The Finance Minister of India, Nirmala Sitharaman announced the Budget 2020-21 in the parliament, today. The Budget focussed on higher growth, incentives for the agriculture and infrastructure sector, tax reforms for the corporates, and big changes in the personal income tax rates, among other initiatives. Below-provided is a detailed look into the highlights of the Indian Budget 2020-21.
The Finance Minister (FM) intends to double the income of farmers by 2022. She says the hand-holding of farming-based activities will be done in cooperation with states. A total of 6.11 crore farmers are already insured under the Fasal Bima. PM Kusum Scheme helped to rely on social energy and reduce dependence on kerosene and diesel. About 20 lakhs farmers can now set up standalone solar pumps. Farmers can generate a livelihood by utilizing barren land for solar energy.
- The government can help with 15 lakhs solarise grid-connection pump sets. The government will also provide warehouse building incentives.
- FM wishes to revise incentives for the use of chemical fertilizers.
- Zero budget natural farming will be soon started to promote organic farming.
- The Indian Railways will set up Kisan rail on PPP goods. This is with the intention to transport perishable goods.
- Civil Aviation will add Krishi Udan. It will help value realization in the North-Eastern and tribal areas.
- For the horticulture sector, the focus will be on one product in one district.
- Cooperatives and NBFCs are already active in agricultural lending. The FM plans to expand the NABARD refinance scheme.
- A proposal of Agri credit for 2020-21 is Rs. 15 lakh crore.
By 2025, there is a plan to double the milk-producing capacity to 108 MT from 53.5 MT. The government will raise 200 lakh tons of fish production. Also, there will be Sagar Mitras (fish farmers). Along with these two benefits, there will be caged cultivation and the production of algae. The FM plans to allocate Rs. 2.83 lakh crore for Agri and allied activities (including irrigation, agriculture, and rural development) for FY21.
- Healthcare, Water, and Resources
A total of Rs. 69,000 crore will be provided for the healthcare sector. Out of which Rs. 6,400 will be allocated for PM Jan Arogya Yojana. PPP mode hospitals will be set up in areas with no hospitals. 112 districts will be given priority here. Mission Indradhanush will be extended to cover new vaccines and new diseases.
- Under Ayushman Bharat, there are 20,000 empanelled hospitals. More will be added in Tier 2 and 3 cities to benefit the poor in the areas.
- TB Harega, Desh Jeetega campaign will be boosted to ensure the end of TB by 2025 in India.
- 3.6 lakh crore has been approved for Jal Jeevan Mission. This will augment local water resources, water harvesting, desalination, and renewal of older sources in FY21.
FM says there is a need for greater finance in the education sector to attract good teachers. FDA and ECBs will look for the education sector. Rs. 99,300 crore is proposed for the education sector. Dialogues have been initiated with states about the education policy of NEP. The NEP will be announced soon. IND-SAT exam will be held for African and Asian students for ‘Study in India’ scholarships. There will be set up for Police and Forensic Sciences.
- By March 2021, 150 higher education institutes will get apprenticeship programs.
- Urban local bodies will offer fresh engineers job opportunities for a year.
- Degrees soon can be taken online.
- It will be provided by the top 100 NIRF ranked institutes.
- 3,000 crore will be provided for the skill development of nurses, paramedical staff, teachers, and caregivers abroad.
FM acknowledges that India has rich skills in trading and metallurgy. She says that there will be programs to create opportunities for startup owners. There will be a setup of investment clearance cells for entrepreneurs. Assistance will be provided in funding. A portal will be set up for this purpose. FM also proposes a scheme to encourage the manufacturing of mobile phones, electronic equipment, and semiconductor packaging. This can be used for the manufacturing of medical devices as well.
For exports, a new Nirvik is being worked on. It will ensure lower premiums and faster claims settlements. Each district will be developed as an export hub. This year, there will be a launch of a system to provide the pending refunds to exporters and duties applied (including VAT and electricity). Rs. 27,300 crore will be allocated for the development of industry and commerce in FY21.
The goal is to make MSMEs competitive. NSDC will help with skill development in the infrastructure sector. National Infrastructure Pipeline has 6,500 projects. By 2024, 12 lots of highway bundles are to be monetized. Delhi-Mumbai expressway should be completed by 2023. Chennai-Bengaluru expressway will be started as well. The plan is to set up a total of 9,000 km of the economic corridor.
- Additional numbers of TejasExpress type trains are to be set up for tourist destinations.
- 20% equity will be provided for Bengaluru Suburban Transportation Project. This will be a project amounting to Rs. 18,600 crore.
- There will be a set-up for a governance framework for ports. The framework will also look at one major port and its listing on the stock exchanges.
- Power and Renewable Sector
Rs. 22,000 crores will be allocated for the power and renewable sector. There will be a launch of a new scheme of smart meters. The prepaid meters will provide consumers with the ability to choose a rate and supplier, as per their needs.
Internet of Things, Artificial Intelligence, and Analytics are changing the world. FM says there will be a set-up for a policy to build data centre parks across India. Public institutions at Gram Panchayat levels will receive digital connectivity. Rs. 6,000 crore will be allocated to BharatNet. In FY21,
- BharatNet from fibre to homes will link 100,000 Gram Panchayats.
- For securing a comprehensive national-level database, two national-level science schemes will be set up.
- Rs. 8,000 crores will be allocated to the set up of the National Mission on Quantum Computing and Technology.
- Women, Senior Citizens, and SC/ST/OBC
In FY21, Rs. 28,600 crores will be allocated for women-linked programs. Rs. 35,600 crore will be allocated for nutrition-related programs for FY21. Under Beti Bachao Beti Pdhai, the gross enrolment of girls is 59.7% at the higher secondary level, 81.32% at the secondary level, and 94.32% at the elementary level. FM proposes a task force in 6 months to lower maternal mortality rates.
- For FY21, Rs. 9,500 crores will be allocated for senior citizens.
- 85,000 crore will be allocated for the relief of SC/OBC.
- 53,700 crore will be allocated for STs.
For FY21, Rs. 3,100 crores will be allocated to the Culture Ministry. Rs. 2,500 crores to be allocated for the promotion of tourism. Under UDAN, 100 more airports will be developed by 2024. There will be a set up of 5 archaeological sites with museums in Adichanallur in Tamil Nadu, Rakhi Gadi in Haryana, Dholavira in Gujarat, Hastinapur in UP, and Shivsagar in Assam. In Ranchi, Jharkhand, a trial museum will be set up. In Lothal, a maritime site will be set up.
From 1 January 2021, India’s commitment to the Paris Agreement action for climate change will kick in. The government will provide Rs. 4,400 crore to encourage state governments to draw initiatives for clean air. The power plants will have higher emissions will be closed. Such lands will be used for other requirements.
The deduction of Rs. 1, 50,000 for affordable housing will be extended to loan sanctions by a year. Extension by one year to March 2021 will also be there for a tax holiday on the profits of affordable housing project developers.
- Ease of Business
During the 75th year of the country’s independence (2022), India will host the G-20 residency. This event will focus on driving global economic advantage. Rs. 100 crore will be allocated for this purpose.
- Financial Sector
To build a robust and reliable finance sector, Rs. 3.5 crore as capital will be infused into PSU banks. Some of the banks will be encouraged for fundraising purposes. For this, encouragement will be provided to move the capital market. Deposit insurance cover is now hiked to Rs. 5 lakh from Rs. 1 lakh.
- NBFC eligibility for SARFAESI Act reduced from Rs. 500 crore AUM to Rs. 100 crore.
- There will be amendments to the FRDA Act. This will separate the NPS Trust of government employees from the PFRDA.
- FM says there will be selling of government stake in IDBI Bank to private investors.
- MSME Budget
Entrepreneurs of MSMEs will be offered subordinate debts. This will be treated as quasi-equity. From the debt restructuring last year, more than 5 lakh MSMEs will be benefitted. The government has also requested RBI to extend the window of debt structuring by a year to March 2021.
- Financial Markets
Liquidity constraints will be looked into for HFCs and NBFCs. The FPI Limit in corporate bonds will be raised from 9% to 15%. Government securities will be available for non-resident investors. Legislation on the mechanism for netting financial contracts will be accomplished to improve investors’ confidence. There will be a launch of debt ETF. This will consist of government securities.
- The FM also says she will debate the projected fiscal number in compliance with the procedure as in FRBM Act. Repayments of these debts are done for the Consolidated Fund of India.
- The revised expenditure estimate is Rs. 26.99 crores for FY20. Revised receipts stand at Rs. 19.32 lakh crore for FY21.
- The Finance Ministry estimates the fiscal deficit as 3.8% of GDP in FY20, and for BEFY21 it is 3.5%.
- 30.42 lakh crore is the total expenditure for FY21. The new market borrowing for FY20 and FY21 is Rs. 4.99 lakh crore and Rs. 5.36 lakh crores, respectively.
FM thinks that IFSC has the capacity to become the centre of finance. It consists of 19 insurance entities. GIFT City will set up an international bullion exchange. It will better the price discovery of gold and enhance the position of India to create more jobs. LIC is to be likely one of the biggest IPOs in the country. The government will list LIC on stock exchanges.
- Income Tax
There will be amendments to the IT Act. Here, the CBDT will be mandated for the taxpayers’ charter. PAN will be available instantly online. This will be on the basis of Aadhaar without filling any forms. There will be an amendment to enable faceless appeals along the lines of faceless assessments. There will be a reduction in the personal income tax regime for those who forego exemptions and deductions. The new tax regime will be optional. Personal income tax is now at the lowest level.
- 10% for income between Rs. 5 lakhs to Rs. 7.5 lakhs against 20%.
- 15% for income between Rs. 7.5 lakhs TO Rs. 10 lakhs against 20%
- 20% for income between Rs. 10 lakhs to Rs. 12.5 lakhs against 30%
- 25% for income between Rs. 12.5 lakhs to Rs. 15 lakhs against 30%
- 30% for income above Rs. 15 lakhs
- Tax Reforms
For the government, a secure and safe business environment is the key. For this purpose, the Contracts Act will be strengthened to save companies and businesses from tax harassment. Companies Acts shall also be amended to build criminal liabilities for civil acts. There is a proposal for the deferment by 5 years for tax paid by employees on ESOPs from start-ups. There will be no audit for companies with or up to a turnover of Rs 5 crores.
- Companies will no longer have to pay the dividend distribution tax. It has been abolished. This will make India a more attractive destination for investments.
- Cooperatives will now be taxed at 30%. Cooperatives can choose 22% tax, 4% cess with no exemptions and 10% surcharge.
- The power generation companies can now avail of the corporate tax cut.
- In infrastructure and other notified sectors, the government will offer exemptions for sovereign wealth funds. The minimum lock-in period will be of 3 years.
- For FPIs, the withholding tax rate will be extended to 2023. Concessional 5% withholding tax will be extended to the municipal bonds.
- Direct Tax
A new direct tax dispute settlement will be set up under ‘Vivad se Vishwaas Scheme’. This will be for the hearing of direct tax pending cases. No penalty is to be charged if taxpayers pay taxes by March 31, 2020.
- GST and Custom Duty
GST reforms for simplified return-filling form will be continued. GST rates are being deliberated upon. This will improve the ease of doing business in India. Revisions to some of the custom duty exemptions will be done after September 2020. Customs duty will be raised on furniture and footwear. A health cess will apply to the import of medical equipment.
The announcement of Budget 2020-21 was in line with increasing the purchasing power of the common people. It also brought some necessary tax reforms for the corporates/cooperatives. Several initiatives were seen in infrastructure, technology, healthcare, women, and financial markets. These efforts, reliefs, and steps will surely pave a better future for India, over the upcoming financial year.