This document provides a summary and analysis of key points from the Indian Union Budget 2020-2021 presented by the Finance Minister. Some of the key highlights included in the 3-page summary are:
- A new optional income tax regime that provides lower tax rates but removes certain deductions and exemptions.
- Proposed disinvestment target of INR 2.1 lakh crore through sale of stakes in PSUs like LIC and BPCL.
- Infrastructure spending to get a boost through initiatives like the National Infrastructure Pipeline.
- Customs duties increased on various imports like electronics, footwear, and furniture to boost domestic manufacturing.
- Measures to resolve long pending direct tax disputes and raise funds through disinvestment
1. Budget 2020
Prof. (Dr.) Saurabh Agarwal
Ph D (FMS, Delhi University), M. Phil. (DSE, DU), M. Com. (DSE,
DU), B. Com. (H) (SRCC), UGC (NET), AMT (AIMA)
Professor of Accounting & Finance & Principal (Offg.)
IIF College of Commerce and Management Studies
www.iifccms.edu.in
2. Budget 2020
• 10% TDS on dividend payment in mutual
funds and not on capital gains arising from
redemption of units
• Individuals can Switch Tax Regime Every Year-
- However, not for a person with a business-
Official app in progress.
• Nominal GDP growth of 10%
• Fiscal deficit 3.8%
3. New Tax Rates
What’s Out
Some of the 70 exemptions and deductions you
won’t get in the new regime
-Section 80 C Investments
-House rent allowance
-Housing loan interest
-Leave travel allowance
-Medical insurance premium
-Standard deduction
-Saving bank interest
-Education loan interest
What stays
Some 50 tax exemptions have been left untouched
-Standard deduction on rent
-Agricultural income
-Income from life insurance
-Retrenchment compensation
-VRS proceeds
-Leave encashment on retirement
Source: TOI
11. Tax
• 5.8 Crore people who file tax returns in 2018-19
• 5.3 Crore people claimed IT deductions of less
than INR 2 lakh including 80C, 80D and
80CCD(1B)
• 48 lakh or 9% assesses, claimed deductions more
than INR 2 lakh
• 3.77 lakh tax assesses who claimed deductions
exceeding INR 4 lakh
• A loss of INR 40,000 crores estimated - ???
• Source: Govt
16. Impact
• White goods [including refrigerators (INR 200-INR 600),
washing machines], smartphones (INR 20-60), apparel,
shoes expensive
• Butter, cheese, shoes, fans, food grinders, iron room
heaters, tea and coffee makers, kitchenware and hair
dryers expensive by 5 to 10%
• Price increase from 2% to 30%
• Exports fall by 1.96% - $239.29 billion (A-D 2019)
• Imports declined by 8.9% - $ 118.10 billion
• Trade Deficit - $118.10 billion
17. Disinvestment
• INR 2.11 lakh Cr from disinvestment proceeds
in 2020 – 21
• In 2019-20 – INR 65,000 Cr
• Reducing stake in LIC, PSBs, BPCL, Concor
• Exit IDBI Bank
• 150 passenger trains to private players
18. LIC IP0
• LIC will become 4th largest co after Reliance
Industries, TCS and HDFC Bank
• Help Centre meet INR 2.1 lakh Cr divestment
• INR 5.75 lakh cr estimated market capitalisation
• INR 80,000 proceeds from 10% sale
• INR 31 lakh Cr LIC’s assets under management
• INR 25,241 cr NPAs out of a total debt of INR
4,05,304 cr in FY 19
19. Hike in Deposit Insurance to Pinch
Banks
• Deposit Insurance and Credit Guarantee Corp
(DICGC) to insure INR 5 lakh up from INR 1
lakh
• Bank pays INR 10 for every INR 10,000 insured
• Earlier paying INR 100 will now pay INR 500
20. Stock market
• Bright – Infra & Construction, Cement, Agro-
chemical, Consumer & IT
• Avoid – Capital Goods, Insurance, Real Estate,
Commodities and NBFCs
• Stock Picks
• Large cap - ICICI Bank, TCS, L&T, SBI
• Small cap – Bata India, Kalpataru Power, Repco
Home Finance, Siemens, Supreme Ind
• Life Insurance stocks likely to go down - ICICI Pru,
SBI life and HDFC life
21. DDT
• DDT removal will hurt Foreign Portfolio Investors
(FPIs)
• 28.5% - if FPI is a trust
• 20% - if FPI is a corporate
• Adding
• Unitholders of infrastructure (InvIT) and real
estate (REIT) hit
• FPI based out of US and Canada will see no
effective change
22. DDT
• Will reduce burden on Indian companies who pay
dividend distribution tax at an effective rate of
20.5%
• Investors getting dividends upto INR 10,00,000 do
not pay tax and above INR 10,00,000 pay 10%
• Now after abolition of DDT investors may pay as
high as 43%
• Systematic withdrawal plans better for mutual
fund investors needing cash flows
24. STT and CTT
• INR 13k cr STT collections in FY 21 (up 4%)
• CTT on Commodity Options – A seller of a
Commodity Futures index will pay commodity
transaction tax of 0.01%
• If delivery is given/taken – 0.0001%
• If trade is squared off – 0.125%
25. Main Point
• Infrastructure to get boost by 100% tax
exemption on investments by sovereign
wealth funds (SWFs)
• At INR 29,000 crore civic bodies to likely get
40% more in 2020-21
• 11% hike in Special Protection Group (SPG) to
59 Cr from 535 Cr
• G-Sec ETF proposed (recently Bharat Bond ETF
raised INR 12,500 crore)
26. Main points
• Medical Equipment imports attract cess – 0-7.5%
import duty and 5% health cess – X ray machines,
blood pressure instruments, glucometers, digital
thermometers and ultrasound machines
• Cigarette Prices to rise 4-5%, Hooka and Zarda to
also cost more
• Combs, brooms, brushes, mops, fans, grinders,
mixers, shavers, irons, dryers, toasters et to
increase by 5-10% as customs duty up from 10%
to 20%
28. NRIs
• More Tax Compliance Issues
• Those living abroad without becoming
residents of any country will be treated as
Indian residents and taxed accordingly
• NRI status for those who stay 245 days abroad
as compared to 181 days earlier
29. Affordable Homes Get Tax Holiday
Boost
• Extended the deadline for first time home
buyers to avail additional INR 1.5 lakh interest
deduction on home loans by a year till 31
March 2021
• This is in addition to INR 2 lakh allowed as
deduction across segments
30. Infrastructure
• Budgetary support to Railway Ministry
Schemes
69,967 Cr – 72,216 Cr
• National Highways Authority of India
36,691 Cr- 42,500 Cr
• Road Works
45,887 Cr – 48,759 Cr
32. Infrastructure
• Metro Projects
17,612 Cr – 17,482 Cr
• Wind Power
1,026 Cr – 1,299 Cr
• Solar Power
1789 Cr – 2,150 Cr
• Bharat Net
3,000 Cr – 8,000 Cr – link 100,000 gram panchayats
Support to Infrastructure Pipeline
12,500 Cr
33. Resolve Direct Tax Disputes
• Accumulated interest and penalties for 7-8
year old cases could be double the actual tax
payable
• INR 8 lakh cr already stuck in direct tax
litigation
• INR 50,000 Cr estimated amount the govt
could end up collecting under the scheme
• 1% of all the cases constitute more than 50%
of the total value of all tax litigation
34. Main Points
• Concessional tax rate of 15% to new domestic
power cos provided they start generating
electricity by 31st March 2023
• Upper limit imposed with a yearly cap of INR
750000 on tax exempt employer’s
contribution to provident fund,
superannuation fund and NPS
• Cooperative to be taxed at 22% plus 10%
surcharge plus 4% cess
35. Start Ups
• Defers tax on stock options by 5 years –
turnover below INR 100 crore and be
incorporated after March 31, 2016 but before
April 1, 2021
• Opening Data Parks
• Sarkari Internship with urban local bodies
• Single Investment cell
• Invest INR 8,000 crore in National Mission on
Quantum Technology
36. Start Ups
• Vision to create INR 36,000 crore fund to provide
production linked incentives to Smartphone
makers
• Deduct 1% tax at source by online marketplaces
like Flipkart, Amazon, Uber and UrbanClap -
Applicable to sellers who clock over INR 5 lakh in
sales on particular platform – cash flow or small
trader affected – will create working capital issues
who are already paying 5% TDS on marketplaces
charges
37. Policy Changes
• Fiscal Discipline
• Honouring Contracts
• Decriminalising Corp Offences
• Bridge Courses – teachers, nurses, par medical
staff and caregivers abroad
• Tighter Origin Norms for FTA Benefits, High Onus
on Importer- RCEP
• Adjusted Gross Revenue (AGR) mop up to boost
telecom revenue by 125% - Additional revenue of
INR 50,520 Cr
40. Conclusion
• No Stimulus as govt sticks to fiscal consolidation
• Higher capex and infra spend
• Higher Import duties
• ELSS , Insurance schemes may become less
popular
• Savings could reduce
• The Budget had no big fiscal stimulus, several
protectionist duties, and few steps to revive a
slowing economy – Swaminathan Aiyar
• Budget of Vision, Action: PM
41. Media Presentations
• Zee News interview on Budget 2020 on 1.2.2020 from 10
am to 12 pmYoutube:
https://www.youtube.com/watch?v=X6t1EJYjtJg2.
• Total News interview on Budget 2020 on 1.2.2020 from 1
pm to 4 pmYoutube: https://youtu.be/6uK-
L59XjDMhttps://www.youtube.com/watch?v=6uK-
L59XjDM&t=1875s3.
• Total News interview on Economic Survey on 31.01.2020
from 5 pm to 6pmYoutube:
https://www.youtube.com/watch?v=0yf2Czihdm84.
• Tehzeeb TV interview in Program - INTERNATIONAL DEBATE
ON THE DAVOS 2020 : WORLD ECONOMIC FORUM on 1st
February 2020Youtube: https://youtu.be/Pb-e5RZYsYg
42.
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44. Thank you and Jai Hind
Member, Employee State Insurance Corporation (ESIC), Ministry of
Labour and Employment, Government of India
(http://www.esic.nic.in/)
Member, Governing Body, Dattopant Thengadi National Board for
Worker's Education and Development (formerly Central Board for
Workers Education - CBWE), Ministry of Labour and Employment,
Government of India (http://www.cbwe.gov.in/about-us.aspx)
Member, Managing Committee, ASSOCHAM (www.assocham.org)