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Budget 2020 key highlights
- 1. Budget 2020 Prof. (Dr.) Saurabh Agarwal Ph D (FMS, Delhi University), M. Phil. (DSE, DU), M. Com. (DSE, DU), B. Com. (H) (SRCC), UGC (NET), AMT (AIMA) Professor of Accounting & Finance & Principal (Offg.) IIF College of Commerce and Management Studies www.iifccms.edu.in
- 2. Budget 2020 • 10% TDS on dividend payment in mutual funds and not on capital gains arising from redemption of units • Individuals can Switch Tax Regime Every Year- - However, not for a person with a business- Official app in progress. • Nominal GDP growth of 10% • Fiscal deficit 3.8%
- 3. New Tax Rates What’s Out Some of the 70 exemptions and deductions you won’t get in the new regime -Section 80 C Investments -House rent allowance -Housing loan interest -Leave travel allowance -Medical insurance premium -Standard deduction -Saving bank interest -Education loan interest What stays Some 50 tax exemptions have been left untouched -Standard deduction on rent -Agricultural income -Income from life insurance -Retrenchment compensation -VRS proceeds -Leave encashment on retirement Source: TOI
- 10. Alternate Income
- 11. Tax • 5.8 Crore people who file tax returns in 2018-19 • 5.3 Crore people claimed IT deductions of less than INR 2 lakh including 80C, 80D and 80CCD(1B) • 48 lakh or 9% assesses, claimed deductions more than INR 2 lakh • 3.77 lakh tax assesses who claimed deductions exceeding INR 4 lakh • A loss of INR 40,000 crores estimated - ??? • Source: Govt
- 12. Headed for lower Tax and No Exemptions Source: TOI
- 13. Source: ET
- 14. What will be expensive? Source: ET
- 15. What will be expensive now? Source: ET
- 16. Impact • White goods [including refrigerators (INR 200-INR 600), washing machines], smartphones (INR 20-60), apparel, shoes expensive • Butter, cheese, shoes, fans, food grinders, iron room heaters, tea and coffee makers, kitchenware and hair dryers expensive by 5 to 10% • Price increase from 2% to 30% • Exports fall by 1.96% - $239.29 billion (A-D 2019) • Imports declined by 8.9% - $ 118.10 billion • Trade Deficit - $118.10 billion
- 17. Disinvestment • INR 2.11 lakh Cr from disinvestment proceeds in 2020 – 21 • In 2019-20 – INR 65,000 Cr • Reducing stake in LIC, PSBs, BPCL, Concor • Exit IDBI Bank • 150 passenger trains to private players
- 18. LIC IP0 • LIC will become 4th largest co after Reliance Industries, TCS and HDFC Bank • Help Centre meet INR 2.1 lakh Cr divestment • INR 5.75 lakh cr estimated market capitalisation • INR 80,000 proceeds from 10% sale • INR 31 lakh Cr LIC’s assets under management • INR 25,241 cr NPAs out of a total debt of INR 4,05,304 cr in FY 19
- 19. Hike in Deposit Insurance to Pinch Banks • Deposit Insurance and Credit Guarantee Corp (DICGC) to insure INR 5 lakh up from INR 1 lakh • Bank pays INR 10 for every INR 10,000 insured • Earlier paying INR 100 will now pay INR 500
- 20. Stock market • Bright – Infra & Construction, Cement, Agro- chemical, Consumer & IT • Avoid – Capital Goods, Insurance, Real Estate, Commodities and NBFCs • Stock Picks • Large cap - ICICI Bank, TCS, L&T, SBI • Small cap – Bata India, Kalpataru Power, Repco Home Finance, Siemens, Supreme Ind • Life Insurance stocks likely to go down - ICICI Pru, SBI life and HDFC life
- 21. DDT • DDT removal will hurt Foreign Portfolio Investors (FPIs) • 28.5% - if FPI is a trust • 20% - if FPI is a corporate • Adding • Unitholders of infrastructure (InvIT) and real estate (REIT) hit • FPI based out of US and Canada will see no effective change
- 22. DDT • Will reduce burden on Indian companies who pay dividend distribution tax at an effective rate of 20.5% • Investors getting dividends upto INR 10,00,000 do not pay tax and above INR 10,00,000 pay 10% • Now after abolition of DDT investors may pay as high as 43% • Systematic withdrawal plans better for mutual fund investors needing cash flows
- 23. Source: ET
- 24. STT and CTT • INR 13k cr STT collections in FY 21 (up 4%) • CTT on Commodity Options – A seller of a Commodity Futures index will pay commodity transaction tax of 0.01% • If delivery is given/taken – 0.0001% • If trade is squared off – 0.125%
- 25. Main Point • Infrastructure to get boost by 100% tax exemption on investments by sovereign wealth funds (SWFs) • At INR 29,000 crore civic bodies to likely get 40% more in 2020-21 • 11% hike in Special Protection Group (SPG) to 59 Cr from 535 Cr • G-Sec ETF proposed (recently Bharat Bond ETF raised INR 12,500 crore)
- 26. Main points • Medical Equipment imports attract cess – 0-7.5% import duty and 5% health cess – X ray machines, blood pressure instruments, glucometers, digital thermometers and ultrasound machines • Cigarette Prices to rise 4-5%, Hooka and Zarda to also cost more • Combs, brooms, brushes, mops, fans, grinders, mixers, shavers, irons, dryers, toasters et to increase by 5-10% as customs duty up from 10% to 20%
- 27. Import • Higher Customs Duty for Evs – EV MG/Kia to be more expensive Source: ET
- 28. NRIs • More Tax Compliance Issues • Those living abroad without becoming residents of any country will be treated as Indian residents and taxed accordingly • NRI status for those who stay 245 days abroad as compared to 181 days earlier
- 29. Affordable Homes Get Tax Holiday Boost • Extended the deadline for first time home buyers to avail additional INR 1.5 lakh interest deduction on home loans by a year till 31 March 2021 • This is in addition to INR 2 lakh allowed as deduction across segments
- 30. Infrastructure • Budgetary support to Railway Ministry Schemes 69,967 Cr – 72,216 Cr • National Highways Authority of India 36,691 Cr- 42,500 Cr • Road Works 45,887 Cr – 48,759 Cr
- 31. Infrastructure • Sagarmala 381 Cr - 297 Cr • Jal Jeevan Mission 10,001 Cr – 11,500 Cr • Urban Rejuvenation Mission: AMRUT & Smart Cities Mission 9842 Cr – 13,750 Cr
- 32. Infrastructure • Metro Projects 17,612 Cr – 17,482 Cr • Wind Power 1,026 Cr – 1,299 Cr • Solar Power 1789 Cr – 2,150 Cr • Bharat Net 3,000 Cr – 8,000 Cr – link 100,000 gram panchayats Support to Infrastructure Pipeline 12,500 Cr
- 33. Resolve Direct Tax Disputes • Accumulated interest and penalties for 7-8 year old cases could be double the actual tax payable • INR 8 lakh cr already stuck in direct tax litigation • INR 50,000 Cr estimated amount the govt could end up collecting under the scheme • 1% of all the cases constitute more than 50% of the total value of all tax litigation
- 34. Main Points • Concessional tax rate of 15% to new domestic power cos provided they start generating electricity by 31st March 2023 • Upper limit imposed with a yearly cap of INR 750000 on tax exempt employer’s contribution to provident fund, superannuation fund and NPS • Cooperative to be taxed at 22% plus 10% surcharge plus 4% cess
- 35. Start Ups • Defers tax on stock options by 5 years – turnover below INR 100 crore and be incorporated after March 31, 2016 but before April 1, 2021 • Opening Data Parks • Sarkari Internship with urban local bodies • Single Investment cell • Invest INR 8,000 crore in National Mission on Quantum Technology
- 36. Start Ups • Vision to create INR 36,000 crore fund to provide production linked incentives to Smartphone makers • Deduct 1% tax at source by online marketplaces like Flipkart, Amazon, Uber and UrbanClap - Applicable to sellers who clock over INR 5 lakh in sales on particular platform – cash flow or small trader affected – will create working capital issues who are already paying 5% TDS on marketplaces charges
- 37. Policy Changes • Fiscal Discipline • Honouring Contracts • Decriminalising Corp Offences • Bridge Courses – teachers, nurses, par medical staff and caregivers abroad • Tighter Origin Norms for FTA Benefits, High Onus on Importer- RCEP • Adjusted Gross Revenue (AGR) mop up to boost telecom revenue by 125% - Additional revenue of INR 50,520 Cr
- 39. Agriculture, Irrigation and Rural Development Source: MOF
- 40. Conclusion • No Stimulus as govt sticks to fiscal consolidation • Higher capex and infra spend • Higher Import duties • ELSS , Insurance schemes may become less popular • Savings could reduce • The Budget had no big fiscal stimulus, several protectionist duties, and few steps to revive a slowing economy – Swaminathan Aiyar • Budget of Vision, Action: PM
- 41. Media Presentations • Zee News interview on Budget 2020 on 1.2.2020 from 10 am to 12 pmYoutube: https://www.youtube.com/watch?v=X6t1EJYjtJg2. • Total News interview on Budget 2020 on 1.2.2020 from 1 pm to 4 pmYoutube: https://youtu.be/6uK- L59XjDMhttps://www.youtube.com/watch?v=6uK- L59XjDM&t=1875s3. • Total News interview on Economic Survey on 31.01.2020 from 5 pm to 6pmYoutube: https://www.youtube.com/watch?v=0yf2Czihdm84. • Tehzeeb TV interview in Program - INTERNATIONAL DEBATE ON THE DAVOS 2020 : WORLD ECONOMIC FORUM on 1st February 2020Youtube: https://youtu.be/Pb-e5RZYsYg
- 43. How to stay in touch • For MBF/BBF Admission - Indian Institute of Finance (estd. 1987 and A++ B-School by Business India 2019) please visit www.iif.edu For MBA Degree Admission - IIF Business School (estd. 1999), Affiliated to Dr. A.P.J. Abdul Kalam Technical University, Lucknow please visit www.iifbs.edu For B.Com./BBA Degree Admission - IIF College of Commerce & Management Studies (estd. 2016), Affiliated to Chaudhary Charan Singh University, Meerut please visit www.iifccms.edu.in To advertise/subscribe/publish - Finance India (UGC Listed/ABDC listed/Scopus Indexed) - The Quarterly Journal of Finance since 1987 please visit www.financeindia.org To publish book - Edge India Publishing Private Limited (estd. 2005) please visit www.edgeindiabooks.com Facebook https://www.facebook.com/saurabh.agarwal.568294 Linkedin - https://www.linkedin.com/in/saurabh-agarwal-08a92159/ Twitter - https://twitter.com/Saurabh_fms • Email – saurabh.agarwal.fms@gmail.com
- 44. Thank you and Jai Hind Member, Employee State Insurance Corporation (ESIC), Ministry of Labour and Employment, Government of India (http://www.esic.nic.in/) Member, Governing Body, Dattopant Thengadi National Board for Worker's Education and Development (formerly Central Board for Workers Education - CBWE), Ministry of Labour and Employment, Government of India (http://www.cbwe.gov.in/about-us.aspx) Member, Managing Committee, ASSOCHAM (www.assocham.org)