Highlights of Union Budget 2020-21 and Key Take aways
Finance Ministry today announced union budget for 2020-2021. The stock market reacted negatively with 1,000 points down. This simply indicate how budget has disappointed everyone. Finance minister introduced a new tax regime which creates more confusion to the existing tax structure. What are key Highlights of Union Budget 2020-21? What are the changes done in the budget 2020 which affect your personal finances?
Key Highlights of Union Budget 2020-21 – Personal Finance
Finance Minister indicated that this budget would boost income and increase the purchasing power of the individuals. Let us see how far this is true in reality.
1) There are 70+ deductions that are removed. Means you pay more tax.
2) Dividend distribution tax (DDT) is removed. One has to pay income tax based on their individual tax slab. Means you pay more income tax now.
3) The New Income Tax regime has been introduced. If you forego income tax deductions you need to pay lower income tax. Let us see the new income tax rates if you forego reliefs, exemptions only. Otherwise, old income tax rates would continue.
i) Income tax reduced from 20% to 10% for income between Rs 5 to 7.5 lakh.
ii) Income tax reduced from 20% to 15% for income between Rs 7.5 to Rs 10 lakh.
iii) Income tax reduced from 30% to 20% for income between Rs 10 to Rs 12.5 lakh.
iii) Income tax reduced from 30% to 25% for income between Rs 12.5 to Rs 15 lakh.
iv) Income tax retained at 30% above Rs 15 Lakhs of taxable income.
4) Debt ETF would be launched soon which can boost debt market.
5) Under affordable housing, deduction of Rs 1.5 lakh announced earlier has been extended by one more year. Affordable Housing projects to get a tax holiday for one more year subject to getting clearance by March 2021.
If you wish, you want to continue the tax savings, you can refer our article about some of the tips to save income tax.
Key Budget Highlights in 2020 – Impact on banking and financial sector
1) One of the good news is about the security of your fixed deposits. This budget increased deposit insurance cover in banks from Rs 1 Lakh to Rs 5 Lakhs per depositor. If you have FDs in multiple banks, still Rs 5 Lakhs maximum deposit insurance would apply.
2) There are several scams in banking and financial sector. Now the government plans to amend the Indian Companies Act to decriminalize civil offenses.
3) Finance ministry indicated that it would sell stake in LIC through public offering i.e. Initial Public Offering. Investors can expect a good IPO in the near future provided the premium on such IPO is reasonable.
Key Budget Highlights in 2020 – Agriculture sector
1) This budget has allocated Rs 2.8 lakh crore for the agriculture sector.
2) Agriculture credit availability is at Rs 15 lakh crore in 2020-21 financial year.
3) The government would take complete measures for 100 water stressed districts in India.
4) This budget provides assistance to set-up standalone solar pumps to approx. 20 lakh farmers. It is also proposed to help 15 lakh farmers to solarise their power grid.
Krishi UDAN on international and national routes.
Key Budget Highlights in 2020 – Healthcare sector
1) This budget allocates Rs 69,000 crore for the healthcare sector.
2) It proposes to allocate Rs 12,300 crore for Swachh Bharat this financial year.
3) It has put proposal to set up hospitals in Tier-II & Tier-III cities with the private sector using PPP.
Key Budget Highlights in 2020 – Educational sector
1) It allocated Rs 99,300 crore to the education sector in 2020-21 and about Rs 3,000 crore for skill development. These funds are low and may not boost jobs in India.
2) This budget proposes to full fledged online education programs from Top 100 NIRF Ranking institutes which would be at degree level and aimed to benefit underprivileged students.
3) FM indicates that the IND SAT exam for students of Asia and Africa to promote “study in India” program.
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Key Budget Highlights in 2020 – Infrastructure sector
1) Govt has been focusing on Infra sector development in the last 5 years. This union budget proposes to provide Rs 1.7 lakh crore for infrastructure sector.
2) This budget aim to achieve electrification of 27,000 km of lines across various rural areas in India.
3) FM says there is a plan to have a large solar power capacity for Indian Railways. Since Indian Railways are large in size, implementation of this might take time.
4) Budget proposes a Bengaluru suburban rail project at a cost of Rs 18,600 crore.
5) FM says government to monetize 12 lots of national highways by 2024.
6) As part of supporting UDAN, the budget proposes 100 more airports to be developed by 2024.
7) One major airport will be privatized.
8) 5 new smart cities in public-private partnership mode.
Key Budget Highlights in 2020 – Manufacturing sector
1) Budget plans to introduce new schemes which would encourage the manufacturing of mobile phones, electronic equipment and semiconductor packaging.
2) It would encourage any private sector that would build Data Centre Parks throughout the country.
3) FM proposes for Rs 80 billion over five years to be provided for quantum technologies and applications.
4) The milk processing capacity to be doubled by 2025.
We would cover a separate article on how your personal finance would get affected and which income tax regime you need to use.
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Key Highlights of Union Budget 2020-21 and take aways
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