The Weekly Obiter

BUDGET HIGHLIGHTS 2020

February 04, 2020

 The second budget of the re-elected Modi Government was presented by Mrs. Nirmala Sitharaman, the Minister of Finance and Minister of Corporate Affairs, on 1st February 2020 for the financial year 2020-2021. The key highlights of the budget are:

On Taxation

 New optional tax regime with reduced tax rates and without exemptions/deductions:

 Between 5 lakh to 7.5 lakh – 10%

 Between 7.5 lakh to 10 lakh – 15%

 Between 10 lakh to 12.5 lakh – 20%

 Between 12.5 lakh to 15 lakh – 25%

 Above 15 lakh – 30%

 Any citizen of India who is not liable to tax in any other country, will now be considered a resident of India for tax purposes.

 Any citizen who stays abroad for 240 days or more will be termed as non-resident as opposed to the previous 182 days.

 The required for being labelled ‘ordinarily resident’ has been hiked from the previous 2 years to 4 years. As such a person who resided in India for 4 years out of 10 previous years, would now be termed as ordinarily resident.

 Contributions exceeding INR 7,50,000 made by employer to an employee’s account in recognized provident fund, notified pension scheme, or approved superannuation fund would be taxable in the hands of the employees.

 Dividend Distribution Tax to be removed, dividend paid will be taxed in hands of the recipient as per applicable tax rates.

 ESOP taxation deferred up to 5 years after issue or till the employee leaves the company or sells the shares, whichever is earliest.

 Additional deduction of Rs.1.5 lakh for interest paid on loans for affordable housing extended for loans sanctioned till 31 March 2021 from the previous 31 March 2020.

 Aadhaar based instant online PAN allotment system to be introduced.

 Aadhaar based verification of GST compliance to be introduced.

 100% tax concession to sovereign wealth funds on investment in Infrastructure projects.

 15% tax concession to power generation companies.

 Proposal to introduce tax holidays for affordable housing developers.

 “Vivad se Vishwas” scheme introduced to waive interest and penalty on delayed tax payers if the scheme is availed by March 31, 2020. As such the taxpayer has to only pay the demanded tax amount. Scheme will stay open till June 30, 2020 but after March 31 additional amount would be charged.

 Tax payers charter to be added in the Act to reduce tax payer’s harassment.

 A system of e-appeal to be incorporated soon, in like with the e-assessment scheme, to promote efficiency, transparency and accountability.

On Banking and Finance Sector

 Bank deposit insurance cover increased from Rs. 1 lakh to Rs. 5 lakh per depositor.

 Proposal to sell the balance holding of government in IDBI Bank.

 Public sector banks to enter into capital market to raise additional capital.

 NBFCs eligibility limit for debt recovery mechanism under SARFAESI Act 2002 to be reduced from the existing size limits of Rs.500 crore to Rs. 100 crore or loan size from existing Rs.1 crore to Rs.50 lakh.

 Government to infuse Rs. 3.5 crore into public sector banks.

For MSMEs

 Proposal to enable NBFCs to extend invoice financing to MSMEs through TReDS.

 Proposal Scheme to provide subordinate debt for entrepreneurs of MSMEs, to be given by banks and fully guaranteed through Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).

 App-based invoice financing loans product to be launched in order to help reduce delayed payments and cash flow mismatches for MSMEs.

 The turnover threshold of Rs. 1 crore for a mandatory audit requirement proposed to be increased to Rs. 5 crore for businesses with less than 5% cash transactions.

 NIRVIK Scheme to provide insurance cover and reduce premium for small exporters.

 RBI asked to extend the window for debt restructuring for MSMEs till March 2021.

 For Start-ups

 Turnover threshold for claiming 100% deduction of profits for three consecutive assessment years, increased from 25 crore to 100 crore and the period increased from 7 years to 10 years.

 ESOP taxation deferred up to 5 years after issue or till the employee leaves the company or sells the shares, whichever is earliest.

 Proposal to provide early life funding, including a seed fund to support ideation and development of early stage Start-ups.
 Proposal to set up an Investment Clearance Cell and online portal to facilitate faster clearances for business at state and central level.

 Proposal for a new digital platform for facilitating intellectual property protection.

On Agriculture

 Budget of Rs. 2.83 lakh crore allocated for sector comprising agriculture and allied activities.

 Agri-credit availability set at Rs. 15 lakh crore for 2020-21.

 Provision of standalone solar pumps to 20 lakh farmers and help another 15 lakh farmers to solarize their power grids.

 Village storage scheme proposed to be run by women SHGs.

 Introduction of refrigerated coach in ‘kissan’ trains to carry perishables and milk.

On Infrastructure

 Rs. 1.7 lakh crore to be provided for transport infrastructure in 2021.

 National Logistics Policy to be introduced.

 Expansion of the National Gas Grid to 27,000 km.

 Proposal to build a large solar power capacity for Indian Railways.

 Proposal to build Bengaluru suburban rial project at a cost of Rs.18,600 crore.

 100 more airports to be developed by 2024 to support UDAN.

 Additional deduction of Rs. 1.5 lakh for interest paid on loans for affordable housing borrowed up to March 31, 2020 now applicable for loans borrowed up to March 31, 2021.

 International Bullion Exchange to be set up at the IFSC in GIFT City.

 Monetization of 12 lots of highways by 2024.

 Proposal to build 9,000 km of economic corridor.

 National Recruitment Agency, National Police University and National Forensic University to be set up.

 On Investments and corporate markets:

 Limit on FPIs in corporate bonds to be raised from 9% to 15%.

 New debt ETF to be floated for government bonds.

 Specified categories of government securities will be fully opened for non-residence investors along with domestic investors.

 Government to divest certain amount of stake in LIC through an IPO.

 Proposal to set up an Investment Clearance Cell as the one stop shop for information, support and permissions needed by business at both state and central level for investment purposes.

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The update is intended for your general information only. The information and opinions contained in this document are derived from public sources which we believe to be reliable and accurate but which, without further investigation, cannot be warranted as to their accuracy, completeness or correctness. It is not intended to be nor should be regarded as legal advice and no one should act on such information without appropriate professional advice. Athena Legal accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material.

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