The Key Highlights of Union Budget 2020-2021
1)     Major Action Points for Rural Development

Ø  Kisan Rail to be setup by Indian Railways through PPP:

·        To build a seamless national cold supply chain for perishables (milk, meat, fish, etc.

·        Express and Freight trains to have refrigerated coaches.

Ø  Krishi Udaan to be launched by the Ministry of Civil Aviation:

·        Both international and national routes to be covered.

·        North-East and tribal districts to realize Improved value of agri-products.

Ø  One-Product One-District for better marketing and export in the Horticulture sector.

Ø  Balanced use of all kinds of fertilizers – traditional organic and innovative fertilizers.

Ø  PM-KUSUM to be expanded:

·        Rs. 20 lakh farmers to be provided for setting up stand-alone solar pumps.

·        Another Rs. 15 lakh farmers to be helped to solarise their grid-connected pump sets.

·        Scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid.

2)     Wellness, Water and Sanitation

·        69,000 crore allocated for overall Healthcare sector.

·        6400 crore (out of Rs. 69,000 crore) for PM Jan Arogya Yojana (PMJAY):

·        Rs. 3.60 lakh crore approved for Jal Jeevan Mission:

·        12, 300 crore allocation for Swachh Bharat Mission in 2020-21:

·        Committment to ODF-Plus in order to sustain ODF behaviour.

·        Emphasis on liquid and grey water management.

·        Focus also on Solid-waste collection, source segregation, and processing.

3)     Education and Skills

·        99,300 crore for education sector and Rs. 3000 crore for skill development in 2020-­21.

·        New Education Policy to be announced soon.

·        National Police University and National Forensic Science University proposed for policing science, forensic science, and cyber-forensics.

·        Degree level full-fledged online education program by Top-100 institutions in the National Institutional Ranking Framework.

·        Up to 1-year internship to fresh engineers to be provided by Urban Local Bodies.

·        Budget proposes to attach a medical college to an existing district hospital in PPP mode.

·        Special bridge courses to be designed by the Ministries of Health, and Skill Development:

o   To fulfill the demand for teachers, nurses, para-medical staff and care-givers abroad.

o   To bring in equivalence in the skill sets of the workforce and employers’ standards.

·        150 higher educational institutions to start apprenticeship embedded degree/diploma courses by March 2021.

·        External Commercial Borrowings and FDI to be enabled for education sector.

·        Ind-SAT proposed for Asian and African countries as a part of Study in India

4)     Economic Development

Ø  Industry, Commerce and Investment

·        27,300 crore allocated for 2020-21 for development and promotion of Industry and Commerce.

·        Investment Clearance Cell proposed to be set up:

o   To provide “end to end” facilitation and support.

o   To work through a portal.

·        Five new smart cities proposed to be developed.

·        Scheme to encourage manufacture of mobile phones, electronic equipment and semi­conductor packaging proposed.

·        National Technical Textiles Mission to be set up:

o   With four-year implementation period from 2020-21 to 2023-24.

o   At an estimated outlay of Rs 1480 crore.

o   To position India as a global leader in Technical Textiles.

·        New scheme NIRVIK to be launched to achieve higher export credit disbursement, which provides for:

o   Higher insurance coverage

o   Reduction in premium for small exporters

o   Simplified procedure for claim settlements.

·        Turnover of Government e-Marketplace (GeM) proposed to be taken to Rs 3 lakh crore.

·        Scheme for Revision of duties and taxes on exported products to be launched.

o   Exporters to be digitally refunded duties and taxes levied at the Central, State and local levels, which are otherwise not exempted or refunded.

·        All Ministries to issue quality standard orders as per PM’s vision of “Zero Defect-Zero Effect” manufacturing.

5)     Infrastructure

·        Rs. 100 lakh crore to be invested on infrastructure over the next 5 years.

·        National Infrastructure Pipeline:

o   Rs. 103 lakh crore worth projects; launched on 31st December 2019.

o   More than 6500 projects across sectors, to be classified as per their size and stage of development.

·        A National Logistics Policy to be released soon:

o   To clarify roles of the Union Government, State Governments and key regulators.

o   A single window e-logistics market to be created

o   Focus to be on generation of employment, skills and making MSMEs competitive.

·        National Skill Development Agency to give special thrust to infrastructure-focused skill development opportunities.

·        Project preparation facility for infrastructure projects proposed.

o   To actively involve young engineers, management graduates and economists from Universities.

·        Infrastructure agencies of the government to involve youth-power in start-ups.

·        Rs. 1.7 lakh crore proposed for transport infrastructure in 2020-21.

6)     Highways:

·        Accelerated development of highways to be undertaken, including:

o   2500 Km access control highways.

o   9000 Km of economic corridors.

o   2000 Km of coastal and land port roads.

o   2000 Km of strategic highways.

·        Delhi-Mumbai Expressway and two other packages to be completed by 2023.

·        Chennai-Bengaluru Expressway to be started.

·        Proposed to monetise at least 12 lots of highway bundles of over 6000 Km before 2024.

7)     Indian Railways:

Ø  Five measures:

·        Large solar power capacity to be set up alongside rail tracks, on land owned by railways.

·        Four station re-development projects and operation of 150 passenger trains through PPP.

·        More Tejas type trains to connect iconic tourist destinations.

·        High speed train between Mumbai and Ahmedabad to be actively pursued.

·        148 km long Bengaluru Suburban transport project at a cost of Rs 18600 crore, to have fares on metro model. Central Government to provide 20% of equity and facilitate external assistance up to 60% of the project cost.

Ø  Indian Railways’ achievements:

·        550 Wi-fi facilities commissioned in as many stations.

·        Zero unmanned crossings.

·        27000 Km of tracks to be electrified.

8)     Airports:

·        100 more airports to be developed by 2024 to support Udaan scheme.

·        Air fleet number expected to go up from present 600 to 1200 during this time.

9)     Power:

·        22, 000 crore proposed for power and renewable energy sector in 2020-21.

·        Expansion of national gas grid from the present 16200 km to 27000 km proposed.

·        Further reforms to facilitate transparent price discovery and ease of transactions.

10)  Governance

·        Clean, corruption-free, policy driven, good in intent and most importantly trusting in faith.

·        Taxpayer Charter to be enshrined in the Statute will bring fairness and efficiency in tax administration.

·        Companies Act to be amended to build into statues, criminal liability for certain acts that are civil in nature.

o   Other laws with such provisions are to be corrected after examination.

·        Major reforms in recruitment to Non-Gazetted posts in Government and Public sector banks:

o   An independent, professional and specialist National Recruitment Agency (NRA) for conducting a computer-based online Common Eligibility Test for recruitment.

o   A test-centre in every district, particularly in the Aspirational Districts.

·        A robust mechanism to be evolved for appointment including direct recruitment to various Tribunals and specialised bodies to attract best talents and professional experts.

·        Contract Act to be strengthened.

·        New National Policy on Official Statistics to:

o   Promote use of latest technologies including AI.

o   Lay down a road-map towards modernised data collection, integrated information portal and timely dissemination of information.

·        A sum of Rs. 100 crore allocated to begin the preparations for G20 presidency to be hosted in India in the year 2022.

·        Development of North East region:

o   Improved flow of funds using online portal by the Government.

o   Greater access to financial assistance of Multilateral and Bilateral funding agencies.

·        Development of Union Territories of J&K and Ladakh:

o   An amount of Rs. 30,757 crore provided for the financial year 2020-21.

o   The Union Territory of Ladakh has been provided with Rs. 5,958.

11)  Financial Sector

·        Reforms accomplished in PSBs :

o   10 banks consolidated into 4.

o   3,50,000 crore capital infused.

·        Governance reforms to be carried out to bring in transparency and greater professionalism in PSBs.

·        Few PSBs to be encouraged to approach the capital market to raise additional capital

·        Deposit Insurance and Credit Guarantee Corporation (DICGC) permitted to increase Deposit Insurance Coverage to Rs. 5 lakh from Rs.1 lakh per depositor.

·        Scheduled Commercial Bank’s health under monitoring through a robust mechanism, keeping depositors’ money safe.

·        Cooperative Banks to be strengthen by amending Banking Regulation Act for:

o   Increasing professionalism.

o   Enabling access to capital.

o   Improving governance and oversight for sound banking through the RBI.

·        NBFCs eligibility limit for debt recovery reduced from:

o   Rs. 500 crore to Rs 100 crore asset size.

o   Rs. 1 crore to Rs 50 lakh loan size.

·        Private capital in Banking system:

o   Government to sell its balance holding in IDBI Bank to private, retail and institutional investors through the stock exchange.

·        Easier mobility in jobs:

o   Auto-enrolment in Universal Pension coverage.

o   Inter-operability mechanism to safeguard the accumulated corpus.

·        Pension Fund Regulatory Development Authority of India Act to be amended to:

o   Strengthen regulating role of PFRDAI.

o   Facilitate separation of NPS trust for government employees from PFRDAI.

o   Enable establishment of a Pension Trust by the employees other than Government.

·        Factor Regulation Act 2011 to be amended to:

o   Enable NBFCs to extend invoice financing to the MSMEs through TReDS

·        New scheme to provide subordinate debt for entrepreneurs of MSMEs by the banks

o   Would be counted as quasi-equity.

o   Would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).

o   The corpus of the CGTMSE would accordingly be augmented by the government.

·        Window for MSME’s debt restructuring by RBI to be extended by one year till March 31, 2021.

o   More than five lakh MSMEs have already been benefitted.

·        An app-based invoice financing loans product for MSMEs to be launched.

o   To prevent the problem of delayed payments and consequential cash flows mismatches.

·        Export promotion of MSMEs:

o   For selected sector such as pharmaceuticals, auto components and others.

o   An Rs 1000 crore scheme anchored by EXIM Bank together with SIDBI.

o   Hand holding support for technology upgradations, R&D, business strategy etc.

12)  Disinvestment

·        Government to sell a part of its holding in LIC by way of Initial Public Offer (IPO).

13)  Direct Tax

Ø  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   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

o   Instant PAN to be allotted online through Aadhaar.

o   ‘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.

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

o   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.

14)  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.

15)  Unprecedented Milestones and Achievements of Indian Economy

·        India now the fifth largest economy of the world.

·        India’s Foreign Direct Investment elevated to US$ 284 billion during 2014-19 from US$ 190 billion during 2009-14.