Budget 2020: Finance Minister announces pro-middle class budget
Finance Minister Nirmala Sitharaman on Saturday announced cuts in personal income tax, extended tax benefits for affordable housing and gave relief to companies on payment of dividends in the Union Budget for 2020-21 as the government looked to boost consumption to bring an economy out of the worst slowdown in 11 years.
Aspirational India, economic development and a caring society for all are the three prominent themes of the Union Budget 2020-21, Sitharaman said presenting her second Budget in the Lok Sabha.
Sitharaman’s marathon 2 hour 43 minutes speech, the longest by any Finance Minister, which she had to truncate with only two pages left unread, sought to lift the economy largely on Rs 13 lakh crore government spending and set an ambitious disinvestment target that hinges on a stake sale in crown jewel Life Insurance Corporation of India, which has a net worth of over Rs 31 lakh crore.
The Finance Minister proposed raising customs duty on a variety of products ranging from tableware and kitchenware to footwear, furniture, stationery, and toys to give a level-playing field to domestic companies and boost ‘Make in India.’
Sitharaman in her Budget for 2020-21, proposed new income tax slabs of 15 percent and 25 percent in addition to the existing 10 percent, 20 percent, and 30 percent.
The new income tax slabs would be for individuals not availing certain specified deductions or exemptions. Under the proposed income tax slabs, annual income up to Rs 2.5 lakh is exempt from tax, Those individuals earning between Rs 2.5 lakh to Rs five lakh will pay 5 percent. Income between Rs 5 lakh and Rs 7.5 lakh will be taxed 10 percent, while those between Rs 7.5 lakh and Rs 10 lakh at 15 percent.
Those earning between Rs 10 lakh and Rs 12.5 lakh will pay tax at 20 percent whereas those between Rs 12.5 lakh and Rs 15 lakh will pay at the rate of 25 percent. Income above Rs 15 lakh will be taxed at 30 percent. Individuals opting for taxation under new rates will not be entitled to exemption/deductions, including under Section 80C and 80D, LTC, housing rent allowance, the deduction for entertainment allowance, professional tax and interest on self-occupied/vacant plot.
Currently, annual income up to Rs 2.5 lakh is exempt from income tax, While a 5 percent tax is charged for income between Rs 2,5 lakh and Rs 5 lakh. 20 percent for income between Rs 5 lakh and Rs 10 lakh and 30 percent for those whose income is above Rs 10 lakh.
Clad in a bright yellow sari with a light green border, Sitharaman recited a poem in Kashmiri and its Hindi translation in her Budget speech. The poem referred to Shalimar Bagh and Dal Lake in Kashmir emphasizing that India belongs to all its citizens.
The gesture comes as Kashmir valley remains on the path to normalcy after the abrogation of Article 370.
The Hindi translation of the poem read: Humara watan, Khilte hue Shalimar Bagh jaise, Humara watan Dal Lake mein khilte hue kamal jaisa nau jawanon ke garam khoon jaisa, mere watan tera watan humara watan, duniya ke sabse pyara watan,
Sitharaman followed up with Tamil adage about tending to land, after which she announced measures to boost the agricultural sector and farmers’ income. As the Finance Minister delivered her Budget speech, some of her remarks including Beti Bachao, Beti Padhao met with protests from the Opposition Benches, Sitharaman’s Budget speech was peppered with quotes from Kalidasa’s Sanskrit work Raghuvamsam, Tamil philosopher Thiruvalluvar’s Tirukkural”The new regime shall be optional for taxpayers,” she said.”The proposed structure will provide significant relief to taxpayers and more those in the middle class,” Sitharaman said.To boost growth, the Finance Minister announced higher spending on infrastructure, rural development, and the Agri sector, The government is proposing a 16-point action plan to boost agriculture and farmers’ welfare, she said.
On the other hand, the Finance Minister’s Budget announcement failed to lift investor sentiments with BSE Sensex tumbling over 1,000 points and Nifty slipping below 11,650 marks, Budget 2020 has also proposed a new tax regime. As per the new regime, 70 tax exemptions will be removed.
“In order to simplify the income tax system, I have reviewed all the exemptions and deductions which got incorporated in the income tax legislation over the past several decades. It was surprising to know that currently more than one hundred exemptions and deductions of different natures are provided in the Income Tax Act. I have removed around 70 of them in the new simplified regime. We will review and nationalize the remaining exemptions and deductions in the coming years with a view to further simplify the tax system and lowering the tax rate,” Sitharaman said.
To further ease the process to allot PAN (Permanent Account Number), the government will launch a system of instant allotment of PAN on the basis of Aadhar, ” the Finance Minister said.
The government has permitted Deposit Insurance and Credit Guarantee Corporation (DICGC) to raise deposit insurance coverage by five times to Rs 5 lakhs from Rs 1 lakh, Prime Minister Narendra Modi said new reforms in Budget 2020 will accelerate the economy.
He said agriculture, infrastructure, textiles, and technology are the main areas of employment. “In order to increase the employment generation, these four have been given a lot of emphasis in the Budget, ” he said.