Demystifying Budget 2020 - 2021

The economic slowdown in India has been quite evident since the end of 2018. Finance Minister Nirmala Sitharam presented the Union Budget 2020-2021 in the Lok Sabha. Government has taken certain measures in this budget to address the slowdown. Budget 2020-21 addresses every sector of the economy to boost the consumption, get money for investments, creation of assets and private investments being at pace. The government has taken the path of fiscal consolidation in the budget of 2020-21. As claimed by her this Budget will boost the income and purchasing power of the people.

1.      Tax:

Beginning with the one word the Finance Minister took 132 times announcing the budget- Tax.

·   The proposals say a citizen of India who would be deemed to be a resident of India in any Financial Year is not liable to pay tax in any other country.

·  The present budget consists of more than 100 tax exemptions. Over 70 deductions have been removed. Most important ones are Deductions under section 80C, 80D. The new tax regime is optional giving individual to still claim exemptions/deductions under old tax regime. 

· Additional deduction Surcharge and educations would be levied as per the existing rates.

·  Companies are no longer required to the Dividend Distribution Tax (DDT). Abolition of this tax can boost market sentiment and make India equities more attractive. Analysts says this removal of DDT will take no big toll on revenues the losses in revenue gets offset by the tax the shareholders pay.

·  Government to sell part of stake in LIC via Public offering. However, it is not an easy task as valuation of LIC IPO is going to be a big hurdle. Such disinvestment and direct involvement of market may limit government’s hand in bringing in further equity investments into PSU’s needing money. This also bring a big question “Who will buy? “

· Startups were hoping of removal of double taxation and wanted ESOP to be taxed only at the time of sale which was not changed in the new budget. This leads to a cash flow problem for the employees who do not want to sell their shares immediately.

·        To end tax harassment new taxpayer charter to be instituted. Tax harassment won’t be tolerated says FM.

2. National Textile Mission:

Texting and Garmenting sector of India is one of the most important and essential sectors for employment generation. National Textile mission with an estimated outlay of Rs. 1480 has been proposed which will help in economic reveal of the textile industry.

3. Agriculture:

Measures have been taken to double the income of farmers. Rs. 2.83 lakh crore has been allocated for the development of the agriculture sector of India. Output of Agriculture products such as cotton helps in boosting the agriculture economy and it has been tried to help India retain the existing position as the World’s largest cotton producer.

1. A budget allocation of Rs. 2.83 lakhs crore for the sector comprising agriculture and allied activities.

2. Provide 20 Lakh farmers to set up standalone solar pumps. Help another 15 Lakh farmers to solarize their power goal.

3.  Agri credit availability set at 15 lakh crores for 2020-21.

4. Health and Sanitization:

1. 12,300 Swachh Bharat missions this year.

2.  Allocation of Rs. 60000 crores for the health sector.

3.  Proposals to set up hospitals in Tier II and Tier III cities with the private sector using PPP.

5.  Education:

Education is the key component of shaping the future workforce. The new budget focuses on adoption of education policy. The draft of new education policy prepared by a team of nine experts focuses on funding research within the education system of India.

1.  Rs.99,300 crore for education sector in 2021 and about Rs.3,000 crore for skill development.

2. Underprivileged students would be given degree fledged online courses by institutions top ranked by NIRF.

3. Budget also allocated Rs. 125 crores for teachers training and adult education.

6.  Infrastructure:

The new budget is a thrust on creating better infrastructure. Allocation of Rs. 1.7 lakhs have been made for the development of transport infrastructure of India. The new budget focus on strategic highways will help in creating more employment.

1.  Proposal to provide Rs. 1.7 Lakh crore for transport infrastructure in 2021.

2. Chennai Bengaluru expressway and Bengaluru suburban rail project to be started

Aim to achieve electrification of 17000 km of lines.