover limit from existing Rs 25 crores to Rs 100 crores. Moreover considering the fact that in the initial years, a start-up may not have adequate profit to avail this deduction, the Budget proposes to extend the period of eligibility for claim of deduction from the existing 7 years to 10 years.

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KEY HIGHLIGHTS OF UNION BUDGET 2020-21

 

Ministry of Finance

KEY HIGHLIGHTS OF UNION BUDGET 2020-21

Dated: 01 FEB 2020

Presenting the first Union Budget of the third decade of 21st century, Finance Minister Smt. Nirmala Sitharaman, today unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term, and long-term measures.

The Key Highlights of Union Budget 2020-21 are as follows:

Three prominent themes of the Budget

  • Aspirational India - better standards of living with access to health, education and better jobs for all sections of the society
  • Economic Development for all - “Sabka Saath , Sabka Vikas , Sabka Vishwas”.
  • Caring Society - both humane and compassionate; Antyodaya as an article of faith.
  • Three broad themes are held together by:
    • Corruption free, policy-driven Good Governance.
    • Clean and sound financial sector.
  • Ease of Living underlined by the three themes of Union Budget 2020-21.

Three components of Aspirational India

  • Agriculture, Irrigation, and Rural Development
  • Wellness, Water, and Sanitation
  • Education and Skills

Sixteen Action Points for Agriculture, Irrigation and Rural Development

  • Rs. 2.83 lakh crore to be allocated for the following 16 Action Points:
    • Rs. 1.60 lakh crore for Agriculture, Irrigation & allied activities.
    • Rs. 1.23 lakh crore for Rural development & Panchayati Raj.                          - 
  • Agriculture credit:
    • Rs. 15 lakh crore target set for the year 2020-21.
    • PM-KISAN beneficiaries to be covered under the KCC scheme.
    • NABARD Re-finance Scheme to be further expanded.
  • Comprehensive measures for 100 water-stressed districts proposed.
  • Blue Economy:
    • Rs. 1 lakh crore fisheries’ exports to be achieved by 2024-25.
    • 200 lakh tonnes fish production targeted by 2022-23.
    • 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations to involve youth in fisheries extension.
    • Growing of algae, sea-weed and cage culture to be promoted.
    • Framework for development, management and conservation of marine fishery resources.
  • Kisan Rail to be setup by Indian Railways through PPP:
    • To build a seamless national cold supply chain for perishables (milk, meat, fish, etc.
    • Express and Freight trains to have refrigerated coaches.
  • Krishi Udaan to be launched by the Ministry of Civil Aviation:
    • Both international and national routes to be covered.
    • North-East and tribal districts to realize Improved value of agri-products.
  • One-Product One-District for better marketing and export in the Horticulture sector.
  • Balanced use of all kinds of fertilizers - traditional organic and innovative fertilizers.
  • Measures for organic, natural, and integrated farming:
    • Jaivik Kheti Portal – online national organic products market to be strengthened.
    • Zero-Budget Natural Farming (mentioned in July 2019 Budget) to be included.

Integrated Farming Systems in rain-fed areas to be expanded.

o Multi-tier cropping, bee-keeping, solar pumps, solar energy production in non-cropping season to be added.

  • PM-KUSUM to be expanded:
    • 20 lakh farmers to be provided for setting up stand-alone solar pumps.
    • Another 15 lakh farmers to be helped to solarise their grid-connected pump sets.
    • Scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid.
  • Village Storage Scheme:
    • To be run by the SHGs to provide farmers a good holding capacity and reduce their logistics cost.
    • Women, SHGs to regain their position as Dhaanya Lakshmi.
  • NABARD to map and geo-tag agri-warehouses, cold storages, reefer van facilities, etc.
  • Warehousing in line with Warehouse Development and Regulatory Authority (WDRA) norms:
    • Viability Gap Funding for setting up such efficient warehouses at the block/taluk level.
    • Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) to undertake such warehouse building.
  • Financing on Negotiable Warehousing Receipts (e-NWR) to be integrated with e-NAM.
  • State governments who undertake implementation of model laws (issued by the Central government) to be encouraged.
  • Livestock:
    • Doubling of milk processing capacity to 108 million MT from 53.5 million MT by 2025.
    • Artificial insemination to be increased to 70% from the present 30%.
    • MNREGS to be dovetailed to develop fodder farms.
    • Foot and Mouth Disease, Brucellosis in cattle and Peste Des Petits ruminants (PPR) in sheep and goat to be eliminated by 2025.
  • Deen Dayal Antyodaya Yojana – 0.5 crore households mobilized with 58 lakh SHGs for poverty alleviation.

Wellness, Water and Sanitation

  • Rs. 69,000 crore allocated for overall Healthcare sector.
  • Rs. 6400 crore (out of Rs. 69,000 crore) for PM Jan Arogya Yojana (PMJAY):
    • More than 20,000 hospitals already empanelled under PM Jan Arogya Yojana (PMJAY).
    • Viability Gap Funding window proposed for setting up hospitals in the PPP mode.
    • Aspirational Districts with no Ayushman empanelled hospitals to be covered in the first phase.
    • Targeting diseases with an appropriately designed preventive regime using Machine Learning and AI.
  • Jan Aushadhi Kendra Scheme to offer 2000 medicines and 300 surgicals in all districts by 2024.
  • TB Harega Desh Jeetega campaign launched - commitment to end Tuberculosis by 2025.
  • Rs. 3.60 lakh crore approved for Jal Jeevan Mission:
    • Rs. 11,500 crore for the year 2020-21.
    • Augmenting local water sources, recharging existing sources, and promoting water harvesting and de-salination.
    • Cities with million-plus population to be encouraged to achieve the objective during the current year itself.
  • Rs.12, 300 crore allocation for Swachh Bharat Mission in 2020-21:
    • Committment to ODF-Plus in order to sustain ODF behaviour.
    • Emphasis on liquid and grey water management.

o Focus also on Solid-waste collection, source segregation, and processing.

Education and Skills

  • Rs. 99,300 crore for education sector and Rs. 3000 crore for skill development in 2020-21.
  • New Education Policy to be announced soon.
  • National Police University and National Forensic Science University proposed for policing science, forensic science, and cyber-forensics.
  • Degree level full-fledged online education program by Top-100 institutions in the National Institutional Ranking Framework.
  • Up to 1-year internship to fresh engineers to be provided by Urban Local Bodies.
  • Budget proposes to attach a medical college to an existing district hospital in PPP mode.
  • Special bridge courses to be designed by the Ministries of Health, and Skill Development:
    • To fulfill the demand for teachers, nurses, para-medical staff and care-givers abroad.
    • To bring in equivalence in the skill sets of the workforce and employers’ standards.
  • 150 higher educational institutions to start apprenticeship embedded degree/diploma courses by March 2021.
  • External Commercial Borrowings and FDI to be enabled for education sector.
  • Ind-SAT proposed for Asian and African countries as a part of Study in India program.

Economic Development

Industry, Commerce and Investment

  • Rs. 27,300 crore allocated for 2020-21 for development and promotion of Industry and Commerce.
  • Investment Clearance Cell proposed to be set up:

o To provide “end to end” facilitation and support.

o To work through a portal.

  • Five new smart cities proposed to be developed.
  • Scheme to encourage manufacture of mobile phones, electronic equipment and semi-conductor packaging proposed.
  • National Technical Textiles Mission to be set up:

o With four-year implementation period from 2020-21 to 2023-24.

o At an estimated outlay of Rs 1480 crore.

o To position India as a global leader in Technical Textiles.

  • New scheme NIRVIK to be launched to achieve higher export credit disbursement, which provides for:

o Higher insurance coverage

o Reduction in premium for small exporters

o Simplified procedure for claim settlements. 

  • Turnover of Government e-Marketplace (GeM) proposed to be taken to Rs 3 lakh crore.
  • Scheme for Revision of duties and taxes on exported products to be launched.

o Exporters to be digitally refunded duties and taxes levied at the Central, State and local levels, which are otherwise not exempted or refunded.

  • All Ministries to issue quality standard orders as per PM’s vision of “Zero Defect-Zero Effect” manufacturing.

Infrastructure

  • Rs.100 lakh crore to be invested on infrastructure over the next 5 years.
  • National Infrastructure Pipeline:

o Rs. 103 lakh crore worth projects; launched on 31st December 2019.

o More than 6500 projects across sectors, to be classified as per their size and stage of development. 

  • A National Logistics Policy to be released soon: 

o To clarify roles of the Union Government, State Governments and key regulators.

o A single window e-logistics market to be created

o Focus to be on generation of employment, skills and making MSMEs competitive.

  • National Skill Development Agency to give special thrust to infrastructure-focused skill development opportunities.
  • Project preparation facility for infrastructure projects proposed.

o To actively involve young engineers, management graduates and economists from Universities.

  • Infrastructure agencies of the government to involve youth-power in start-ups.
  • Rs.1.7 lakh crore proposed for transport infrastructure in 2020-21.

Highways:

  • Accelerated development of highways to be undertaken, including:

o 2500 Km access control highways.

o 9000 Km of economic corridors.

o 2000 Km of coastal and land port roads.

o 2000 Km of strategic highways.

  • Delhi-Mumbai Expressway and two other packages to be completed by 2023.
  • Chennai-Bengaluru Expressway to be started.
  • Proposed to monetise at least 12 lots of highway bundles of over 6000 Km before 2024.

Indian Railways:

  • Five measures:

o Large solar power capacity to be set up alongside rail tracks, on land owned by railways.

o Four station re-development projects and operation of 150 passenger trains through PPP.

o More Tejas type trains to connect iconic tourist destinations.

o High speed train between Mumbai and Ahmedabad to be actively pursued.

o 148 km long Bengaluru Suburban transport project at a cost of Rs 18600 crore, to have fares on metro model. Central Government to provide 20% of equity and facilitate external assistance up to 60% of the project cost.

  • Indian Railways’ achievements: 

o 550 Wi-fi facilities commissioned in as many stations.

o Zero unmanned crossings.

o 27000 Km of tracks to be electrified.

Ports & Water-ways:

  • Corporatizing at least one major port and its listing on stock exchanges to be considered.
  • Governance framework keeping with global benchmarks needed for more efficient sea-ports.
  • Economic activity along river banks to be energised as per Prime Minister’s Arth Ganga concept.

Airports:

  • 100 more airports to be developed by 2024 to support Udaan scheme.
  • Air fleet number expected to go up from present 600 to 1200 during this time.

Electricity:

  • “Smart” metering to be promoted.
  • More measures to reform DISCOMs to be taken.

Power:

  • Rs.22, 000 crore proposed for power and renewable energy sector in 2020-21.
  • Expansion of national gas grid from the present 16200 km to 27000 km proposed.
  • Further reforms to facilitate transparent price discovery and ease of transactions.

New Economy

  • To take advantage of new technologies:

o Policy to enable private sector to build Data Centre parks throughout the country to be brought out soon.  

o Fibre to the Home (FTTH) connections through Bharatnet to link 100,000 gram panchayats this year.

o Rs.6000 crore proposed for Bharatnet programme in 2020-21.

  • Measures proposed to benefit Start-ups:

o A digital platform to be promoted to facilitate seamless application and capture of IPRs.

o Knowledge Translation Clusters to be set up across different technology sectors including new and emerging areas.

o For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harbouring test beds and small scale manufacturing facilities to be established.

o Mapping of India’s genetic landscape- Two new national level Science Schemes to be initiated to create a comprehensive database.

o Early life funding proposed, including a seed fund to support ideation and development of early stage Start-ups.

  • Rs.8000 crore proposed over five years for National Mission on Quantum Technologies and Applications.

Caring Society

  • Focus on:

o Women & child,

o Social Welfare;

o Culture and Tourism

  • Allocation of Rs. 35,600 crore for nutrition-related programmes proposed for the FY2020-21.
  • Rs.28, 600 crore proposed for women specific programs.
  • Issue about age of a girl entering motherhood - proposed to appoint a task force to present its recommendations in six months’ time.
  • Financial support for wider acceptance of technologies, identified by Ministry of Housing and Urban Affairs to ensure no manual cleaning of sewer systems or septic tanks, to be provided.
  • Rs. 85, 000 crore proposed for 2020-21 for welfare of Scheduled Castes and Other Backward Classes.
  • Rs. 53, 700 crore provided to further development and welfare of Scheduled Tribes.
  • Enhanced allocation of Rs. 9,500 crore provided for 2020-21 for senior citizens and Divyang.

Culture & Tourism

  • Allocation of Rs. 2500 crore for 2020-21 for tourism promotion.
  • Rs.3150 crore proposed for Ministry of Culture for 2020-21.
  • An Indian Institute of Heritage and Conservation under Ministry of Culture proposed; with the status of a deemed University.
  • 5 archaeological sites to be developed as iconic sites with on-site Museums:

o Rakhigarhi (Haryana)

o Hastinapur (Uttar Pradesh)

o Shivsagar (Assam)

o Dholavira (Gujarat)

o Adichanallur (Tamil Nadu)

  • Re-curation of the Indian Museum in Kolkata, announced by Prime Minister in January 2020.
  • Museum on Numismatics  and Trade to be located in the historic Old Mint building in Kolkata.
  • 4 more museums from across the country to be taken up for renovation and re-curation.
  • Support for setting up of a Tribal Museum in Ranchi (Jharkhand).
  • Maritime museum to be set up at Lothal- the Harrapan age maritime site near Ahmedabad, by Ministry of Shipping.
  • State governments expected to develop a roadmap for certain identified destinations and formulate financial plans during 2021 against which specified grants to be made available to the States in 2020-21.

Environment & Climate Change

  • Allocation for this purpose to be Rs.4400 crore for 2020-21.
  • Proposed to advise the utilities to close the running old thermal power plants with carbon emission above the pre-set norms.
  • States that are formulating and implementing plans for ensuring cleaner air in cities above one million to be encouraged.
  • PM launched Coalition for Disaster Resilient Infrastructure (CDRI) with Secretariat in Delhi. Second such international initiative after International Solar Alliance.

Governance

  • Clean, corruption-free, policy driven, good in intent and most importantly trusting in faith.
  • Taxpayer Charter to be enshrined in the Statute will bring fairness and efficiency in tax administration.
  • Companies Act to be amended to build into statues, criminal liability for certain acts that are civil in nature.
    • Other laws with such provisions are to be corrected after examination.
  • Major reforms in recruitment to Non-Gazetted posts in Government and Public sector banks:
    • An independent, professional and specialist National Recruitment Agency (NRA) for conducting a computer-based online Common Eligibility Test for recruitment.
    • A test-centre in every district, particularly in the Aspirational Districts.
  • A robust mechanism to be evolved for appointment including direct recruitment to various Tribunals and specialised bodies to attract best talents and professional experts.
  • Contract Act to be strengthened.
  • New National Policy on Official Statistics to:
    • Promote use of latest technologies including AI.
    • Lay down a road-map towards modernised data collection, integrated information portal and timely dissemination of information.
  • A sum of Rs. 100 crore allocated to begin the preparations for G20 presidency to be hosted in India in the year 2022.
  • Development of North East region:
    • Improved flow of funds using online portal by the Government.
    • Greater access to financial assistance of Multilateral and Bilateral funding agencies.
  • Development of Union Territories of J&K and Ladakh:
    • An amount of Rs. 30,757 crore provided for the financial year 2020-21.

o The Union Territory of Ladakh has been provided with Rs. 5,958.

Financial Sector

  • Reforms accomplished in PSBs :
    • 10 banks consolidated into 4.
    • Rs. 3,50,000 crore capital infused.
  • Governance reforms to be carried out to bring in transparency and greater professionalism in PSBs.
  • Few PSBs to be encouraged to approach the capital market to raise additional capital
  • Deposit Insurance and Credit Guarantee Corporation (DICGC) permitted to increase Deposit Insurance Coverage to Rs. 5 lakh from Rs.1 lakh per depositor.
  • Scheduled Commercial Bank’s health under monitoring through a robust mechanism, keeping depositors’ money safe.
  • Cooperative Banks to be strengthen by amending Banking Regulation Act for:
    • Increasing professionalism.
    • Enabling access to capital.
    • Improving governance and oversight for sound banking through the RBI.
  • NBFCs eligibility limit for debt recovery reduced from:
    • Rs. 500 crore to Rs 100 crore asset size.
    • Rs 1 crore to Rs 50 lakh loan size.
  • Private capital in Banking system:
    • Government to sell its balance holding in IDBI Bank to private, retail and institutional investors through the stock exchange.
  • Easier mobility in jobs:
    • Auto-enrolment in Universal Pension coverage.
    • Inter-operability mechanism to safeguard the accumulated corpus.
  • Pension Fund Regulatory Development Authority of India Act to be amended to:
    • Strengthen regulating role of PFRDAI.
    • Facilitate separation of NPS trust for government employees from PFRDAI.
    • Enable establishment of a Pension Trust by the employees other than Government.
  • Factor Regulation Act 2011 to be amended to:
    • Enable NBFCs to extend invoice financing to the MSMEs through TReDS
  • New scheme to provide subordinate debt for entrepreneurs of MSMEs by the banks
    • Would be counted as quasi-equity.
    • Would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).
    • The corpus of the CGTMSE would accordingly be augmented by the government.
  • Window for MSME’s debt restructuring by RBI to be extended by one year till March 31, 2021.
    • More than five lakh MSMEs have already been benefitted.
  • An app-based invoice financing loans product for MSMEs to be launched.
    • To prevent the problem of delayed payments and consequential cash flows mismatches.
  • Export promotion of MSMEs:
    • For selected sector such as pharmaceuticals, auto components and others.
    • An Rs 1000 crore scheme anchored by EXIM Bank together with SIDBI.

o Hand holding support for technology upgradations, R&D, business strategy etc.

Financial Market

  • Deepening Bond Market.
    • Certain specified categories of Government securities to be opened fully for non -resident investors also.
    • FPI limit in corporate bonds increased to 15% from 9% of its outstanding stock.
  • New legislation to be formulated for laying down a mechanism for netting of financial contracts.  
    • Scope of credit default swaps to expand.
  • Debt Based Exchange Traded Fund expanded by a new Debt-ETF consisting primarily of Government Securities.
    • To give attractive access to retail investors, pension funds and long-term investors.
  • A Partial Credit Guarantee scheme for the NBFCs formulated post the Union budget 2019-20 to address their liquidity constraints. 
    • New mechanism to be devised to further this.

o Government support to securities so floated.

Infrastructure Financing

  • Rs.103 lakh crore National Infrastructure Pipeline projects earlier announced.
  • Rs 22,000 crore to cater to the equity support to Infrastructure Finance Companies such as IIFCL and a subsidiary of NIIF.
  • IFSC, GIFT city: full of potential to become a centre of international finance as well as a centre for high end data processing:

o An International Bullion exchange(s) to be set up as an additional option for trade by global market participants with the approval of regulator.

Disinvestment

  • Government to sell a part of its holding in LIC by way of Initial Public Offer (IPO).

Fiscal Management

  • XV Finance Commission (FC):

o XV Finance Commission has given its first report for FY2020-21

o Recommendations accepted in substantial measure

o Its final report for five years beginning 2021-22 to be submitted during the latter part of the year.

  • GST Compensation Fund:

o Balances due out of collection of the years 2016-17 and 2017-18 to be transferred to the Fund, in two instalments.

o Hereinafter, transfers to the fund to be limited only to collection by way of GST compensation cess.

  • Overhaul of Centrally Sponsored Schemes and Central Sector Schemes necessary:

o To align them with emerging social and economic needs of tomorrow

To ensure that scarce public resources are spent optimally

  • On the recent debate over transparency and credibility of projected fiscal numbers, it is assured that procedure adopted is compliant with the FRBM Act.
  • For the FY 2019-20:

o Revised Estimates of Expenditure: at Rs.26.99 lakh crore

o Revised Estimates of Receipts: estimated at Rs.19.32 lakh crore.

  • For year 2020-21:

o Nominal growth of GDP estimated at 10%.

o Receipts: estimated at Rs.22.46 lakh cr

o Expenditure: at Rs.30.42 lakh cr.

  • Significant tax reforms for boosting investments recently undertaken. However, expected tax buoyancy expected to take time.
  • Fiscal deficit of 3.8% estimated in RE 2019-20 and 3.5% for BE 2020-21.  It comprises two ingredients;

o 3.3% for year 2019-20 and 3% for the 2020-21 budget estimate.

o Deviation of 0.5%, consistent with Section 4(3) of FRBM Act, both for RE 2019-20 and BE 2020-21. (Section 4 (2) of the FRBM Act provides for a trigger mechanism for a deviation from the estimated fiscal deficit on account of structural reforms in the economy with unanticipated fiscal implications.)

o Return path, committing to fiscal consolidation without compromising needs of investment out of public funds, is laid in Medium Term Fiscal Policy cum Strategy Statement.

o Market borrowings: Net market borrowings: Rs.4.99 lakh crore for 2019-20 and Rs.5.36 lakh crore for 2020-21.

  • A good part of the borrowings for the financial year 2020-21 to go towards Capital expenditure that has been scaled up by  more than 21%.

Direct Tax

Direct Tax Proposals - To stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations.

  • Personal Income Tax:
    • Significant relief to middle class taxpayers.
    • New and simplified personal income tax regime proposed:

Taxable Income Slab (Rs.)

Existing tax rates

New tax rates

0-2.5 Lakh

Exempt

Exempt

2.5-5 Lakh

5%

5%

5-7.5 Lakh

20%

10%

7.5-10 Lakh

20%

15%

10-12.5 Lakh

30%

20%

12.5-15 Lakh

30%

25%

Above 15 Lakh

30%

30%


    • Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime.
    • Remaining exemptions and deductions to be reviewed and rationalised in coming years.
    • New tax regime to be optional - an individual may continue to pay tax as per the old regime and avail deductions and exemptions.
    • Measures to pre-fill the income tax return initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no assistance from an expert to pay income tax.
    • New regime to entail estimated revenue forgone of Rs. 40,000 crore per year.
  • Corporate Tax:
    • Tax rate of 15% extended to new electricity generation companies.
    • Indian corporate tax rates now amongst the lowest in the world.
  • Dividend Distribution Tax (DDT):
    • DDT removed making India a more attractive investment destination.
    • Deduction to be allowed for dividend received by holding company from its subsidiary.
    • Rs. 25,000 crore estimated annual revenue forgone.
  • Start-ups:
    • Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.
    • Tax payment on ESOPs deferred.
  • MSMEs to boost less-cash economy:
    • Turnover threshold for audit increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.
  • Cooperatives:
    • Parity brought between cooperatives and corporate sector.
    • Option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions.
    • Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).
  • Tax concession for foreign investments:
    • 100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments.
  • Affordable housing:
    • Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021.
    • Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till 31st March, 2021.

Tax Facilitation Measures

  • Vivad Se Vishwas’ scheme, with a deadline of 30th June, 2020, to reduce litigations in direct taxes:
    • Waiver of interest and penalty - only disputed taxes to be paid for payments till 31st March, 2020.
    • Additional amount to be paid if availed after 31st March, 2020.
    • Benefits to taxpayers in whose cases appeals are pending at any level.
  • Faceless appeals to be enabled by amending the Income Tax Act.
  • For charity institutions:
    • Pre-filling in return through information of donations furnished by the done.
    • Process of registration to be made completely electronic.
    • Unique registration number (URN) to be issued to all new and existing charity institutions.
    • Provisional registration to be allowed for new charity institutions for three years. 
    • CBDT to adopt a Taxpayers’ Charter.
  • Losses of merged banks:
    • Amendments proposed to the Income-tax Act to ensure that entities benefit from unabsorbed losses and depreciation of the amalgamating entities.
    •  

Indirect Tax

  • GST:
    • Cash reward system envisaged to incentivise customers to seek invoice.
    • Simplified return with features like SMS based filing for nil return and improved input tax credit flow to be implemented from 1st April, 2020 as a pilot run.
    • Dynamic QR-code capturing GST parameters proposed for consumer invoices.
    • Electronic invoice to capture critical information in a centralized system to be implemented in a phased manner.
    • Aadhaar based verification of taxpayers being introduced to weed out dummy or non-existent units.  
    • GST rate structure being deliberated to address inverted duty structure.
  • Customs Duties:
    • Customs duty raised on footwear to 35% from 25% and on furniture goods to 25% from 20%. 
    • Basic customs duty on imports of news print and light-weight coated paper reduced from 10% to 5%.
    • Customs duty rates revised on electric vehicles and parts of mobiles.
    • 5% health cess to be imposed on the imports of medical devices, except those exempt from BCD.
    • Lower customs duty on certain inputs and raw materials like fuse, chemicals, and plastics.
    • Higher customs duty on certain goods like auto-parts, chemicals, etc. which are also being made domestically. 
  • Trade Policy Measures
    • Customs Act being amended to enable proper checks of imports under FTAs.
    • Rules of Origin requirements to be reviewed for certain sensitive items.
    • Provisions relating to safeguard duties to be strengthened to enable regulating such surge in imports in a systematic way. 
    • Provisions for checking dumping of goods and imports of subsidized goods being strengthened.
    • Suggestions for reviews of exemptions from customs duty to be crowd-sourced.
  • Excise duty proposed to be raised on Cigarettes and other tobacco products, no change made in the duty rates of bidis.
  • Anti-dumping duty on PTA abolished to benefit the textile sector.

Unprecedented Milestones and Achievements of Indian Economy

  • India now the fifth largest economy of the world.
  • 7.4% average growth clocked during 2014-19 with inflation averaging around 4.5%.
  • 271 million people raised out of poverty during 2006-16.
  • India’s Foreign Direct Investment elevated to US$ 284 billion during 2014-19 from US$ 190 billion during 2009-14.
  • Central Government debt reduced to 48.7% of GDP (March 2019) from 52.2% (March 2014
  • Two cross-cutting developments:
    • Proliferation of technologies (Analytics, Machine Learning, robotics, Bio-informatics and Artificial Intelligence).
    • Highest ever number of people in the productive age group (15-65 years) in India.
  • GST removed many bottlenecks in the system.

Future Aim for sustaining India’s unique global leadership, driven by Digital Revolution

  • Seamless delivery of services through Digital Governance.
  • Improvement in physical quality of life through National Infrastructure Pipeline.
  • Risk mitigation through Disaster Resilience.
  • Social security through Pension and Insurance penetration.

 

 

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