Union Budget 2020 announced by the Finance Minister Nirmala Sitharaman disappointed Dalal Street as Sensex closed 987.9 points or -2.43% lower at 39,735 while Nifty 50 shed 300 points or -2.66% at 11,661.
Nifty Bank tumbled 3.3% led by 4% decline in Nifty PSU Bank as no recapitalization measure for public sector banks was announced.
Nifty Realty plummeted 8% and Nifty Auto closed 2.8% lower as no specific reforms for the respective sectors were proposed. Nifty IT was the only major sectoral index to close higher (up 0.8%) on forthcoming policy that would allow private sector to build data center parks.
The Star Highlight
- Insurance cover for bank depositors to be hiked to ₹5 lakh from ₹1 lakh
The Big Numbers
- The nominal gross domestic product (GDP) growth for 2020–21 is estimated at 10%
- Receipts for 2020–21 are pegged at ₹22.46 lakh crore while expenditure at ₹30.42 lakh crore
- Revised estimated expenditure for FY20 has been estimated at ₹26.99 lakh crore and receipts at ₹19.32 lakh crore
- Fiscal deficit target revised to 3.8% of GDP for 2019–20 and the target for 2020–21 (FY21) is set at 3.5% of GDP.
Raising money
- Government will sell part of its stake in LIC through initial public offer (IPO)
- The balance that the government is holding in IDBI Bank will be sold to private retail investors
- The government has set a divestment target at ₹2.1 lakh crore for FY21
- For the current fiscal (FY20), the divestment target has been set at ₹1.05 lakh crore
For Taxpayers — The Most Awaited One!
In a relief for taxpayers, a new income tax regime has been introduced in this year’s budget. The new tax slabs are as follows :
- The new tax slabs come with low rates but with no exemptions. Therefore, you claim for deductions/exemptions under the old tax regime, whereas you cannot claim exemptions under the new regime
- Tax payers have the option to choose between the old (existing) income tax regime or the new one. Old or new, which tax regime to opt for will be dependant on the income and investments made by the individual
- The FM in her presentation stated that the income tax relief will cost over ₹40,000 crore revenue loss for the government
- In a relief for companies, dividend distribution tax (DDT) has been abolished therefore companies do not have to pay the DDT. Dividend shall be taxed at the hands of the recipients
- DDT abolishment will lead to revenue loss of ₹25,000 crore for the government, she said
Startups
- The Centre has proposed deferring the tax payment on ESOP shares by 5 years or until employees leave the company, or when they sell their shares whichever is earlier
- An eligible startup with an (annual) turnover of up to ₹25 crore will be given a deduction of 100% of its profits for three consecutive (tax) assessment years out of the first seven years.
Skill Development
- The budget allocates ₹99,300 crore for the education sector for 2020–21
- ₹3,000 crore is proposed for the skill development to provide relevant skill training
- FM Sitharaman also proposed new education policy that will be launched soon
For the Farmers
- The government is committed to double the income of the farmers by 2022 and has listed out 16 points action plan to achieve the same
- The FM has asked the state governments to adopt 3 central model laws on agricultural land leasing, marketing and contract farming
- The Civil Aviation Ministry will launch Krishi Udaan for transporting agri-products to national and international destinations
For People’s Wellbeing
- The government will set up hospitals in Public Private Partnership (PPP) mode. Out of the 112 aspirational districts, those which don’t have Ayushman will be given priority
- The proceeds from taxes on medical devices will be utilised for supporting the establishment of hospitals
- ₹69,000 crore will be allocated for the healthcare sector and of the entire amount, ₹6,400 crore will be sanctioned for Ayushman Bharat Yojna
Manufacturing
Quoting the Finance Minister here — ‘’India needs to manufacture networked products which will make India part of the global chain. Electronics industry’s potential in manufacturing and job creation is immense. We need to encourage manufacturing of mobile phones, electronic equipment and semiconductors. Details will be announced’’
The upcoming year will tell if the Budget proposals will work in the favour of the economy as well as the people.
