Nirmala Sitharaman said the 2020-21 Budget was aimed at boosting incomes and enhancing purchasing power (Photo Credit: PTI File)
Union Budget 2020: Nirmala Sitharaman presented the second budget of Modi 2.0 in Parliament on Saturday. The Budget, also the second for the Finance Minister, aims to revive the economy to pull it out of its worst slowdown in more than a decade. India is currently staring at an estimated 5 per cent growth rate- the slowest since 2009.
In her speech, Finance Minister Nirmala Sitharaman announced record spending in agriculture and infrastructure sectors, slashed income tax for individuals and abolished dividend tax for companies. However, her announcements failed to cheer up the markets as BSE Sensex almost shed 1000 points while NSE Nifty lost over 300 points.
Sitharaman said the Budget was aimed at boosting incomes and enhancing purchasing power, stressing that the economy's fundamentals were strong and inflation was well contained.
In the longest Budget speech of almost 160 minutes, Sitharaman said this budget is woven around three prominent themes, namely - aspirational India, caring society and economic development.
Nirmala Sitharaman announced change in the income tax slabs revising income tax rates for earning up to Rs 15 lakh, while no tax will be applied on earnings up to Rs 5 lakh. The new slabs have significantly reduced the taxes for most of the brackets. Those earning Rs 5-7.5 lakh will now pay just 15 per cent, while those earning up to Rs 5 lakh in a year will pay no tax. If you are earning between Rs 10 lakh to Rs 12.5 lakh and between Rs 12.5 lakh and Rs 15 lakh, you will have to pay lesser tax than before.
The cut in income tax rates, which would help save about Rs 31,000 a year in tax for persons with annual income of up to Rs 17 lakh, was however conditioned on current exemptions and deductions including standard deduction for Rs 50,000 as well as the waiver earned on payment of up to Rs 1.5 lakh in tuition fee of children, and contribution towards insurance premium and provident fund, being given up.
Nirmala Sitharaman also announced sale of government stake in the country's largest insurer Life Insurance Corporation (LIC). The government also raised the limit of insurance cover in case of bank failure on deposits was increased to Rs 5 lakh from Rs 1 lakh.
She raised import duty on a variety of products ranging from tableware and kitchenware to electrical appliances to footwear, furniture, stationery and toys to boost domestic manufacturing while at the same time provided funds to help farmers set up solar power generation units and set up coal storages to transport perishables.
Sitharaman on Saturday announced that a record Rs 1.7 lakh crore spending was planned for transport infrastructure and Rs 40,740 crore allocation was made for the energy sector. She also proposed Rs 27,300 crore for development of industry and commerce. For farm and rural sectors, she allocated Rs 2.83 lakh crore and fixed Rs 15 lakh crore target for giving agriculture credit.
The government will miss its deficit target for the third year in a row, pushing shortfall to 3.8 per cent of GDP in the current fiscal as compared to 3.3 per cent previously planned. The fiscal deficit target for the coming fiscal year starting April 1 has been fixed at 3.5 per cent.
For the next fiscal, she pegged net borrowings of Rs 5.45 lakh crore and doubled target of raising revenue from the sale of government stake in PSUs to Rs 2.1 lakh crore.
Sitharaman during her Budget 2020 speech said Dividend Distribution Tax has been removed and will be applicable to individual investors only. Sitharaman accepted the demand of the industry to reverse the taxability of dividends back to the recipients, making equity investment more attractive. Now, dividends will be taxed in the hands of recipients, a move that will cause Rs 25,000 crore dent to her coffers.
Also, she deferred taxes for ESOPs in the hands of employees which will be an important decision for the employees to own shares in the employer without getting worried about organising cash to pay taxes. This will also provide greater flexibility to the employers and employees in the structuring of their employment prospects.
One proposal that could be become contentious was tax being imposed on Indian citizens abroad if they are not taxable in their home country.
The Union Budget 2020 allotted Rs 99,300 crore for the education sector and Rs 3,000 crore for skill development. FM Sitharaman said that the government will soon announce a new education policy.
Indian Railways will set up Kisan Rail for the transportation of perishable agro-produce. Government will launch Krishi Udan scheme on international and national routes to assist farmers in transporting agricultural products. Sitharaman announced 100 more airports by 2024 under the UDAN (Ude Desh ka Aam Naagrik) regional connectivity scheme. She also announced the proposed completion of the Delhi-Mumbai expressway by 2023 and the launch of Chennai-Bengaluru expressway.