Highlights of budget 1st February 2020

                 
                   *Budget 2020 Highlights:*



* 60 lakhs new taxpayers added via GST introduction

* New simplified GST returns from April 2020

* FDI elevated during period 2014-2019 to $284bn

* Central government debt reduced to 48.7% of GDP in 2019

* 16 points action plan for agricultural & irrigation sector under aspirational India

* New Education Policy will be announced soon

* ECB and FDI will open in education sector

* Degree level full fledged online programs to be started

* National Police University & Forensic university is proposed to be set up

* INR 99,300 cr proposed for education sector

* Investment clearance cell to be set up to facilitate investments and to provide advisory at State as well as Centre level

* 5 new smart cities to be developed

* Move to develop each district an export hub

* INR 27,300 cr for promotion of industry & commerce

* National logistics policy to be released soon

* Digital refund of duties to exporter

* Setting up of solar panels on barren lands

* More Tejas types train to be introduced to connect iconic cities

* 100 more Airports to be developed by 2024

* Proposed to states to replace old electric meters to the smart pre-paid electric meters. This will give flexibility to consumer to choose service provider.

* INR 22,000 cr proposed for power & renewal energy sector

* Private sectors to built data centre parks throughout the country, policy may come soon

* INR 6,000 cr proposed for 'Bharat Net'

* Funding for ideation and start up

* INR 28,600 cr proposed in this budget specific to women

* Proposed to set up Indian Institute of Heritage & culture as a deemed university

* 5 Archeological sites would be developed as iconic sites with onsite museums

* Setting up of Tribal Museum in Ranchi, Jharkhand

* INR 2,500 cr proposed for development of Tourism sector

* Taxpayer's charter to be a part of statute to build confidence/trust

* Government will ensure that citizens need not worry about tax harassment. There is a debate on building criminal liabilites for civil acts. Companies Act will be amended to correct this

* Robust mechanism is in place to monitor health of all scheduled banks

* Insurance cover for deposits increased from INR 1 lakh to 5 lakh

* Universal pension coverage with auto enrollment to be introduced (through PFRDI) to every person

* Invoice financing by NBFCs to MSME sector - Amendments to be made in Factoring Act

* Certain amendments to be made in SARFESI Act

* Non residents can invest in certain Government securities

* Liquidity constraints of NBFCs & HFCs will be addressed - Government has taken steps from last year

* International Buillion exchange to be setup in GIFT IFSC

* LIC initial public offer will come to list on stock exchange; Government will sell part of its holding

*Tax Proposals*

* Personal income tax - proposed to bring new income-tax regime for individual Taxpayer's
New slab rate (without exemption)
10% - income  5 - 7.5 lakhs
15% - 7.5 - 10 lakhs
20% - 10 - 12.5 lakhs
25% - 12.5 - 15 lakhs
30% - Above 15 lakhs
Income upto 5 lakhs no tax

* if individual ears income of 15 lakhs then tax would be 1.95 lakh vis-a-vis 2.73 lakhs as earlier

* New scheme of individual tax rates is optional

* FM says - reviewed all existing income tax exemptions and removed 70 of them in new regime and will review remaining and rationalize

* Propose to remove DDT and dividend would be taxable in the hands of shareholders; removal of cascading effect of dividend distributed by holding to subsidiary (25k cr revenues forgone on account of DDT abolishion)

* Concessional tax rate for electricity/power generation companies

* 100% tax exemption on new investment by foreign funds in infrastructure sector by 2024 with a minimum lock in period of 3 years

* ESOPs given by startups to employees currently taxed as perquisites; deffering of tax payment by employees to 5 years

* Increase in turnover limit from 25 cr to 100 cr for startups

* Deduction can be claimed by startups upto 10 years

* Tax audit turnover threshold limit increased from 1

Changes in income tax rate in 2020-21

On 1st February 2020 nirmla sitaraman said in her speech the rate of income tax will be lower than 2019-20 and specified new income tax rate.

The new and old tax rate in 2020- 21 are as follows.

These tax rate will be applicable in future tax payment date.

                         Income tax

Direct Tax

Direct Tax Proposals - To stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations.

•    Personal Income Tax:

o    Significant relief to middle class taxpayers.

o    New and simplified personal income tax regime proposed:

Taxable Income Slab (Rs.)    Existing tax rates    New tax rates

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%

o    Around 70 of the existing exemptions and deductions (more than 100) to be removed in the new simplified regime.

o    Remaining exemptions and deductions to be reviewed and rationalised in coming years.

o    New tax regime to be optional - an individual may continue to pay tax as per the old regime and avail deductions and exemptions.

o    Measures to pre-fill the income tax return initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no assistance from an expert to pay income tax.

o    New regime to entail estimated revenue forgone of Rs. 40,000 crore per year.

•    Corporate Tax:

o    Tax rate of 15% extended to new electricity generation companies.

o    Indian corporate tax rates now amongst the lowest in the world.

•    Dividend Distribution Tax (DDT):

o    DDT removed making India a more attractive investment destination.

o    Deduction to be allowed for dividend received by holding company from its subsidiary.

o    Rs. 25,000 crore estimated annual revenue forgone.

•    Start-ups:

o    Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.

o    Tax payment on ESOPs deferred.

•    MSMEs to boost less-cash economy:

o    Turnover threshold for audit increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.

•    Cooperatives:

o    Parity brought between cooperatives and corporate sector.

o    Option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions.

o    Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).

•    Tax concession for foreign investments:

o    100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments.

•    Affordable housing:

o    Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house extended till 31st March, 2021.

o    Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till 31st March, 2021.

Tax Facilitation Measures

•    Instant PAN to be allotted online through Aadhaar.

•    ‘Vivad Se Vishwas’ scheme, with a deadline of 30th June, 2020, to reduce litigations in direct taxes:

o    Waiver of interest and penalty - only disputed taxes to be paid for payments till 31st March, 2020.

o    Additional amount to be paid if availed after 31st March, 2020.

o    Benefits to taxpayers in whose cases appeals are pending at any level.

•    Faceless appeals to be enabled by amending the Income Tax Act.

•    For charity institutions:

o    Pre-filling in return through information of donations furnished by the done.

o    Process of registration to be made completely electronic.

o    Unique registration number (URN) to be issued to all new and existing charity institutions.

o    Provisional registration to be allowed for new charity institutions for three years.

o    CBDT to adopt a Taxpayers’ Charter.

•    Losses of merged banks:

o    Amendments proposed to the Income-tax Act to ensure that entities benefit from unabsorbed losses and depreciation of the amalgamating entities.

                              GST

*Indirect Tax* 

•    GST:

o    Cash reward system envisaged to incentivise customers to seek invoice.

o    Simplified return with features like SMS based filing for nil return and improved input tax credit flow to be implemented from 1st April, 2020 as a pilot run.

o    Dynamic QR-code capturing GST parameters proposed for consumer invoices.

o    Electronic invoice to capture critical information in a centralized system to be implemented in a phased manner.

o    Aadhaar based verification of taxpayers being introduced to weed out dummy or non-existent units.

o    GST rate structure being deliberated to address inverted duty structure.

•    Customs Duties:

o    Customs duty raised on footwear to 35% from 25% and on furniture goods to 25% from 20%.

o    Basic customs duty on imports of news print and light-weight coated paper reduced from 10% to 5%.

o    Customs duty rates revised on electric vehicles and parts of mobiles.

o    5% health cess to be imposed on the imports of medical devices, except those exempt from BCD.

o    Lower customs duty on certain inputs and raw materials like fuse, chemicals, and plastics.

o    Higher customs duty on certain goods like auto-parts, chemicals, etc. which are also being made domestically.

•    Trade Policy Measures

o    Customs Act being amended to enable proper checks of imports under FTAs.

o    Rules of Origin requirements to be reviewed for certain sensitive items.

o    Provisions relating to safeguard duties to be strengthened to enable regulating such surge in imports in a systematic way.

o    Provisions for checking dumping of goods and imports of subsidized goods being strengthened.

o    Suggestions for reviews of exemptions from customs duty to be crowd-sourced.

•    Excise duty proposed to be raised on Cigarettes and other tobacco products, no change made in the duty rates of bidis.

•    Anti-dumping duty on PTA abolished to benefit the textile sector.