Budget 2020 – Highlights

Budget-2020-Highlights

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Hon’ble Finance Minister Ms. Sitharaman has announced the First Union Budget of New Decade on three core principles:

  • Aspirational India
  • Economic Development
  • Caring Society

The budget acknowledged governance and financial sector as two fundamentals requirements to achieve the set targets and objectives under the plan. The budget enumerated measures to boost rural income, technology, digitization, infrastructure investments as well as social welfare.

We have compiled the key announcements that will have a direct impact on the tax-payers, MSMEs, financial sector and investors segments in the country.

Key Highlights

Individual Tax

  1. In a bid to simplify the tax regime and reduce the tax burden on individual tax-payers, the budget has proposed a New Tax Regime
  2. Under the new tax regime, a borrower can decide to not take any income tax exemptions and move to new tax slab structure which has 5 tax slabs. The new tax slab structure has lower marginal tax rates for income up to Rs 15 lakh, when compared to the tax slab structure under the old tax regime.
  3. For the current financial year, FY20-21, tax- payers have been given an option to choose between the New Tax regime and the Old Tax regime
  4. Preparing and filing an Income Tax Return under the new tax regime will be relatively easier as the tax-payers don’t need to claim any exemptions.
  5. The budget has also removed 70 deductions from a long list of 100+ deductions to reduce the complexity of the personal Income Tax Act.
  6. Dividend Distribution Tax has been withdrawn and dividend income shall be taxable in the hands of the recipient
  7. The budget has proposed to introduce a tax payer charter in the statute which the objective of reducing harassment of tax payers by Income Tax authorities.

See detailed Income Tax Slabs

Corporate Tax

  1. The corporate tax for newly set up manufacturing and power generation companies has been reduced to 15%.
  2. Co-operative societies have been given the option to pay tax @ 22% without any deductions.
  3. Dividend Distribution Tax has been withdrawn and dividend income shall be taxable in the hands of the recipient

Affordable Home buyers taking a home loan

  1. Last year budget provided for an additional home loan interest exemption of Rs. 1.5 lakhs for affordable home loans sanctioned on and before 31st March 2020. The exemption has been extended further by 1 year and will now be applicable for home loans taken to purchase affordable houses up to 31st March 2021.
  2. The tax holiday approval date for developers of affordable housing projects has been extended by 1 year.

Depositors and Investors

  1. The Insurance coverage of deposits by individual depositors in a bank has been increased from Rs. 1 lakh to 5 lakh per depositor
  2. Dividend income received by investors will now be taxable as per the applicable income tax slab for the individual tax payer
  3. Debt ETFs (Exchange Traded Funds) for G-Secs to be launched, which will allow retail investors to participate in the G-Sec market.

MSMEs

  1. Banks asked to restructure MSME NPAs for one more year. Deadline extended to March 2021.
  2. Mandatory Audit threshold for MSMEs increased from Rs. 1 crore to Rs. 5 crores.

Banking, NBFC’s and Housing Finance Companies

Recovery by NBFC’s and HFC’s strengthened by extending Provision of SARFESI Act extended to NBFC’s with asset size of Rs. 100 crores and above instead of Rs. 500 crores earlier and for loan account of Rs. 50 lakhs and above instead of Rs. 1 cr earlier.

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