Highlights of Union Budget for 2020-21
FY21 ESTIMATES
- Fiscal deficit seen at 3.5% of GDP
- Net market borrowing pegged at 5.36 trln rupees
- Gross market borrowing at 7.8 trln rupees
- Pegs nominal GDP growth at 10%
- Receipts seen at 22.46 trln rupees
- Total spending seen at 30.42 trln rupees
- ETNow: Pegs divestment target at 2.1 trln rupees
FY20 REVISED
- Net market borrowing pegged at 4.99 trln rupees
- Fiscal deficit seen at 3.8% of GDP
- Receipts 19.32 trln rupees
- Spending revised to 26.99 trln rupees
FISC HEALTH
- Expected tax buoyancy will take time
- Good part of govt borrowing to be used for capex
- Fully provided for all flagship schemes of govt
- To activate FRBM Act escape clause on structural reforms
- Fundamentals of economy strong
- Centre’s debt down to 48.7% of GDP Mar 2019 vs 52.2% Mar 2014
GROWTH, INFLATION
- India now 5th largest economy in the world
- FY14-19 average GDP growth 7.4%
- Financial structure must keep evolving to become $5-trln economy
- Stable, predictable business environment a key objective
- Reliable, robust, clean financial sector critical for economy
DIRECT TAX
- Looking at inverted duty structure under GST
- Introducing Aadhaar-based verification for indirect taxes
- Instant allotment of PAN on basis of Aadhaar
- To amend Income Tax Act to help merged PSU banks to absorb losses
- To waive interest on tax disputes if amount paid by Mar 31
- Propose scheme to settle old direct tax cases
- To amend laws to allow faceless tax appeals
- Propose to abolish dividend distribution tax
- Dividend to be taxed only in hands of recipient
- Revenue forgone on dividend distribution tax 250 bln rupees
- To review, rationalise tax exemptions over next few years
- New power cos to attract 15% corporate tax
- Cooperatives can be taxed at 22% without exemptions
- Concessional 4% withholding tax on bonds listed in GIFT City
- Proposes some tax sops on ESOPs of staff at startups
- Deferring tax payment on sale of ESOP for 5 yrs in start-ups
- Concessional 5% withholding tax extended to municipal bonds
- Can avail new tax rates if not availing some exemptions
- Tax holiday for affordable housing extended by 1 year
- Turnover threshold for audit of MSMEs hiked to 50 mln rupees
- Tax on income above 1.5 mln rupees at 30%
- Person with income of 1.5 mln rupees to get 78,000-rupee relief
- No tax on income below 500,000 rupees
- Cut tax on income of 1.25-1.50 mln rupees to 25%
- Cut tax on income of 1.00-1.25 mln rupees to 20%
- Cut tax on income of 750,000-1 mln rupees to 15%
- Cut tax on income of 500,000-750,000 rupees to 10%
- New direct tax scheme optional for taxpayers
- Large benefits for taxpayers under new direct tax regime
- Propose to significantly reduce income tax in new regime
- To bring simplified personal income tax regime
- Tax proposals to bring ease of compliance, reduce litigation
- Tax proposals focused on simulating growth
- Want to enshrine taxpayers’ charter into statute
- Tax harassment can’t be tolerated
- 100% tax exemption on sovereign wealth funds’ infra investment
- Removed 70 of 100 income tax exemptions in new regime
- Revenue foregone on income tax cut at 400 bln rupees/year
INDIRECT TAX
- Propose nominal health cess on import of medical devices
- Customs duty on footwear, furniture raised
- To review remaining customs duty exemptions
- Some customs duty exemptions being withdrawn
- To review rules of origin for imports under free trade deal
- Amending laws to ensure no undue gains for imports under FTA
- To transfer FY17, FY18 cess balance to GST compensation fund
- GST compensation to states to be limited to cess collection
- GST helped add 6 mln tax payers in 4 years
- Average household saves 4% of monthly spend due to GST
- Effective tax for all commodities came down due to GST
- GST did face certain challenges
- Turnaround time for trucks cut by 20% due to GST
- Inspector Raj has vanished due to GST
- GST has resulted in efficiency gains
- GST has been gradually maturing
- GST has facilitated formalisation of economy
- GST extended 1-trln-rupee benefit annually to consumers
REFORMS
- Accepted substantial recommendations of 15th finance panel
- To improve quality of life through national infra pipeline
- Already provided 220 bln rupees for national infrastructure pipeline
- To encourage states to follow model laws made by Centre
FINANCIAL SECTOR, MARKETS
- Propose to divest LIC via IPO
- GIFT City to set up international bullion exchange
- To enhance credit guarantee scheme for NBFCs
- To allow NRIs to buy certain govt securities
- To float new debt ETF comprising primarily of gilts
- Some gilts to be completely available to overseas investors
- FPI limit in corporate bonds to be raised to 15% from 9%
- To amend Factoring Regulation Act to cover NBFCs
- Asked RBI to mull extending MSME recast window by 1 more year
- Encourage PSU banks to approach capital mkt for fund raising
- Have robust system to check health of scheduled commercial banks
- To amend Banking Regulation Act to strengthen co-op banks
- “Depositors money absolutely safe”
- Deposit insurance cover hiked to 500,000 rupee/depositor
- To sell govt stake in IDBI Bank to private investors
- FY14-19 saw twin focus on structural reforms, inclusive growth
- Banks saw clean-up, recapitalisation during FY14-19
- Aim for seamless delivery of svcs via digital governance
- Recognise need to support energised spirit of entrepreneurs
- Note there is global discussion on monetary policy efficacy
- To carry out governance reforms in PSU banks
- To mull strengthening National Contracts Act
- Propose new national policy on national statistics
- To ensure civil offence has no criminal penalty in Cos Act
INFRASTRUCTURE, INDUSTRY
- Allocate 273 bln rupees in FY21 to develop commerce, industry
- To allot 14.8 bln rupees on national technical textile mission
- Plan project preparation facility for infra pipeline
- India needs to boost domestic manufacturing
- To launch new export credit scheme NIRVIK
- NIRVIK to have higher insurance cover, lower premiums
- NIRVIK scheme for small exporters
- Moot new manufacturing scheme for medical devices
- Need to boost manufacturing of electronic items in India
- Scheme for mobile phone manufacture, semiconductor packaging
- Scheme also for electronic equipment manufacturing
- Plan five new smart cities via PPP mode
- Propose to set up an investment clearance cell
- Investment clearance cell to work through a portal
- To create single window for e-logistics market
- To soon release national logistics policy
- To digitally refund duties to exporters
- All ministries to issue quality standard orders
- Propose 1.7 trln rupees for transport infra FY21
- To seek external funds for Bengaluru suburban rail network
- To develop 100 more airports by 2024 to support UDAAN scheme
- To mull listing at least 1 key port on bourses
- Plan more Tejas-type trains to connect tourist locations
- Moot large solar capacity alongside tracks on railway land
- To actively pursue Mumbai-Ahmedabad high-speed train
- Aim to achieve 27,000 km electrification for railway tracks
- Need commercialisation of highways for NHAI to raise funds
- To monetise over 12 lots of highway bundles before 2024
- Delhi-Mumbai expressway to be completed by 2023
- To start Chennai-Bengaluru Expressway
- Allocate 220 bln rupees for power, renewable sector in FY21
- To expand national gas grid to reach 27,000 km
- To announce more reforms for transparent price discovery in gas
- To develop Bengaluru city rail network for 186 bln rupees
- To take more steps to reform power distribution cos
- Intend to promote pre-paid smart electricity metering
- 100,000 gram panchayats to be linked with Bharat Net this year
- Propose 60 bln rupees for Bharat Net programme in FY21
- Policy to enable pvt sector to set up data centre parks
- Moots 80 bln rupees for quantum technology plan for 5 years
- Two national-level science schemes to map India genetic landscape
- Propose 25 bln rupees to promote tourism in FY21
- To provide 31.5 bln rupees for culture ministry in FY21
- Propose to set up tribal museum in Ranchi
- Propose 44 bln rupees for clean air in FY21
- Advised to shut thermal power units if emission above limit
- Propose to set up national recruitment agency
- Propose national recruitment agency for non-gazetted posts
- To decriminalise some norm violations under Companies Act
- To set up international bullion exchange in GIFT City
FARM SECTOR
- Agri services need copious investments
- Farm markets need to be liberalised
- To unveil 16 action plans to focus on farm sector
- Committed to doubling farmers’ income by 2022
- To help 1.5 mln farmers to solarise grid connected pump sets
- Solar power from farms to be sent to grids
- Expanding KUSUM plan to 2 mln farmers for solar powered pumps
- Provided energy sovereignty through KUSUM scheme
- Moot comprehensive steps for 100 water stressed districts
- Rural road plan, fincl inclusion helped raise farm income
- To launch Krishi Udaan scheme for domestic, global routes
- Krishi Udaan to help value realisation in tribal areas
- Krishi Udaan to help value realisation in northeast
- Railways to form kisan rail for perishable cold supply chain
- Kisan rail for perishables’ cold supply chain through PPP
- Viability gap funding for warehousing at block, taluk levels
- NABARD to map, geo-tag farm warehouses, cold storage
- To further strengthen NABARD refinance
- Must change regime incentivising excessive chemical fertiliser use
- To have framework for development, mgmt of marine resources
- To raise fish output to 20 mln tn by FY23
- Target 500 fish farmer producer organisations
- To double milk processing capacity to 108 mln tn by 2025
- MGNREGA to be used to develop fodder farms
- To expand NABARD refinance scheme to NBFCs, co-operatives
- Negotiable warehousing receipts to be integrated with e-NAM
- Give support to states for cluster-based horticulture farm
