2020 BUDGET

February 11, 2020 0 By admin

           Against the backdrop of http://www.sagarworld.in a slowing domestic economy, the government presented the Union Budget for the financial year 2020-2021. The government did a fine balancing act by providing boost to the economy through various announcements and at the same time not deviating significantly from the path of fiscal consolidation. The government laid out three prominent themes of this year’s budget: ‘Aspiring India’, ‘Economic development’ and ‘to build a caring society’.

KEY ANNOUNCEMENTS

Steps announced under ‘Aspiring India’ theme

  1. Agriculture
  2. Government to continue to work towards doubling farmer’s income by 2022 and has allocated ` 2.83 trillion for agriculture and rural development
  3. Indian railways to set up Kisan rail to bolster cold supply chain
  4. Health and Well being
  5. Amount of ` 690 billion allocated for Health sector
  6. Mission Indradhanush has been extended to cover new diseases and new vaccines
  7. Swachh Bharat Mission received an allocation of ` 123 billion
  8. Education
  9. Amount of ` 993 billion allocated for Education sector
  10. Foreign Direct Investments (FDI) and External Commercial Borrowings (ECB) have been allowed for education sector

Steps announced under ‘Economic development’ theme

  1. Government allocated ‘ 273 billion for industry and commerce
  2. Proposal to setup five new smart cities and investment clearance cell for entrepreneurs
  3. Proposed schemes to encourage making of mobile phones and medical devices
    1. Boost to infrastructure sector
  4. In a bid to give a boost to infrastructure in the economy, government proposed to spend `3.6 trillion on piped water project and `1.7 trillion on transport infrastructure
  5. NHAI to monetize at least 12 highway bundles and at least one major port to be corporatized and listed in FY 2021

Steps announced under ‘to be caring society’ theme

  • Amount of `356 billion allocated for nutritional programs
    • Proposal to spend `286 billion for women-centric programs, `850 billion for backward castes and `95 billion for senior citizens

Fiscal deficit target for FY 2021 has been pegged at 3.5% of GDP

  • Government announced fiscal deficit target of 3.5% of GDP for FY 2021
    • Fiscal deficit for FY 2020 revised to 3.8% as compared to 3.3% budgeted earlier in the interim budget last year
    • Net market borrowing at ` 5.36 lakh crore versus (as compared to ` 4.99 lakh crore in FY 2020)

Steps announced for Financial markets

  1. Deepening of bond markets
  2. Limit of FPI in corporate bonds has been raised to 15% from an existing limit of 9%
  3. Some government securities to be fully opened for NRIs
  4. Proposal to float new debt ETF of government bonds
  • To augment the liquidity support to NBFCs and HFCs, government proposed to enhance the partial credit enhancement scheme
  • Proposal to sell part of government stake in LIC in FY 2021

Tax proposals

  1. Personal income tax
  2. In order to boost personal income, government proposed revised tax slabs:
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%
  • Under the proposed scheme, tax payers have to forego most of the exemptions and deductions
  • However, tax payers will have the choice to opt for either the new scheme or the existing one
  • This can have implication for sectors which have been the beneficiaries of the tax deductions till now
  • Removal of Dividend Distribution Tax (DDT)
  • This is a positive step for institutional investors as dividend will be taxed at the hand of recipients
  • Lower corporate tax rate of 15% has been extended to power sector in addition to manufacturing companies
  • Withholding tax for FPIs has been extended to 2023 to attract foreign flows