Highlights of Union Budget 2020 India

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On 1st February 2020, Union Budget 2020 India has been presented by the Union Finance Minister Ms. Nirmala Sitharaman.  This budget marks the first budget of the third decade of the 21st century.  

This is the second union budget presented by Ms. Sitharaman on the trot and she does best efforts to cover all the sectors in her budget speech that lasted for 160 minutes approximately. 

The Finance Minister unveiled a series of comprehensive reforms to escalate the economy by adopting short-term, mid-term, and long-term procedures in different sectors. 

Budget 2020 Expectations

The Prime Minister of India, Narendra Modi has invited suggestions from the common man in respect of Union Budget 2020 presented by the Finance Minister, Nirmala Sitharam. 

Now the point comes what the common man expects from Budget 2020?

Undoubtedly, the common man, especially the middle and lower middle class wants the more disposable income to meet the daily expenses.  

The finance minister can do one thing to meet the expectation is to raise the tax exemption limit from Rs 2.5 lakh to Rs 5 lakh. 

Also, the common man expects that inflation should not rise.  Something needs to be done in the sector of affordable housing.  Lower rates of GST on regularly used consumer goods are expected to boost the economy.  

Budget 2020 India Summary

The 2020 budget focuses on the revision of the economy, providing benefits to local manufacturers, as far as the government is concerned for self-employment. 

The budget also considers the boosting of domestic consumption, creating entrepreneurs and providing opportunities for youth in India.

Though the Finance Minister admitted that the government could not meet its fiscal deficit targets of the previous year, the Budget 2020 clearly elaborates the tax regimes.

The FM said that Budget 2020 focuses on social security by the maximum use of insurance penetration and pension schemes.

The union budget 2020 is concentrating on three major themes that are held together by corruption-free good governance driven by policies and clean and stable financial sector.  The themes include:

  • Goal-Oriented country in which all sections of the society will obtain high living standards with easy access to affordable education, good health and better employment opportunities.
  • Approach to attain a society that is compassionate and caring.
  • The economic development of all sectors of society in connection to Prime Minister’s earlier buzz word “ Sabka Sath, Sabka Vikas” now as “ Sabka Sath, Sabka Vikas, Sabka Vishwas”.

Perks for Agriculture and rural development in Budget 2020

agriculture budget 2020 india

The Union Budget 2020 India aims for “Ease of Living” in India by focusing on agriculture friendly initiatives. 

As the farmers and rural areas are the key focus of the current government, the budget includes Rs. 15 Lakh Crore for the financial year 2020-21 for Agriculture credit targets.  These initiatives will comprise Krishi Udaan and Kisan Rail scheme for a flawless national cold supply chain for consumables. 

Another scheme for farmers is for setting up a whole solar pump on their own and this will be done with the help of PM-KUSUM for over 20 lakh farmers.

Ms. Sitharaman, during her budget speech, reiterated the commitment of increasing the farmer’s income to double by 2022.  She said that the government has already strengthened around 6.11 crore farmers by insuring them under PM Fasal Bima Yojana.  

In addition to that comprehensive measures to make grid-connected pump sets solar enable for another 15 lakh farmers took place in the budget 2020 India.

Health Sector in Budget 2020

budget for health sector 2020

PM Jan Arogya Yojana took the top place for the health sector in the Union Budget 2020.  The budget has a provision of Rs. 69,000 crore for the health sector including Rs 6400 Crore for Prime Minister Jan Arogya Yojana (PMJAY). 

It proposes more than 20,000 empanelled hospitals in Tier-2 and Tier-3 cities for poor people as well as spreading out Jan Aushadhi Kendra to all districts of the country. 

These medicine centers will offer about 2000 generic medicines and around 300 surgicals by 2024. 

The Ayushman Bharat scheme will include the campaign “TB Harega Desh Jeetega” to attain the goal of zero cases of Tuberculosis by the end of 2025.  Also, for better health, it is proposed to double the milk processing by 2025.

What comes in the education sector’s hands?    

education sector budget

Ms. Sitharaman proposed to establish the Indian Institute of Heritage and Conservation. 

In addition, 150 higher educational institutes, by 2021, will start degree and diploma courses which will include apprenticeship as the mandatory system. 

The budget has the provision of Rs. 99,300 Crore for institutional set-up and Rs 3000 Crore for skill development for the FY 2020-21. 

Special bridge courses are proposed to be designed by the Ministries of Health, Skill development. 

An Ind-SAT is proposed to be organized in African and Asian countries under “Study in India” programme of the central govt. 

Furthermore, a National Forensic Science University, as well as a National Police University, is proposed to be initiated in the field of forensic science and policing science respectively. 

These are some measures that will be taken to strengthen the education sector and make education employment oriented.

Social Welfare of Women and Children

women welfare budget 2020 india

Emphasizing the theme of a caring society, Ms. Sitharaman said that nutrition-related programme will be the key responsibility of the government for the financial year 2020-21 and for so Rs. 35,600 crore is proposed in the budget. 

Moreover, specific programmes for women empowerment and welfare also took place in the budget speech and the FM said that Rs. 28,600 crore has been allotted for such programmes.

The budget also comprises Rs 85000 crore for the well being of Scheduled castes and other backward classes. 

In addition, Scheduled Tribes too got Rs. 53,700 crore in 2020-21 for their development. 

The Sitharaman is mindful of the welfare of Divyang and Senior Citizens.  Accordingly, Rs. 9,500 crore is being allocated for the cause.

Culture and Tourism sector

tourism budget 2020 india

Harping on Culture and Tourism, a deemed university for an Indian Institute of Heritage and conservation is proposed to be established under the Ministry of Culture. 

Apart from this, 5 archeological sites are in the proposal for development as iconic sites along with on-site museums.  These sites include Hastinapur (Uttar Pradesh), Rakhigarhi (Haryana), Dholavira (Gujarat), Shivsagar (Assam) and Adichanallur (Tamil Nadu).       

Environment and Climate Change

environment and climate budget 2020

Dwelling on the issues of environment and climate change, the Indian states that are moving towards creating and implementing plans for ensuring a cleaner environment in cities above one million will be encouraged.

For this purpose the allocation in the budget is Rs. 4,400 crore for 2020-21.  Swachh Bharat Mission and Jal Jeevan Mission are also in the list of the public welfare schemes.

Governance

The Finance Minister announced to set up a National Recruitment Agency (NRA). 

It will be a professional, independent specialist organisation to conduct computer-based online test, common eligibility test for the recruitment of all non-gazetted posts.  

This will lead to a clean, corruption-free, good in intent and policy-driven governance.

Allocation of fund for Economic Development

The finance minister said that Rs. 27,300 crore is allocated for economic development including the promotion of industry and commerce.  Also, the setting up of Investment Clearance Cell is included in the plan for an end to end facilitation. 

PPP model is to be adopted for the development of five new smart cities in different states.  Electronic equipment manufacturers will be encouraged.  A new scheme called NIRVIK is to be launched for the support of exporters. 

As Government e-Marketplace (GeM) is working well as a single platform for procurement of goods, works and services so it is proposed in the union budget 2020 India that by adding new vendors, the turnover of GeM is to be taken to Rs 3 Lakh crore.

A boom in Infrastructure in Budget 2020

infrastructure budget 2020 india

The FM announces 100 more airports to support Udaan Scheme for cheaper traveling by air.  PPP model is to be accepted for the operation of 150 passenger trains.  With this Indian Railways is aiming to get electrification of 27000 Km of tracks.  The development of highways will be accelerated.

Delhi-Mumbai expressway will be one of those highways to be completed by 2023.  Chennai-Bengaluru Expressway is also proposed to be started.  A huge amount of Rs 1.70 Lakh crore is proposed to be provided for the development of transport infrastructure in 2020-21. 

The power and renewable energy sector also get a budget allocation of Rs. 22,000 crore in the year.  These measures will definitely boost the Indian infrastructure.         

Budget 2020 on banks and other financial institutions

The finance minister in her 120 minutes speech said that the Government of India during the last few years has infused about Rs 3,50,000 crore in Public Sector Banks as capital for growth purposes. 

The Government has already allowed the consolidation of 10 Public Sector banks into four.  Also, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has also got permission from the government to increase the deposit insurance coverage from Rs one lakh to Rs five lakh to the individual depositor.

The limit for debt recovery for Non-Banking Financial Companies (NBFCs)  to be reduced from Rs. 500 crore to 100 Crores to asset size or in the context of loan size it is reduced from Rs 1 crore to Rs 50 Lakh.  A universal pension scheme is to be infused for easy mobility in jobs.  Budget 2020 India will throw a positive impact on banks.    

Simplification of Taxation in Budget 2020

Keeping in view the simplification of tax, the FM on February 1, 2020, in parliament has proposed a simplified income tax regime in the union Budget 2020. 

In the new tax system, the rates of income tax will be reduced for individual taxpayers if the taxpayers opt to forgo 70 tax exemptions.  Also, the tax system has been simplified for companies, various scale industries or enterprises.  An individual can opt for the new tax regime or the existing taxation system.

Amendment in the definition of residential status, in reference to tax calculation, is determined on new rules under Budget 2020 India. According to this, a citizen of India would be taxable in any financial year if the said individual is not liable for tax in abroad.  The residential status would be counted as:

  • The staying period in India by an individual in a Financial Year is 182 days or more.
  • The staying period in India by an individual in the current Financial Year is 120 days or more and during the preceding four financial years, it should be 365 days or more.

Other conditions for determining residential status of individuals for other categories would be the same.  Moreover, an ordinary resident in India will be taxed on their income from worldwide resources while non-ordinary residents (who have not resided in India for 7 or more out of 10 preceding years will be taxed on the income received from India. 

The new tax regime will be optional; a person can choose the old tax system if he opts for deductions or the new tax system on lower slab rates if he forgoes deductions.  In both the cases, a person whose taxable earning is upto Rs. 5 lakh will be exempted from the Income Tax.

The proposed changes in existing tax slabs can be understood by the following table:

Taxable Income Slab (Rs.) Existing Tax Rates New Tax Rates
0-2,50,000 0% 0%
2,50,000-5,00,000 5% 5%
5,00,000-7,50,000 20% 10%
7,50,000-10,00,000 20% 15%
10,00,000-12,50,000 30% 20%
12,50,000-15,00,000 30% 25%
Above 15,00,000 30% 30%

Surcharge and Education Cess shall remain unchanged.

Certain contributions by the employer to be taxed in the hands of employees

The contributions made by an employer to a recognized account of an employee such as recognized provident fund, approved superannuation fund, notified pension scheme, if exceeds Rs 7.5 lakhs, would be taxed when reaches to employee’s hands.

What’s there for Start-ups in Budget 2020 India?

ESOP(Employee Stock Option Plan) is highly in trend among startups to attract and retain extremely talented employees.  At present, ESOP is taxable.  In order to catalyze the startups, the Sitharaman has proposed to defer the tax payment for five years of an employee joins an ESOP or till they sell their shares or when they leave the startup company, whichever is earliest. 

Good news for Electricity Generation Companies

In order to attract manufacturers to deal in the field of power generation, new provisions are introduced in the Budget 2020 India to provide concessional corporate tax rates @ 15% so that new investors may engage in the generation of electricity.

Tax Exemption to Charity Institutions

Charity institutions are fully exempted from tax calculation of their income.  In addition, the donor of these institutions will get deductions in computing the taxable income.  To claim the tax exemption, the charity institution must be registered with the Income Tax Department.  A URN (Unique Registration Number will be given to all existing and new charity institutions as per the reports. 

What comes in Medium, Small and Micro Enterprises fate?

The shopkeepers, small traders, and retailers who comprise the MSME sector, are given relief by raising the turnover threshold for audit by five times. Earlier it was Rs. 1 crore but in the new tax regime, it would reach Rs 5 crore only the condition is, the relief will be given to those enterprises that do not carry out more than 5% of total business transactions in cash.

Affordable Housing Scheme continues

union budget 2020 india housing

In the 2019 Budget, the government has given an additional deduction of up to Rs 1.5 lakh for interest paid on home loans subject to terms and conditions.  The scheme will be continued in the Budget 2020 till the end of March 2021.

Indirect Taxes

When the point of indirect tax comes, GST takes first place in the discussion.  From April 1, 2020, a simplified GST return system shall be implemented.  New return filing options like nil return can be filed by SMS, pre-filing of return and overall simplification of GST is the agenda of the Budget 2020 India.

When it comes to the custom side, India has taken a high jump in the Trading Across Border parameter in connection with the Ease of Doing Business rankings which is given by the World Bank to countries of the world.  We have achieved 68th rank, earlier it was 146th.  According to PIB, National Calamity Contingent Duty (NCCD) on Tobacco Products including Cigarettes is proposed to be increased while NCCD on Bidis will remain as it is. 

Is Budget 2020 India good or bad?

There was no point included in the Budget 2020 India on the recapitalization of banks and this will hold investments and consumptions in the economy.  To attract Mega Manufacturing Plants, the announcement of a competitive regime is in the budget. 

If we talk about the previous budget, the PM Kisaan Samman Nidhi was a major step that was taken to increase the income of the farmers. Under this scheme, the announcement of giving Rs 6000 annually to the farmers was done.  It would be good to adopt the land-holding model of Telangana for more benefits to farmers since there is no accurate data available about the actual land of every farmer.

For efficient tax administration, administrative reforms are placed in the budget to resolve the disputes.  A new scheme named “Vivad se Vishwas” has been proposed.  Under the scheme, an individual will have to pay only the amount of the disputed taxes provided the individual pays the taxes before 31 March 2020.  The taxpayer would get a complete waiver of penalty and interest on tax.  For the positives and negatives of the scheme, we have to wait for the time period. 

To ease the allotment process of PAN (Permanent Account Number), the government has introduced an Aadhaar based system to instantly allot PAN online.  This process will not require filling up of detailed form.  Surely, this will help the individual to get a PAN without any hassle. 

Budget 2020 Conclusion

Though the Finance Minister has kept the concerns of the middle class in the budget, it lacks positivity in few places.  Everything comes with pros and cons and so is with the Budget 2020 India.  Though the new tax regime will be applicable from 1 April 2020, the taxpayers have options to keep on going with the old one if they like to.  For more updates on the Budget 2020, we will have to wait for its impact on the economy of India. 

Source: Union Budget Gov Site, Wikipedia

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