Budget 2020: Tax changes and other main highlights

Union finance minister Nirmala Sitharaman had her task cut out for the Budget, with the government estimating economic growth this financial year to clock its weakest pace since the global financial crisis of 2008-09.

What, then, were the minister’s answers to this slowdown? Direct tax giveaways. And billions of dollars for farms, infrastructure and healthcare.

“This is a Budget to boost people’s income and enhance their purchasing power,” Sitharaman said. Here are some highlights from this government’s second full Budget of its second term in power:

Taxation:

1. New income tax slabs for those who forgo exemptions. Those earning up to Rs 5 lakh will still pay no levy. The bracket rate for those earning between Rs 5 and Rs 7.5 lakh will be set at 10%, between Rs 7.5 and Rs 10 lakh at 15%, between Rs 10 and Rs 12.5 lakh at 20%, and a 25% tax rate for those earning between Rs 12.5 and Rs 15 lakh. Those earning above Rs 15 lakh will be taxed at the upper limit of 30%
2. Around 70 of more than 100 income tax deductions and exemptions have been removed.
3. The Income Tax Act will be amended to mandate the Central Board of Direct Taxes (CBDT) to bring about a taxpayers’ charter.
4. On the company front, the government has proposed to abolish the DDT (dividend distribution tax) and impose a levy on individuals who receive company dividends.
5. There is also a proposal to extend the corporate tax cut to 15% for new domestic companies engaged in electricity generation.
6. Startups with a turnover of up to Rs 100 crore will be allowed a deduction of 100%  of profits for three consecutive assessment years out of 10 years. Previously, only startups with a turnover of up to Rs 25 crore were allowed to claim this deduction of seven years.
7. The Budget has also proposed to defer taxes on employee stock ownership schemes given to startup employees.
8. The finance minister has proposed a scheme to reduce litigation in tax dispute cases, including a complete waiver on interest and penalty, if settled before 31 March 2020, and some additional amount thereafter. 
9. The tax holiday for affordable housing developers has been extended for one more year, till March 31 2021.
10. Co-operative societies will also be given the option to be taxed at 22% with a 10% surcharge and 4% cess with no exemptions of deductions. Furthermore, the government has also proposed to exempt them from Alternative Minimum Tax, similar to how companies in the new tax regime are exempted from the Minimum Alternate Tax.

Numbers and Outlays:

1. The agricultural credit target is set at Rs 15 trillion
2. The total outlay for the agricultural and rural development space has been set at Rs 2.83 trillion
3. The health sector has been allocated a total of Rs 69,000 crore. This includes outlays for schemes such as Ayushman Bharat With reference to other flagship government schemes, the Swachh Bharat Mission and Jal Jeevan Mission have been allotted Rs 12,300 crore and Rs 11,500 crore
4. Education has been allotted Rs 99,300 crore. This is a slight increase from the previous budget’s Rs 94,853.64 crore. Further, skills and skill development has been granted Rs 3,000 crore.
5. Transport Infrastructure has been granted Rs 1.7 lakh crore. The government also emphasised its push on the Rs 103 lakh crore national infrastructure pipeline.
6. Power and the renewables space has been granted Rs 22,000 crore.
7. A proposed outlay of Rs 8,000 crore over a period of five years for the National Mission on Quantum Technologies and Applications
8. In terms of social spending, nutrition programmes have been granted Rs 35,600 crore, while women-related projects have been allocated Rs 28,600 crore. Senior citizens and Divyang (referring to disabled) citizens have been given Rs 9,500 crore
9. Culture and cultural development has been given Rs 3,150 crore, with tourism being given a proposed outlay of Rs 2,500 crore.

Others:

1. In terms of distressed assets, the government has proposed reducing asset size under The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (Sarfaesi Act), 2002, from Rs 500 crore to Rs 100 crore and loans from Rs 1 crore to Rs 50 lakh.
2. There is also a proposal to sell the balance holdings of IDBI to private, retail and institutional investors through the stock exchange route.
3. The government is also looking to sell a part of its holding in the Life Insurance Corporation through the initial public offering method.
4. There are also proposed changes for micro, small and medium enterprises (MSMEs). For example, firms with a turnover of Rs 5 crore or more will now have to have their books audited, up from the current Rs 1 crore.
5. Also, the Centre will seek to make amendments to the Factor Regulation Act 2011 to enable non-banking financial companies to extend invoice financing to MSMEs through the Trade Receivables Discounting System.
6. There is also a proposal to introduce a scheme to provide subordinate debt for MSME entrepreneurs. This debt will be provided by banks and will count as quasi-equity that will be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE). The corpus for the CGTMSE will be augmented by the government, according to the finance minister.
7. The government has also asked the RBI to consider extending the debt restructuring window for MSMEs by another year to March 31, 2021, from the end of March this year.
8. Certain specified categories of government securities will also be fully opened for non-resident investors, apart from being available to domestic buyers as well.