Union Budget 2020-21 Key Highlights: New Income Tax Slab 2020-21

Finance Minister, Nirmala Sitharaman on 1^st February 2020 presented the Union Budget of India for 2020-2021. This is the second budget of Narendra Modi led National Democratic Alliance returned to power for a second term.

The Union budget has been structured on the overall theme of “Ease of Living” To the Indian. The Finance Minister said that the Union Budget 2020 has the following aims:

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

The Budget 2020 revolves around three salient themes:

• Aspirational India
• Economic Development
• Caring Society

Aspirational India:

1. Agriculture, Irrigation and Rural Development

• Farmers and rural poor continue to remain the main focus of the Government. The Finance Minister said that the government would be spending Rs 2.83 lakh crore on Agriculture, Rural Development, Irrigation, and other related activities. She said that 6.11 crore farmers have been insured under PM Fasal Bima Yojana.
• Agricultural credit target has been set at Rs 15 lakh crore for the fiscal year 2020-21.
• ‘Kishan Rail’ and ‘Krishi Udaan’ would be launched by Indian Railways and Ministry of Civil Aviation respectively for the cold supply chain to transport perishable goods.
• Elimination of diseases like brucellosis in cattle and PPR in sheep and goat by 2025.
• Milk processing capacity to increase from 53.5 million MT to 108 million MT by 202.5
• Artificial insemination to increase from 30% to 70%.
• Fish production to expand to 200 lakh tones by 2022-23
• Youth to be involved in the fishery extension through 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations in India.
• SHGs run village storage schemes would be launched.

2. Wellness, Water and Sanitation

• Dwelling on Wellness, Water and Sanitation theme, Finance Minister in said, Rs 69,000 crore would be provided for Health care including Rs 6400 crores for Prime Minister Jan Arogya Yojana (PMJAY). She said that under this Yojana, more than 20,000 impanelled hospitals have been set up in Tier-2 and Tier-3 cities for poorer people.
• FIT India movement has been launched to fight non-communicable diseases.
• Hospitals would be set up in PPP mode in the Aspirational Districts.
• Jan Ausadhi Kendra Scheme would be expanded in all the districts by 2024.
• ‘TB Harega Desh Jeetega’ campaign has been launched which intends to end Tuberculosis by 2025.
• Rs 3.60 lakh crore has been approved under Jal Jeevan Mission. This scheme would promote water harvesting and desalinization.

3. Education and Skills

• The Finance Minister said that the new educational policy would be announced soon.
• Rs 99,300 would be allocated to the education sector and Rs 3000 crores for skill development.
• 150 higher educational institutions will start apprenticeship embedded courses by March 2020-21.
• Internship opportunities would be provided to fresh engineers by urban local bodies.
• Degree level online education programmes for students of deprived sections of the society would be started.
• Special bridge courses to be designed by the Ministries of Health and skills development for those who want to study abroad.
• An Ind-SAT to be conducted in Asia and Africa under ‘Study in India Programme’ to provide foreign students with scholarships to study in Indian higher education institutions.

Economic Development:

1. Industry, Commerce, and Investment

Under this theme, the Finance Minister said that Rs 27,300 crore would be allocated for development and promotion of Industry and Commerce for the year 2020-21.

• An Investment Clearance Cell would be set up to provide ‘end to end’ facilitation.
• A scheme has been proposed to encourage the manufacture of mobile phones, electronic equipment, and semiconductor packaging.
• A National Textile Mission would be set up for four years from 2020-21 to 2023-24 at an estimated outlay of Rs 1480 crore.
• NIRVIK scheme would be launched to achieve higher export credit disbursement.
• The finance minister said that Government e-Marketplace (GeM) is moving ahead for creating a Unified Procurement System in the country to provide a single platform for procurement of goods and services. It is proposed to take the net turnover of GeM to Rs 3 lakh crores.

2. Infrastructure

Under Infrastructure, Miss Sitharaman said that Rs 22,000 crore has already been provided support to National Infrastructure Pipeline which was launched on 31^st December 2019 of Rs 103 lakh crore.

• The rapid development of highways would be undertaken.
• Electrification of 27000 km of tracks to be achieved by Indian Railways.
• The Finance Minister said that the government has commissioned 550 wi-fi facilities in many stations.
• Four station re-development projects and operation of 150 passenger trains would be done through PPP model.
• Around 100 airports would be developed by 2024 to support the Udaan scheme.
• Allocation of Rs 1.70 lakh crore proposed for transport Infrastructure in 2020-21.
• The expansion of the National gas grid from the present 16200 km to 27000 km has been proposed.

3. New Economy

• The Finance Minister proposed to bring out a policy that would enable the private sector to build Data Centre Parks throughout the country.
• The government has also proposed to allocate Rs 6,000 crore for the Bharatnet programme which would help in better digital connectivity across the country.
• Measures have been proposed to benefit the Start-ups include a digital platforms for seamless application and capture of IPRs.
• Knowledge Translation Clusters for emerging technology sectors would be developed.

The government has also proposed an outlay of Rs 8,00 crore for five years for the National Mission on Quantum Technology and Applications.

Caring Society:

1. Women and Child, Social Welfare

• Under this theme, the Finance Minister proposed to allocate Rs 35,600 crore for nutrition-related programs for the fiscal year 2020-21.
• Rs 85,000 crore would be allocated towards the welfare of Scheduled Castes and other Backward classes and Rs 53,700 crore for the development of Scheduled Tribes.
• Rs 9,500 crores would be provided for the welfare of senior citizens.

2. Culture and Tourism

• It has been proposed that the Indian Institute of Heritage and Conservation under the Ministry of Culture would be established with the status of a deemed university.
• 5 archaeological sites to be developed as iconic sites with on-site museums in india.
• Museum of Kolkata, as well as 4 other museums, would be re-curated and renovated.
• A Maritime museum in Lothal and a Tribal Museum in Ranchi would be set up.

3. Environment and Climate Change

On this issue, plans would be implemented for ensuring clean air in cities above one million. Rs 4,400 crores would be allocated for this purpose.

Changes in Income Tax Slab 2020-21 in Budget 2020

The government has announced a major change in tax structure in the present budget. The corporate tax rate has been reduced to a level of 15% for the new companies and 22% for the existing companies. With that, the corporate tax rates in India are now the lowest in the world.

To provide relief to the individual taxpayers and to simplify the Income-Tax law, the Finance Minister has proposed a new personal tax regime, where the income tax rates will be reduced for the individual taxpayers.

The proposed changes in Income tax slabs 2020-21 are listed in the following table

Taxable Income Slab (Rs)	Existing Income Tax Rates 2019-20	New Income Tax Rates 2020-21
0-2.5 lakh	Exempt	Exempt
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%
Above 15 lakh	30%	30%

In this new tax regime, the considerable tax benefit will accrue to a taxpayer depending upon the exemptions and deductions claimed by him. The Finance Minister has said that the old tax regime with its higher tax rates will continue to exist and this new tax regime will be optional for the taxpayers. An individual who is already availing more deductions and exemption under the Income Tax act may choose to avail them and continue to pay tax in the old regime.

The old tax regime will include all the rebates and exemptions that a taxpayer could use to reduce the overall tax payment. The Finance Minister has further said that this new tax regime does not include around 70 of the exemptions that were there in the old one.

Thus it can be said that in this new tax regime, one can pay less amount of tax but cannot avail of those 70 exemptions of the old tax regime.

Dividend Distribution Tax in Budget 2020

To provide relief to a large class of investors and to increase the attractiveness of the Indian equity market, the Finance Minister has proposed to remove the Dividend Distribution Tax (DDT). The removal of Dividend Distribution Tax will lead to an estimated annual revenue foregone of Rs 25,000 crore.

Tax  Concession for Foreign Investments

The government has proposed a major tax concession on investments made by sovereign wealth funds. The Finance Minister has granted 100% exemption on interest, dividend and capital gains income on the investment made in infrastructure and other prominent sectors for three years till March 31, 2024.

Start-ups

The Finance minister has proposed to ease the burden of taxation on the employees in the start-up companies by exempting them from paying tax for five years or till they leave the company or when they sell their  own shares.

Medium, Small and Micro Enterprises

To reduce the burden on the small retailers and traders who comprise the MSME sector, the Finance Minister has proposed to raise the turnover threshold for audit from the existing Rs 1 crore to Rs 5 crore. This limit will be only applicable for the businesses which carry out less than 5% of their business transactions in cash.

Affordable Housing 

The additional deduction of up to 1 lakh 50 thousand rupees for interest paid on Home loans taken for the purchase of an affordable house was announced by the Finance Minister in the last budget. The date of loan sanction for availing this deduction has been proposed to be extended by one year, beyond 31^st March 2020.

Indirect Tax Budget 2020

• A simplified form of GST return would be implemented from the 1^st of April 2020. Features like SMS based filing for nil return, return pre-filling, improved input tax credit flow, etc will be available. GST parameters will be captured when payment for purchases will be made through QR-code.
• The Finance Minister has proposed some basic changes in customs duties to encourage domestic processing and manufacturing in the country. Custom duties on items like household goods, electrical appliances, auto parts, footwear, furniture, and some mobile parts have been raised. Nominal health cess of 5% on imports of medical equipment have been proposed. This has been done to enhance the MSMEs, to facilitate the ease of doing business and to increase the local employment.

Union Budget 2020 was the longest ever budget speech delivered by our honorable Finance Minister, Nirmala Sitharaman. She is also the second woman to present the budget for a second time after Smt. Indira Gandhi.