The Finance Minister of India has announced the Budget 2020 on 1st February 2020. The budget incorporates three themes, namely striving for an Aspirational India, which ensures access to improved standards of living, ensuring economic development for all citizens, and establishing a caring society that practices the values of humanity and compassion. In addition, the budget also covers the Finance Segment. This article provides an overview of the budget.
Aspirational India – Component One of Budget 2020
The segment Aspirational India is further classified. The classification is explained below.
Agriculture, Irritation and Rural Development
This program incorporates the following sixteen-point action plan:
- Encouragement will be provided to State Governments that are engaged in implementing the model agricultural laws issued by the Central Government.
- One hundred water-stressed districts will be provided with comprehensive relief measures.
- Farmers will be provided assistance to set up solar power generation plants on their own, without requiring assistance from technical experts.
- The use of organic fertilizers will be encouraged. The Central Government intends to increasingly avoid payment of incentives for the usage of chemical fertilizers.
- NABARD will undertake to map and geo-tag warehousing and other facilities that enable the storage of agricultural produce. The Government intends to introduce Viability Gap Funding (VGF) to help businessmen who set up warehouses and cold storage facilities.
- The Government intends to provide financial assistance to farmers to enhance the storage capacity of seeds in villages.
- Kisan trains will be introduced to benefit farmers. The trains will have refrigerated coaches for the transportation of meat, milk, and fish.
- A new scheme known as Krishi Udaan will be launched for benefitting farmers. Under the scheme, farmers will have the facility to transport their products using the aviation mode.
- Reform measures will be launched to improve the horticulture sector. The measures will concentrate on the concept of ‘one product one district’.
- The Government will undertake measures to expand integrated farming systems in rainfed areas. Measures will also be undertaken to encourage the use of Zero Budget Natural Farming methods.
- The Government will step up the facilities available on Negotiable Warehousing Receipts. The move will help small entrepreneurs to make use of an additional source of short-term finance.
- The NABARD re-financing scheme will be expanded to include a greater number of NBFCs and co-operative societies.
- The Government will undertake measures to eliminate diseases in cattle and livestock. The existing coverage of artificial insemination will be enhanced to seventy percent.
- Marine fishery resources conservation, the involvement of youth in fish processing employment opportunities, and the growing of algae to boost fish population will be undertaken.
Wellness, Water and Sanitation
- The Government will provide VGF for the creation of health infrastructure in Tier Two and Tier Three cities. The hospitals will be constructed on a Public-Private Partnership (PPP) model.
- The Government proposes to intensify the eradication drive launched against tuberculosis. The objective of the drive is to eradicate tuberculosis by 2025.
- The Government will focus on solid waste collection, source segregation of waste, and environment-friendly processing measures for handling waste.
- The existing Jal Jeevan Mission will now be directed towards focusing on recharging existing sources of groundwater. Under the scheme, the Government will also focus on the promotion of water harvesting and desalination.
Education and Skills
- The Government proposes to launch a New Education Policy which will endow students with job skills.
- Steps will be taken to procure finance, including FDI, to ensure a better flow of funds to the education sector. Hence, the quality of education across the country is sought to be improved.
- Higher education institutions across the country will be given permission to provide internship opportunities to fresh engineering graduates and general stream graduates. The period of the internship would be one year.
- A full-fledged online education program will be initiated for providing graduation. Only institutions falling within the first hundred ranks of the National Institutional Ranking framework are eligible to award degrees under the program.
- Ind-SAT will be introduced for students coming to India from African and Asian countries. The examination will be used for benchmarking foreign candidates who apply for scholarships for studying in Indian higher education centers.
- The Government proposes the establishment of a National Police University and a National Forensic Science University.
- Medical colleges are proposed to be constructed adjoining hospitals throughout the country, to meet the growing demand for doctors. The Government will provide the facility of VGF for the construction of medical colleges adjoining hospitals. Also, bridge courses will be introduced for care-givers and paramedical staff who are going to work abroad.
Economic Development – Component Two of Budget 2020
The segment Economic Development is further classified. The classification is explained below.
Industry and Commerce
- The Government proposes to set up an investment clearance cell which will provide end to end facilitation for investors.
- Five new smart cities will be set up using the PPP model.
- New schemes are proposed to be launched for the manufacture of electronic and medical devices.
- A National Technical Textiles Mission is proposed to be implemented before 2024.
- Quality standard control orders will be issued for establishing rigorous standards of quality in the manufacturing industry.
- The NIRVIK scheme is proposed to be launched for providing higher insurance coverage to small exporters. Also, a scheme for the reversion of duties and taxes paid on exports will be launched during 2020-21.
- A proposal is introduced for involving youngsters in infrastructure projects. The proposed program will make infrastructure-focused skill development opportunities available for graduates.
- The Government has formulated a proposal to introduce a National Logistics Policy. The purpose of the policy is to create a single window e-logistics market.
- The development of highways will be continued at an active pace. FASTag mechanism will be introduced for over 14000 kilometers (KM) is proposed to be undertaken.
- The Government proposes to achieve electrification of over 27000 KM of railways. Additional Tejas trains will be introduced for connecting tourist destinations across the country.
- Technological up-gradation of sea-ports will be undertaken. Corporatization and listing of one major seaport are under consideration on an experimental basis.
- Conventional electricity meters will be replaced by smart meters. The meters will be operated on the basis of a prepaid smart card.
- The scope of implementation of the Open Acreage Licensing Policy and City Gas Distribution Rights programs will be expanded.
- Measures will be implemented to harness new technologies based on artificial intelligence, 3D printing, DNA data storage, and so on. Data-center parks are proposed to be constructed throughout the country. Public institutions at the gram panchayat level, including government schools, post offices, and police stations, will have FTTH connections.
- Intellectual property rights protection programs will be introduced for the benefit of start-ups, including Knowledge Transition Clusters. The National Mission on Quantum Technologies and Applications is proposed to be introduced over the next five years.
Caring Society – Component Three of Budget 2020
The segment Caring Society is further classified. The classification is explained below.
- The Government intends to strive to eradicate the practice of manual scavenging.
- The Indian Institute of Heritage and Conservation is proposed to be instituted. The institute will have the status of a deemed university. A museum on numismatics and trade will be set up, and existing museum facilities across the facility are curated.
- A Coalition for Disaster Resilient Infrastructure will be created to focus on disaster-resilient infrastructure.
- Thermal plants having high carbon emission levels will be closed in a phased manner.
- The Government proposed that Criminal liabilities for civil acts will be removed from the statute books.
- A National Recruitment Agency will be instituted. Using the services of the agency, candidates can appear for multiple career opportunities with the government at the same time.
- The National Policy on Official Statistics will be supplied with inputs to meet the challenges imposed by India’s increasingly complex economy.
Finance Sector – Component Four of Budget 2020
The finance sector measures the budget 2020 include MSMEs, General Measures, Direct Tax, and Indirect Taxes. Each of these is explained below.
- The required amendments will be made to the Factor Regulation Act 2011 to enable NBFCs to extend invoice financing to the MSMEs through TReDS.
- The Government will bring about a scheme to provide subordinated debt for entrepreneurs of MSMEs. The subordinate debt shall be disbursed through banks and would be counted as quasi-equity. The debt shall be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).
- The last date for using the MSME debt restructuring window is ascertained at 31.03.2021. Hence, the Government has consented to provide an extension of one year. The relaxation will come into effect if the RBI consents to it.
- An app-based invoice financing loan product will be launched for the exclusive benefit of MSMEs.
- To provide funding to MSMEs, a scheme to the tune of one thousand crore rupees will be anchored by EXIM Bank together with SIDBI. The scheme will be available for selected sectors such as pharmaceuticals, auto-components, and others.
- DICGC is allowed to cover five lakh rupees for every deductor. Earlier, the limit was one lakh rupees. Further, the debt recovery limit for NBFCs under the SARFAESI Act 2002 is to be reduced to a hundred crore rupees for asset category and fifty lakh rupees for the loan category. Also, IDBI, which is at present a partially government-controlled entity, will be fully privatized.
- Certain notified categories of Government securities would be opened fully for non-resident investors.
- The Government has estimated the nominal growth of GDP for the year 2020-21 at 10%.
- The Government has estimated a fiscal deficit of 3.8% in RE 2019-20 and 3.5% for BE 2020-21.
Direct Tax (Income Tax)
- The Government has introduced a new scheme for individual taxpayers. If the taxpayer chooses to forgo the deductions available under Chapter VI-A of the Income Tax Act, a concessional rate of tax will apply. The revised tax rate for individuals is as follows:
|Taxable Income in Rs.||Existing Rate||Concessional Rate|
|0 – 2.5 lakh||Nil||Nil|
|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%|
|More than 15 lakh||30%||30%|
- The above concession is optional.
- The Government proposes to remove seventy deductions or exemptions from the Act.
- The dividend distribution tax is removed. The shareholder has to pay tax on the dividend.
- Tax payment on ESOP is deferred to five years or till the time of leaving the company or at the time of sale of the shares, whichever is the earliest.
- The facility of Instant PAN generation is introduced. The facility can be availed with all new taxpayers having an Aadhar card.
MSMEs and Start-ups
- Newly incorporated companies will pay tax at 15%. The company should start manufacturing before 31.03.2023.
- The rate of 15% will also apply to electricity distribution companies.
- At present, start-ups having turnover up to 25 crore rupees is permitted a deduction of 100% of its profits for three consecutive assessment years out of seven years. The turnover limit is now increased to 100 crore rupees. The period of eligibility for the claim of deductions is raised to 10 years.
- The tax audit limit is raised from one crore rupees to five crore rupees. The increased limit applies only to individuals having less than 5% cash transactions.
100% exemption is available for interest, dividends, and capital gains income of foreign investors. The investment should have been made in infrastructure and has a lock-in period of three years.
Under Sections 194LC and 194LD, a concessional rate of 5% is introduced.
Co-operative societies have the option to be taxed at 22% plus 10% surcharge and 4% cess with no exemptions or deductions.
For capital gains, business profits, and other sources in respect of transactions in real estate, if the consideration value should not be less than circle rate by more than 5 percent. The limit is now fixed at 10%.
Vivad se Vishwas Scheme
The Government has proposed the ‘Vivad Se Vishwas’ scheme under the budget 2020. Under the scheme, a taxpayer is required to pay only the amount of the disputed taxes. The taxpayer will get a complete waiver of interest and penalty provided payment is made by 31st March 2020. Individuals availing of this scheme after 31st March 2020 will have to pay marginal interest. The scheme shall remain open till 30th June 2020.
Dynamic QR Code is introduced for GST invoices. Also, Aadhar based verification of taxpayers has been initiated to prevent duplicate invoices.
- Outdated exemptions in the Customs Law shall be removed.
- Customs duty shall be raised on footwear and furniture.
- The Government has intended to reduce basic customs duty on imports of newsprint and light-weight coated paper from 10% to 5%.
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