The Union Budget 2020

The Union Budget 2020 

(Some Important aspects to know from Budget 2020)

Shuchi.P.Nahar

The slowdown in economic growth has appeared to have bottomed out and is expected to pick up in 2020-21, according to Budget documents. The document further said the prospects for the Indian economy in 2020-21 need to be assessed in the light of emerging global and domestic challenges and opportunities.

Presenting the first Union Budget of the third decade of 21st century, Finance Minister Smt. Nirmala Sitharaman, today unveiled a series of far-reaching reforms, aimed at energizing the Indian economy through a combination of short-term, medium-term, and long-term measures.

Three prominent themes of the Budget 

• Aspirational India - better standards of living with access to health, education and better jobs for all sections of the society 
• Economic Development for all - 'Sabka Saath , Sabka Vikas , Sabka Vishwas'. • Caring Society - both humane and compassionate; Antyodaya as an article of faith. 
• Three broad themes are held together by: Corruption free, policy-driven Good Governance. Clean and sound financial sector. 
• Ease of Living underlined by the three themes of Union Budget 2020-21.

Three components of Inspirational India 

• Agriculture, Irrigation, and Rural Development 
• Wellness, Water, and Sanitation 
• Education and Skills 

Some of the Action Points for Agriculture, Irrigation and Rural Development .

• Rs. 2.83 lakh crore to be allocated for the following 16 Action Points: Rs. 1.60 lakh crore for Agriculture, Irrigation & allied activities. 
Rs. 1.23 lakh crore for Rural development & Panchayati Raj.

Agriculture credit: 

• Rs. 15 lakh crore target set for the year 2020-21. 
• PM-KISAN beneficiaries to be covered under the KCC scheme. 
• NABARD Re-finance Scheme to be further expanded. 
• • Comprehensive measures for 100 water-stressed districts proposed. 

Blue Economy: 

• Rs. 1 lakh crore fisheries' exports to be achieved by 2024-25. 
• 200 lakh tonnes fish production targeted by 2022-23. 
• 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations to involve youth in fisheries extension. o Growing of algae, sea-weed and cage culture to be promoted. 
• Framework for development, management and conservation of marine fishery resources. 
• Kisan Rail to be setup by Indian Railways through PPP: To build a seamless national cold supply chain for perishables (milk, meat, fish, etc. Express and Freight trains to have refrigerated coaches. 
• Krishi Udaan to be launched by the Ministry of Civil Aviation: o Both international and national routes to be covered. 
• North-East and tribal districts to realize Improved value of agri-products. 
• One-Product One-District for better marketing and export in the Horticulture sector. 
• Balanced use of all kinds of fertilizers - traditional organic and innovative fertilizers. 
• Measures for organic, natural, and integrated farming:
• Jaivik Kheti Portal – online national organic products market to be strengthened. 
• Zero-Budget Natural Farming (mentioned in July 2019 Budget) to be included. 
• Integrated Farming Systems in rain-fed areas to be expanded. 
• Multi-tier cropping, bee-keeping, solar pumps, solar energy production in non- cropping season to be added. 

PM-KUSUM to be expanded: 20 lakh farmers to be provided for setting up stand-alone solar pumps. 

Another 15 lakh farmers to be helped to solarise their grid-connected pump sets. 
Scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid. 

Village Storage Scheme: 

• To be run by the SHGs to provide farmers a good holding capacity and reduce their logistics cost. 
• Women, SHGs to regain their position as Dhaanya Lakshmi. 
• NABARD to map and geo-tag agri-warehouses, cold storages, reefer van facilities, etc. 
• Warehousing in line with Warehouse Development and Regulatory Authority (WDRA) norms: Viability Gap Funding for setting up such efficient warehouses at the block/taluk level. 
• Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) to undertake such warehouse building. 
• Financing on Negotiable Warehousing Receipts (e-NWR) to be integrated with e-NAM. 
• State governments who undertake implementation of model laws (issued by the Central government) to be encouraged.

Livestock: 

• Doubling of milk processing capacity to 108 million MT from 53.5 million MT by 2025. 
• Artificial insemination to be increased to 70% from the present 30%. 
• MNREGS to be dovetailed to develop fodder farms. 
• Foot and Mouth Disease, Brucellosis in cattle and Peste Des Petits ruminants (PPR) in sheep and goat to be eliminated by 2025.
• • Deen Dayal Antyodaya Yojana – 0.5 crore households mobilized with 58 lakh SHGs for poverty alleviation. Wellness, Water and Sanitation • Rs. 69,000 crore allocated for overall Healthcare sector. 
• • Rs. 6400 crore (out of Rs. 69,000 crore) for PM Jan Arogya Yojana (PMJAY): More than 20,000 hospitals already empanelled under PM Jan Arogya Yojana (PMJAY). 
•  Viability Gap Funding window proposed for setting up hospitals in the PPP mode. o Aspirational Districts with no Ayushman empanelled hospitals to be covered in the first phase. o Targeting diseases with an appropriately designed preventive regime using Machine Learning and AI. 
• • Jan Aushadhi Kendra Scheme to offer 2000 medicines and 300 surgicals in all districts by 2024. 
• TB Harega Desh Jeetega campaign launched - commitment to end Tuberculosis by 2025. • Rs. 3.60 lakh crore approved for Jal Jeevan Mission: o Rs. 11,500 crore for the year 2020-21. 
• Augmenting local water sources, recharging existing sources, and promoting water harvesting and de-salination. 
• Cities with million-plus population to be encouraged to achieve the objective during the current year itself. 
• Rs.12, 300 crore allocation for Swachh Bharat Mission in 2020-21: 
• Committment to ODF-Plus in order to sustain ODF behaviour. o Emphasis on liquid and grey water management. 
• Focus also on Solid-waste collection, source segregation, and processing

Education and Skills 

• Rs. 99,300 crore for education sector and Rs. 3000 crore for skill development in 2020- 21. New Education Policy to be announced soon. 
• National Police University and National Forensic Science University proposed for policing science, forensic science, and cyber-forensics. 
• Degree level full-fledged online education program by Top-100 institutions in the National Institutional Ranking Framework. 
• Up to 1-year internship to fresh engineers to be provided by Urban Local Bodies. 
• Budget proposes to attach a medical college to an existing district hospital in PPP mode. Special bridge courses to be designed by the Ministries of Health, and Skill Development:  To fulfill the demand for teachers, nurses, para-medical staff and care-givers abroad. 
• To bring in equivalence in the skill sets of the workforce and employers' standards. 
• 150 higher educational institutions to start apprenticeship embedded degree/diploma courses by March 2021. 
• External Commercial Borrowings and FDI to be enabled for education sector. 
• Ind-SAT proposed for Asian and African countries as a part of Study in India program. 

Economic Development Industry, Commerce and Investment .

• Rs. 27,300 crore allocated for 2020-21 for development and promotion of Industry and Commerce. 
• Investment Clearance Cell proposed to be set up: o To provide 'end to end' facilitation and support. 
• To work through a portal. 
• Five new smart cities proposed to be developed. 
• Scheme to encourage manufacture of mobile phones, electronic equipment and semi- conductor packaging proposed. 
• National Technical Textiles Mission to be set up: o With four-year implementation period from 2020-21 to 2023-24. o At an estimated outlay of Rs 1480 crore. 
• To position India as a global leader in Technical Textiles. 
• New scheme NIRVIK to be launched to achieve higher export credit disbursement, which provides for: Higher insurance coverage .
• Reduction in premium for small exporters .
• Simplified procedure for claim settlements. 
• Turnover of Government e-Marketplace (GeM) proposed to be taken to Rs 3 lakh crore. Scheme for Revision of duties and taxes on exported products to be launched. 
• Exporters to be digitally refunded duties and taxes levied at the Central, State and local levels, which are otherwise not exempted or refunded. 
• All Ministries to issue quality standard orders as per PM's vision of 'Zero Defect-Zero Effect' manufacturing. 

Infrastructure 

•  Rs.100 lakh crore to be invested on infrastructure over the next 5 years. 
•  National Infrastructure Pipeline: Rs. 103 lakh crore worth projects; launched on 31st December 2019. 
• More than 6500 projects across sectors, to be classified as per their size and stage of development. 
• A National Logistics Policy to be released soon: To clarify roles of the Union Government, State Governments and key regulators. 
• A single window e-logistics market to be created o Focus to be on generation of employment, skills and making MSMEs competitive. 
• National Skill Development Agency to give special thrust to infrastructure-focused skill development opportunities. 
• Project preparation facility for infrastructure projects proposed. o To actively involve young engineers, management graduates and economists from Universities. 
• Infrastructure agencies of the government to involve youth-power in start-ups. 
• Rs.1.7 lakh crore proposed for transport infrastructure in 2020-21.

Financial Market

• Deepening Bond Market. 
• Certain specified categories of Government securities to be opened fully for non - resident investors also. 
• FPI limit in corporate bonds increased to 15% from 9% of its outstanding stock. New legislation to be formulated for laying down a mechanism for netting of financial contracts. o Scope of credit default swaps to expand. 
• Debt Based Exchange Traded Fund expanded by a new Debt-ETF consisting primarily of Government Securities. 
• To give attractive access to retail investors, pension funds and long-term investors. 
• A Partial Credit Guarantee scheme for the NBFCs formulated post the Union budget 2019-20 to address their liquidity constraints. 
• New mechanism to be devised to further this. 
• Government support to securities so floated.

Direct Tax: Direct Tax Proposals 

To stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigation's. Personal Income Tax: Significant relief to middle class taxpayers. 
New and simplified personal income tax regime proposed:

• Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime. 
• Remaining exemptions and deductions to be reviewed and rationalised in coming years. o New tax regime to be optional - an individual may continue to pay tax as per the old regime and avail deductions and exemptions.
• Measures to pre-fill the income tax return initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no assistance from an expert to pay income tax. 
• New regime to entail estimated revenue forgone of Rs. 40,000 crore per year. 

Corporate Tax: 

Tax rate of 15% extended to new electricity generation companies. Indian corporate tax rates now amongst the lowest in the world. 

Dividend Distribution Tax (DDT): 

• DDT removed making India a more attractive investment destination. 
• Deduction to be allowed for dividend received by holding company from its subsidiary. o Rs. 25,000 crore estimated annual revenue forgone. 

Start-ups: 

• Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years. 
• Tax payment on ESOPs deferred. 

MSMEs to boost less-cash economy: 

Turnover threshold for audit increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash. 

 Cooperatives: 

• Parity brought between cooperatives and corporate sector. 
• Option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions. 
• Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT). 

Tax concession for foreign investments: 

• 100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments. 

Affordable housing: 

• Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021. 
• Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till 31st March, 2021. 

Tax Facilitation Measures: 

• Instant PAN to be allotted online through Aadhaar. 
• 'Vivad Se Vishwas' scheme, with a deadline of 30th June, 2020, to reduce litigations in direct taxes: 
• Waiver of interest and penalty - only disputed taxes to be paid for payments till 31st March, 2020. 
• Additional amount to be paid if availed after 31st March, 2020. 
• Benefits to taxpayers in whose cases appeals are pending at any level. 
• Faceless appeals to be enabled by amending the Income Tax Act.

For charity institutions: 

• Pre-filling in return through information of donations furnished by the done. Process of registration to be made completely electronic. 
• Unique registration number (URN) to be issued to all new and existing charity institutions. Provisional registration to be allowed for new charity institutions for three years. 
• CBDT to adopt a Taxpayers' Charter. 

Losses of merged banks: 

Amendments proposed to the Income-tax Act to ensure that entities benefit from unabsorbed losses and depreciation of the amalgamating entities. 

Indirect Tax: GST: 

• Cash reward system envisaged to incentivise customers to seek invoice. 
• Simplified return with features like SMS based filing for nil return and improved input tax credit flow to be implemented from 1st April, 2020 as a pilot run. 
• Dynamic QR-code capturing GST parameters proposed for consumer invoices. 
• Electronic invoice to capture critical information in a centralized system to be implemented in a phased manner. 
• Aadhaar based verification of taxpayers being introduced to weed out dummy or non-existent units. 
• GST rate structure being deliberated to address inverted duty structure. 

Customs Duties: 

• Customs duty raised on footwear to 35% from 25% and on furniture goods to 25% from 20%. 
• Basic customs duty on imports of news print and light-weight coated paper reduced from 10% to 5%. 
• Customs duty rates revised on electric vehicles and parts of mobiles. 
• 5% health cess to be imposed on the imports of medical devices, except those exempt from BCD. 
• Lower customs duty on certain inputs and raw materials like fuse, chemicals, and plastics. o Higher customs duty on certain goods like auto-parts, chemicals, etc. which are also being made domestically.

For more detailed summary kindly read the following sources

Sources: Union Budget 2020

                 CA Club India

                 Economic Times

                 Money Control

                                    Shuchi.P.Nahar