Key Highlights of Union Budget 2020-21 presented on 1st February, 2020

The Union minister for Finance and corporate affairs, made the longest speech and presented Union Budget 2020 on 1st February, 2020.

As expected, Budget 2020-21 has introduced some remarkable changes in Indirect and direct taxes i.e. in Personal Tax regime. Budget 2020 has also introduced some major provisions for Infrastructure Industry, Financial Sector, Agriculture sector etc. Smt. Nirmala Sitharaman, in Budget 2020, has also proposed to introduce the following amendments in determining residential status for certain categories of individuals.

The key highlights on the Union Budget 2020-21 presented on 1st February, 2020 are as follows:

The Finance Minister said that the Union Budget Aims:

• To achieve seamless delivery of services through Digital governance.
• To improve physical quality of life through the National Infrastructure Pipeline.
• Risk mitigation through Disaster Resilience.
• Social security through Pension and Insurance penetration.

The  budget is woven around three prominent themes:

• Aspirational India in which all sections of the society seek better standards of living, with access to health, education and better jobs.
• Economic development for all, indicated in the Prime Minister’s exhortation of “SabkaSaath, SabkaVikas, SabkaVishwas”.
• Caring Society that is both humane and compassionate, where Antyodaya is an article of faith.

Estimation for the financial year is as follows:

• Fiscal deficit seen at 3.5% of GDP
• Net market borrowing fixed at 5.36 trln rupees
• Gross market borrowing estimated at 7.8 trln rupees
• Fixed nominal GDP growth at 10%
• Receipts seen at 22.46 trln rupees
• Total spending seen at 30.42 trln rupees.

Allocation of Funds to various sectors and programmes:

• Rs 99,300 crore allocated for education sector, Rs 3,000 crore rupees for skill development
• Rs 22,000 crore allocated to power and renewable energy.
• Govt provides Rs 53,700 crore for development and welfare of Scheduled Tribes.
• M proposes to provide budget of Rs 85,000 crore for welfare of SC and other backward classes in 2020-21
• Finance Minister is proposed to provide Rs 35,600 crore for nutrition-related programmes in the year 2020-21.
• Rs 1.7 lakh crore provided for transport infrastructure in 2020-21.
• FM proposes Rs 8,000 crore outlay over 5 years for National Mission of Quantum Technology and Application.
• FM Nirmala Sitharaman proposes to provide Rs 27,300 crore for development for industry and commerce for the year 2020-21.
• We have approved Rs 3.6 lakh crore for Jal Jeevan Mission to provide safe drinking water to rural India.
• 12,300 crore rupees allocated for Swachh Bharat.
• 69,000 crore rupees allocated to healthcare sector.
• Rs. 6000 Crores to be to Bharatnet Programme in 2020-21

Finance Minister Nirmala Sitharaman addressing India as the 5th largest economy in the world said that Expected tax buoyancy will take time. Further she said Stable, predictable business environment is a key objective of the government.

Direct Tax:

• Under the new regime, New income tax slabs will be as income up to 0 – 2.5 lakh will be exempted. An individual will be required to pay tax at a reduced rate of 10% between income of Rs 5-7.5 lakh, For income between Rs 7.5-10 lakh– the tax rate has been reduced to 15%, for income between Rs 10-12.5 lakh- the tax rate is currently 30%. which has now been brought down to 20%, Tax rate of 30% on income above Rs 15 lakh will be continued.
• No tax on income below 500,000 rupees
• This new direct tax regime will be optional for taxpayers. To simplify the tax system and lower tax rates, around 70 of more than 100 income tax deductions and exemptions have been removed.
• Now the verification for indirect taxes can be done through Aadhaar Card through Introduction of Aadhaar-based verification.
• On the basis of Aadhaar-card, PAN card will be allotted instantly.
• Cooperative societies will be taxed at 22% without exemptions
• Dividend Distribution Tax (DDT) abolished; Companies will not be required to pay DDT; dividend to be taxed only at the hands of recipients, at applicable rates.
• 15% concessional tax rate for new power generation companies.
• 100% tax concession to sovereign wealth funds on investment in infrastructure projects.
• In order to give a boost to the start-up ecosystem, the Finance Minister has proposed to ease the burden of taxation on the employees by deferring the tax payment for five years or till they leave the company or when they sell their shares, whichever is earliest.
• To end tax harassment, new taxpayer charter to be instituted.
• Registration of charity institutions to be made completely electronic, donations made to be pre-filled in IT return form to claim exemptions for donations easily.
• Proposes to amend Companies Act to bring criminal liability in certain areas.
• The I-T Act will be amended to allow faceless appeals.
• A new direct tax dispute settlement scheme will be launched “Vivaad se Vishwaas scheme”.
• Interest and penalty will be waived for those who wish to pay the disputed amount till March 31.
• Government to look at ensuring that contracts are honoured.
• Proposes new National Policy on Official Statistics to improve data collection and dissemination with the help of technology.
• Rules of origin requirements in Customs Act to be reviewed, to ensure FTAs are aligned with the conscious direction of our policy: FM
• Turnover threshold for audit of MSMEs is hiked to INR 5 Crores from INR 1 Crores.

Indirect Tax:

• A simplified GST return shall be implemented from the 1st April, 2020. 
• 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. 
• Dynamic QR-code is proposed for consumer invoices. GST parameters will be captured when payment for purchases is made through the QR-code.
• Labour intensive sectors in MSME are critical for employment generation. Cheap and low-quality imports are an impediment to their growth. 
• Keeping in view the need of this sector, customs duty is being raised on items like footwear and furniture. 
• Rate of Custom Duty for footwear is being raised from 25% to 35%; and for “parts of footwear” from 15% to 20%. Rate of Duty for specified Furniture goods is being raised from 20% to 25%.
• To give impetus to the domestic industry, and to generate resources for health services, it is proposed to impose a nominal health cess of 5% on imports of specified medical equipment. 
• Basic customs duty on imports of newsprint and light-weight coated paper is being reduced from 10% to 5%.

Infrastructure:

• On the Infrastructure sector as highlighted by the Prime Minister that Rs 100 lakh crore would be invested  over the next 5 years, the National Infrastructure Pipeline was launched on 31st December 2019 of Rs 103 lakh crore. It consists of more than 6500 projects across sectors and are classified as per their size and stage of development. She said that about Rs 22,000 crore has already been provided as support to the Infrastructure Pipeline.
• Four station redevelopment and operation of 150 trains through PPP mode.
• Large solar power capacity would be set up along side rail tracked on land owned by railways, more Tejas type trains to connect iconic tourist destinations will be planned.
• The Jal Vikas Marg on National Waterway-1 will be completed and further, the 890 kms Dhubri-sadiya connectivity will be done by 2022. Focus will be given on a governance framework keeping with global benchmarks to make sea ports efficient. The Government also proposes to develop 100 more airports by 2024 to support UDAAN scheme.
• National gas grid will be expanded from 16,200 km to 27000 km and to deepen gas markets in India, reforms will be introduced to facilitate transparent price discovery and ease of transactions.
• Government will direct all infrastructure agencies of the government to involve youth power in startups. Not only this but the government also proposed the project preparation facility for infrastructure projects to actively involve young engineers, management graduates and economists from Government universities.
• 2500 km of access control highways, 9000 km of economic corridors and 2000 km of strategic highways will be developed. Delhi-Mumbai Expressway to be completed by 2023 and Chennai-Bangalore Expressway will be started soon. At least 12 lots of highway bundles of over 6000 km will be monetised before 2024.

Industry, Commerce and Investment:

• Referring to the theme of Economic Development, the Finance Minister said that Rs 27300 crore would be allocated for development and promotion of Industry and Commerce for the year 2020-21. 
• An Investment Clearance Cell will be set up to provide “end to end” facilitation. It is proposed to develop five new smart cities in collaboration with States in PPP mode.
• A scheme to encourage manufacture of mobile phones, electronic equipment and semiconductor packaging is also proposed.
• A National Technical Textiles Mission would be set up with a four-year implementation period from 2020-21 to 2023-24 at an estimated outlay of Rs 1480 crore to position India as a global leader in Technical Textiles.
• To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched to support mainly small exporters. NIRVIK will help to have higher insurance cover, lower premiums
• Government e-Marketplace (GeM) is moving ahead for creating a Unified Procurement System in the country for providing a single platform for procurement of goods, services and works.
• It is proposed to take the turnover of GeM to Rs 3 lakh crores. 3.24 lakh vendors are already on this platform.

New Economy:

• In the New Economy, a policy to enable private sector to build Data Centre parks throughout the country will be brought out soon.
• Fibre to the Home (FTTH) connections through Bharatnet will link 100,000 gram panchayats this year.
• It is proposed to provide Rs 6000 crore to the Bharatnet programme in 2020-21.  
• Measures proposed to benefit the Start-ups include a digital platform for seamless application and capture of IPRs, Knowledge Translation Clusters to be set up across different technology sectors including new and emerging areas. 
• For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harbouring test beds and small scale manufacturing facilities to be established. 
• It is proposed to provide an outlay of Rs 8000 crore over a period of five years for the National Mission on Quantum Technologies and Applications.

Financial Markets:

• The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO).
• To help easy mobility while in jobs, The Government wishes to infuse into the Universal Pension coverage with auto enrolment.
• More than five lakh MSMEs have benefitted from restructuring of debt permitted by RBI in the last year.  The restructuring window was to end on March 31, 2020. Government has asked the RBI to consider extending this window till March 31, 2021.
• For selected sectors such as pharmaceuticals, auto components and others, it is proposed to extend handholding support for technology upgrades, R&D, business strategy etc.
• A scheme of Rs 1000 crore will be anchored by EXIM Bank together with SIDBI.
• On Financial Markets, about deepening of the bond market, certain specified categories of Government securities would be opened fully for non-resident investors, apart from being available to domestic investors as well. Government also proposes to expand by floating a new Debt-ETF consisting primarily of government securities. 
• This will give retail investors access to government securities as much as giving an attractive investment for pension funds and long-term investors.
• To address the liquidity constraints of the NBFCs/HFCs, post the Union budget 2019-20, the government formulated a Partial Credit Guarantee scheme for the NBFCs.
• The Government and RBI have taken various measures to permit Rupee derivatives to be traded in the International Financial Services Centre at GIFT city, Gujarat.
• Amendment in Banking Regulation Act will be made to strengthen co-op banks. It was announced that the Depositors money will be absolutely safe, Deposit insurance cover is to be hiked to 500,000 rupee/depositor.

 Agriculture and Rural development:

• The Finance Minister said that more than Rs 2.83 lakh crore would be spent on Agriculture, Rural Development, Irrigation and allied activities as farmers and rural poor continue to remain the key focus of the Government. 
• Reiterating the commitment of doubling farmers’ income by 2022, the Government has already provided resilience for 6.11 crore farmers insured under PM Fasal Bima Yojana.
• Agriculture credit target for the year 2020-21 has been set at Rs 15 lakh crore. 
• All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme. 
• Moreover, comprehensive measures for one hundred water stressed districts, proposal to expand PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps and for another 15 lakh farmers to solarise their grid-connected pump sets, setting up of efficient warehouses at the block/taluk level and in Horticulture sector with focus on “one product one district” for better marketing and export are some of the steps in that direction. 
• Foot and Mouth disease, brucellosis in cattle and also peste des petits ruminants(PPR) in sheep and goat to be eliminated by 2025, Coverage of artificial insemination to be increased from the present 30% to 70%, MGNREGA to be dovetailed to develop fodder farms, doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025 to be facilitated.
• To quickly transport  perishable farm goods across the country the government will set up Kisan rail through PPP model and NABARD refinance scheme will be further expanded.
• Similarly on the Blue Economy, raising fish production to 200 lakh tonnes is proposed by  2022-23.
• Youth to be involved in fishery extension through 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations.
• Fishery exports hoped to be raised to Rs 1 lakh crore by 2024-25. Deen Dayal Antyodaya Yojana- for alleviation of poverty, half a crore households are mobilized with 58 lakh SHGs and it will be further expanded.

Social and Education Sector: 

• On Education and Skill front, the Finance Minister said Rs 99,300 crore is being allocated  in 2020-21 and Rs 3000 crores for skill development.
• New Education Policy will be announced soon.
• About 150 higher educational institutions will start apprenticeship embedded degree/diploma courses by March 2021.
• Degree level full-fledged online education programme to be started.
• Under its “Study in India” programme, an Ind-SAT is proposed to be held in Asian and African countries.
• A National Police University and a National Forensic Science University are being proposed in the domain of policing science, forensic science, cyber-forensics etc. It is proposed that special bridge courses be designed by the Ministries of Health, Skill Development.
• Dwelling on the Wellness, Water and Sanitation theme, Smt Sitharaman said Rs 69,000 crore is being provided for Health care including Rs 6400 crores for Prime Minister Jan Arogya Yojana (PMJAY).
• Under PM Jan Arogya Yojana (PMJAY), there are more than 20,000 empanelled hospitals more in Tier-2 and Tier-3 cities for poorer people.
• Indradhanush plan expanded to cover 12 new diseases
• Setting up hospitals in the PPP mode mainly in  Aspirational Districts, using machine learning and AI, in the Ayushman Bharat scheme, “TB Harega Desh Jeetega” campaign to end Tuberculosis by 2025, expansion of Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024 are some of the other wellness measures in the Budget.
• On the sanitation front, the Government is committed to ODF Plus in order to sustain ODF behaviour and the total allocation for Swachh Bharat Mission is Rs.12,300 crore in 2020-21.
• Similarly, Rs 3.60 lakh crore approved for Jal Jeevan Mission and Rs 11,500 crore in 2020-21.

Charitable Institutions:

• All the existing charitable and religious institutions already registered under Section 12A , Section 12AA, Section 10(23C) and Section 80G will be required to re-apply to the income tax authorities to revalidate their existing registrations.
• The process will be online and the new online form will particularly focus on whether the charitable activities of the trust or institution are genuine.
• Once the online forms are ready there will be a window of three months within which application must be submitted. Trusts and institutions may do this on their own or through their auditors or practicing chartered accountants.
• After processing your application, your trust or institution’s registration under section 12AA and 80G may be revalidated by income tax for a period of five years.
• Application for renewal after five years must be made at least six months prior to the expiry of the five years validity period.
• Newly established trusts and institutions applying to income tax for registration for the very first time will be given provisional registration for three years.
• The provisional registration will be valid for three years.
• Prior to 6 months from the completion of three years provisional registration, an application for renewal of provisional registration or rather registration has to be made.
• Every charitable trust or institution registered u/s 80G shall be required to submit a statement of donations received in such form & manner as may be prescribed & the benefit of 80G shall be available to donors on the basis of information relating to donation furnished by the corresponding charitable trust or institution.
• Tax deduction under section 80G will not be available to donors (individuals or companies) who opt for reduced rate of tax.

Miscellaneous:

• National security is on the top of priority list.
• India will host the G20 presidency in the year 2022, says FM Nirmala Sitharaman. Rs 100 crore to be allocated for G20 preparations
• The government on Saturday allocated Rs 30,757 crore for Jammu and Kashmir and Rs 5598 crore for Ladakh in Budget 2020
• Government allocates Rs. 3150 crores for the ministry of culture for the year 2020-21. FM further says Five archaeological sites to be developed at iconic sites with on-site museums at five archaeological sites in the states of Haryana, Tamil Nadu, Gujarat, Assam and Uttar Pradesh.