An overview of Union Budget 2020

An overview of Union Budget 2020

Introduction

1. We are now the 5th largest economy of the world.

Agriculture, Irrigation and Rural Development

2. Scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid would be operationalized.

3. Government will provide Viability Gap Funding for setting up efficient warehouses at the block/taluk level.

4. Indian Railways will set up a ‘Kisan Rail’ – through PPP arrangements to build a seamless national cold supply chain for perishables, inclusive of milk, meat and fish

5. Krishi Udaan – will be launched by the Ministry of Civil Aviation on international and national routes to improve value realisation especially in North-East and tribal districts.

6. ‘One product one district” – Better marketing and export proposal by govt. for supporting States which adopts a cluster basis focusing one product one district

7. Financing on Negotiable Warehousing Receipts (e-NWR) has crossed more than`6000crore. This will be integrated with e-NAM.

8. Government will involve youth in fishery extension through 3477 SagarMitras and 500 Fish Farmer Producer Organisations.

Wellness, Water and Sanitation

9. Proposal to set up Viability Gap funding window for setting up hospitals in the PPP mode. In the 1st phase, those Aspirational Districts will be covered, where presently there are no Ayushman empanelled hospitals. This would also provide large scale employment opportunities to youth. Proceeds from taxes on medical devices would be used to support this vital health infrastructure

Education and Skill

10. New Education Policy will be announced soon.

11. About 150 higher educational institutions will start apprenticeship embedded degree/diploma courses by March 2021.

12. Government proposes to start a programme whereby urban local bodies across the country would provide internship opportunities to fresh engineers for a period up to 1 year

13. Degree level full-fledged online education programme for the students of deprived section of the society as well as those who do not have access to higher education by institutions who are ranked within top 100 in the National Institutional Ranking framework

14. Under ‘Study in India’ programme, Ind-SAT is proposed to be held in Asian and African countries. It shall be used for benchmarking foreign candidates who receive scholarships for studying in Indian higher education centres.

15. Proposal of National Police University and a National Forensic Science University – in the domain of policing science, forensic science, cyber-forensics etc.

16. National Board of Examination imparts PG medical qualifications; Diploma and fellow of National Board (DNB/FNB). The Government will, therefore encourage large hospitals with sufficient capacity to offer resident doctors DNB/FNB courses under the National Board of Examinations.

Industry, Commerce and Investment

17. Proposal to set up an Investment Clearance Cell that will provide ‘end to end’ facilitation and support, including pre-investment advisory, information related to land banks and facilitate clearances at Centre and State level.

18. Proposal to develop 5 new smart cities

19. Proposal of a scheme focussed on encouraging manufacture of mobile phones, electronic equipment and semi-conductor packaging. Details would be announced later.. With suitable modifications, this scheme can be adapted for manufacture of medical devices too

20. Proposal for National Technical Textiles Mission with a 4-year implementation period from 2020-21 to 2023-24 to position India as a global leader in Technical Textiles

21. NIRVIK – To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched, which provides for higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim settlements

22. Scheme for Reversion of duties and taxes on exported products – It is proposed to digitally refund to exporters, duties and taxes levied at the Central, State and local levels, such as electricity duties and VAT on fuel used for transportation, which are not getting exempted or refunded under any other existing mechanism. This Scheme will be launched this year.

Infrastructure

23. Proposal to set up a project preparation facility for infrastructure projects

a. This programme would actively involve young engineers, management graduates and economists from our Universities.

b. It is also proposed to direct all infrastructure agencies of the government to involve youth-power in start-ups. They will help in rolling out value added services in quality public infrastructure for citizens.

24. National Logistics Policy will be released soon- ; it will clarify the roles of the Union Government, State Governments and key regulators. It will create a single window e-logistics market and focus on generation of employment, skills and making MSMEs competitive.

25. Proposal for Setting up a large solar power capacity alongside the rail tracks, on the land owned by the railways. A proposal is under consideration.

26. Government would consider corporatizing at least 1 major port and subsequently its listing on the stock exchanges.

27. 100 more airports would be developed by 2024 to support Udaan scheme.

28. Prepaid smart meters – To promote ‘smart’ metering, all the States and Union Territories are urged to replace conventional energy meters by prepaid smart meters in the next 3 years. Also, this would give consumers the freedom to choose the supplier and rate as per their requirements.

New Economy

29. A Centre would be established that would work on the complexity and innovation in the field of Intellectual Property.

30. Government proposes to provide early life funding, including a seed fund to support ideation and development of early stage Start-ups.

Women & Child, Social Welfare

31. Financial support for wider acceptance of technologies used for cleaning of sewer systems or septic tanks will be provided. Suitable technologies for such tasks have been identified by the Ministry of Housing and Urban Affairs. The Ministry is working with urban local bodies for the adoption of these technologies.

32. Proposal of a Budget provision of about 85,000 crore for 2020-21 towards the welfare of Scheduled Castes, Other Backward classes and about 53,700 crore 2020-21 towards the welfare of scheduled tribes.

Culture & Tourism

33. Proposal to establish an Indian Institute of Heritage and Conservation under Ministry of Culture; it shall have the status of a deemed University to start with.

34. 5 archaeological sites would be developed as iconic sites with onsite Museums. They are: Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh), Shivsagar (Assam), Dholavira (Gujarat) and Adichanallur (Tamil Nadu).

35. In the historic Old Mint building Kolkata, a museum on Numismatics and Trade will also be located.

36. Government shall also support setting up of a Tribal Museum in Ranchi (Jharkhand).

37. A maritime museum would be set up at Lothal- the Harrapan age maritime site near Ahmedabad, by

Ministry of Shipping.

38. India has moved up from rank 65 in 2014 to 34 in 2019 in the Travel & Tourism Competitive Index (World Economic Forum).

Environment & Climate Change

39. Proposal for utilities running thermal power plants which are old and whose carbon emission levels are high are advised to close them, if their emission is above the pre-set norms. The land so vacated can be put to alternative use.

Governance

40. Proposal to set up a National Recruitment Agency (NRA): At present, candidates have to appear for multiple examinations conducted by multiple agencies at different points of time, for similar posts. This places enormous burden on time, effort and cost of young people. To mitigate their hardship faced, it is proposed to set up 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 be set up.

41. Proposal to evolve a robust mechanism for appointment including direct recruitment in various Tribunals and specialised bodies established for speedy disposal of commercial and other disputes. Such mechanism will attract best talents and professional experts.

42. The proposed new National Policy on Official Statistics would use latest technology including AI. It would lay down a road-map towards modernised data collection, integrated information portal and timely dissemination of information.

43. India will host G 20 presidency in the year 2022- the year of 75th anniversary of independence of Indian Nation.

Financial Sector

44. Govt. have approved Consolidation of 10 banks into 4.

45. Deposit Insurance and Credit Guarantee Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a depositor, which is now Rs. 1,00,000 to Rs. 5,00,000 per depositor.

46. 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.

47. Proposal to sell the balance holding of Government of India IDBI Bank to private, retail and institutional investors through the stock exchange.

48. Necessary amendments would be carried out in Pension Fund Regulatory Development Authority of India Act that will also facilitate separation of NPS trust for government employees from PFRDAI. This would also enable establishment of a Pension Trust by the employees other than Government. This will motivate citizens to plan for their old age.

49. Proposal to make necessary amendments to the Factor Regulation Act 2011. This will enable NBFCs to extend invoice financing to the MSMEs through TReDS, thereby enhancing their economic and financial sustainability.

50. Proposal to introduce a scheme to provide subordinate debt for entrepreneurs of MSMEs – This subordinate debt to be provided by banks would count as quasi-equity and 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.

51. Proposal to extend handholding support – for technology upgradations, R&D, business strategy etc – For selected sectors such as pharmaceuticals, auto components and others, we propose 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.

a. Both these institutions would contribute Rs. 50 crore each. This Rs. 100 crore would be achieved towards equity and technical assistance.
b. Debt funding ofRs. 900 crore from banks would be made available.

Financial Markets

52. The limit for FPI in corporate bonds, currently at 9% of outstanding stock, will be increased to 15% of the outstanding stock of corporate bonds.

Infrastructure Financing

53. GIFT City would set up an International Bullion exchange(s) in GIFT-IFSC as an additional option for trade by global market participants. This will enable India to enhance its position worldwide, create jobs in India and will lead to better price discovery of gold.

Disinvestment
54. Government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO).

Direct Tax
55. Our corporate tax rates are now amongst the lowest in the world.

Personal Income Tax and simplification of taxation

56. 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.

Income upto Rs. 2,50,000 – Nil
Income between Rs. 2,50,000 to 5,00,000 – 5%
Income between Rs. 5,00,000 to 7,50,000 – 10%
Income between Rs. 7,50,000 to 10,00,000 – 15%
Income between Rs. 10,00,000 to 12,50,000 – 20%
Income between Rs. 12,50,000 to 15,00,000 – 25%
Income above Rs. 15,00,000 – 30%

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

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

Dividend Distribution Tax

57. Proposal to remove the 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.

58. Further, in order to remove the cascading effect, deduction is also allowed for the dividend received by holding company from its subsidiary.

Concessional tax rate for Electricity generation companies

59. In order to give boost to the manufacturing sector, 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. The concessional corporate tax rate of 15% is also extended to new domestic companies engaged in the generation of electricity.

Tax concession for foreign investments

60. In order to incentivise the investment by the Sovereign Wealth Fund of foreign governments in the priority sectors including the wholly owned subsidiary of Abu Dhabi Investment Authority (ADIA), 100% tax exemption is allowed for interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March, 2024 and with a minimum lock-in period of 3 years.

61. In order to make available foreign funds at a lower cost, the period of concessional withholding rate of 5% under section 194LC for interest payment to non-residents in respect of moneys borrowed and bonds issued up is extended to 30th June, 2023.

62. Extension of period upto 30th June, 2023 for lower rate of withholding of 5% under section 194LD for interest payment to Foreign Portfolio Investors (FPIs) and Qualified Foreign Investors (QFIs) in respect of bonds issued by Indian companies and government securities.

63. Extension of concessional rate of withholding of 5% under section 194LD to the interest payment made on the Municipal Bonds.

64. In order to incentivise listing of bonds at IFSC exchange, the withholding rate is reduced from 5% to 4% on interest payment on the bonds listed on its exchange.

Start-ups

65. In order to give a boost to the start-up ecosystem, the burden of taxation of ESOP on the employees has been deferred by 5 years or till they leave the company or when they sell their shares, whichever is earliest.

66. An eligible Start-up having turnover up to 25 crores is allowed deduction of 100% of its the profits for 3 consecutive assessment years out of 7 years if the total turnover does not exceed 25 crore rupees. In order to extend this benefit to larger start-ups, the turnover limit is increased from existing Rs. 25 crore to Rs. 100 crores. In the initial years, a start-up may not have adequate profit to avail this deduction; the period of eligibility for claim of deduction is extended from the existing 7 years to 10 years.

Concessional tax rate for Co-operatives

67. Option provided to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess, if they do not avail certain specified deduction/exemption. These co-operative societies are also exempted 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 (MSME)

68. Limit of Auditing of Books of Account increase from Rs. 1 crore to Rs. 5 crore to reduce the compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector. The increased limit shall apply only to those businesses which carry out less than 5% of their business transactions in cash.

Affordable housing

69. Extension in date of sanctioning loan for availing additional deduction of Rs. 1,50,000 by 31st March, 2021: Time period of sanctioning affordable housing loan has been extended to 31st March, 2021 to ensure that more persons will avail this benefit of additional deduction of up to Rs. 1,50,000 for interest paid on loans taken for purchase of an affordable house by one more year and to further incentivise the affordable housing,

70. Tax holiday on the profits earned by developers of affordable housing project extended upto 31st March, 2021: In order to boost the supply of affordable houses in the country, a tax holiday is provided on the profits earned by developers of affordable housing project approved by 31st March, 2020. In order to promote the affordable housing projects, the date of approval of affordable housing projects for availing this tax holiday is extended by one more year.

Concession to real estate transactions

71. Comparing consideration value with circle rate: Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in real estate, if the consideration value is less than circle rate by more than 5%, the difference is counted as income both in the hands of the purchaser and seller. In order to minimize hardship in real estate transaction and provide relief to the sector, the limit of 5% has been increased to 10%.

Charity institutions

72. The income of these institutions is fully exempt from taxation. Further, in order to claim the tax exemption, the charity institutions have to be registered with the Income Tax Department.

73. The process of registration will now be completely electronic under which a unique registration number (URN) shall be issued to all new and existing charity institutions. Further, to facilitate the registration of the new charity institution which is yet to start their charitable activities, provisional registration for 3 years is allowed.

74. Donation made to these institutions is also allowed as deduction in computing the taxable income of the donor.

Faceless appeals

75. Amendment in the Income Tax Act so as to enable Faceless appeal on the lines of Faceless assessment.

No Dispute but Trust Scheme – ‘Vivad Se Vishwas’Scheme

76. 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 avail this scheme after 31st March, 2020 will have to pay some additional amount. The scheme will remain open till 30th June, 2020.

77. Taxpayers in whose cases appeals are pending at any level can benefit from this scheme.

Taxpayer’s Charter

78. Amendment in the provisions of the Income Tax Act to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter. The details of the contents of the charter shall be notified soon.

Instant PAN through Aadhaar

79. In order to further ease the process of allotment of PAN, a system will be launched soon 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

80. GST: A simplified return shall be implemented from the 1st April, 2020. This is under pilot run. 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.

81. Electronic invoice is another innovation wherein critical information shall be captured electronically in a centralized system. It will be implemented in a phased manner starting from this month itself on optional basis. It will facilitate compliance and return filing.

82. Aadhaar based verification of taxpayers is being introduced. This will help in weeding out dummy or non-existent units.

83. Dynamic QR-code is proposed for consumer invoices. GST parameters will be captured when payment for purchases is made through the QR-code.

84 A system of cash reward is envisaged to incentivise customers to seek invoice.

85. Deep data analytics and AI tools are being used for crackdown on GST input tax credit, refund, and other frauds and to identify all those who are trying to game the system.

86. Invoice and input tax credit matching is being done wherein returns having mismatch more than 10 % or above a threshold are identified and pursued.

87. Reduction in basic customs duty on imports of news print and light-weight coated paper from 10% to 5%.

88. Anti-dumping duty on PTA is being abolished.

89. Increase in Excise duty, by way of National Calamity Contingent Duty on Cigarettes and other tobacco products. However, no change is being made in the duty rates of bidis.

90. Customs duty is being raised on items like footwear and furniture.

91. Introduction of nominal health cess, by way of a duty of customs, on the imports of medical equipment keeping in view that these goods are now being made significantly in India. The proceed from this cess shall be used for creating infrastructure for health services in the aspirational districts.

References

1. Read key to budget documents at https://www.indiabudget.gov.in/doc/Key_to_Budget_Document_2020.pdf
2. Read budget highlight key features at: https://www.indiabudget.gov.in/doc/bh1.pdf
3. Read the full budget speech at: https://www.indiabudget.gov.in/doc/Budget_Speech.pdf

 

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