On the eventful day of 1st Feb 2020, as the honorable Finance Minister Ms. Nirmala Sitharaman presented the Union Budget for fiscal 2020-2021, she was the cynosure of all eyes. Every Indian, was waiting for the same with bated breath. It was a long 160 minute speech, making a crackling noise, but sadly, lacked a power packed action plan. It left the individuals low and dry as it was short of many expectations. As expected, Contrarians were expecting a substantial fiscal impetus to revive a sagging economy projected to grow at least 5% this fiscal year. The sensex fell over by a massive 1000 points in the intra day even though there were few interesting announcements like the listing of LIC (Life Insurance Corporation), optional new tax regime etc. Sadly none of these could be a substitute for the impetus to resuscitate demand in rural India, which is being plagued by extremely low consumer confidence.
What went wrong? A closer look will reveal the following:
- Public sector banks: The finance minister didn’t see the need to pump money into the banks. Last year the banks received Rs.70000 crore that was used in repairing the balance sheet ripped apart by high Non Performing Assets (NPAs). The finance minister played it safe this time by asking the banks to find money from the market
- Surprisingly there was no package for the manufacturing sector that is considered to be the most promising of all sectors. A lucrative package was sure to have uplifted the market sentiments.
- Even nothing at all to support rural demand. The allotted money of Rs.1,44,817 crore is similar to the previous year’s allocation of 1,43,409 crore.
Let’s take a look at the takeaways:
Amidst the looming darkness there were certain proposals to cheer for as well. Let’s dig deeper:
- The creation of an Investment Clearance cell: Since long the Projects industry was looking for one and this time it was granted. This would remove the multi layer approval system for getting clearance for Infrastructure projects and no wonder, would definitely revive the much needed activity.
- Sale of Govt. stake in LIC: This decision was absolutely cheered on by the investors and was indeed a big announcement by the Finance minister.
- Sale of government stake in IDBI bank: The markets also cheered this decision of the government. Now investors will have more choices in investing in government backed organizations.
- Optional Personal Income Tax system : The Finance minister introduced new slabs and reduced the tax rates for different slabs for the individuals, upto an income of Rs.15 lacs p.a..The catch is, the tax payer has to opt for foregoing all the exemptions under various sections like 80C, 80D, 80CCD-1B etc. A tax payer has the privilege of opting for the new tax regime or sticking to the old one. But one can’t shift once opted for a particular regime.
In a nut shell, the tax payers who have plenty of investments or have a home loan and are already availing deductions wouldn’t find it beneficial to change, but those who are not availing deductions should definitely gain out of the same.
- Attempt to draw foreign capital: The ministry of finance is leaving no stone unturned in making moves to attract foreign capital into infrastructure. 100 percent tax concession to foreign investors would definitely bring in the much desired boost to the investment in infra projects.
- No Dividend Distribution tax for corporate: To ease the burden on corporates, the dividend distribution tax has been shifted to individuals. It will definitely be a welcome relief for the corporates who will shell out less from there pocket now.
Well, the debate on whether the Budget 2020 is a hit or miss could be a never ending saga of arguments and counter arguments, so let’s not drag this further. As a Salaried individual what matters to me is the amount that I get to save after the implementation of the new tax regime. As promised, the finance minister has been successful in simplifying the income tax process and will definitely be able to place more money in people’s hand. The best part is one has the liberty to choose the regime he/she wants to stick to. The ones who have invested more in order to seek deductions under section 80 C and others may stick to the old regime and ones those who don’t have so much of investments can definitely opt for the new regime! In one hand, this strategy would discourage investment but in the other hand, it will increase the purchasing power of the common man. This would definitely boost demand for products. A move that would be welcomed by both corporates and individuals.
Conclusion : As a law abiding citizen of a Sovereign, Secular, Socialist, Republic and democratic country, I strongly believe that the government has been able to deliver in this People’s budget. The budget would definitely unleash the never say die attitude of the Indian entrepreneur by easing liquidity, helping market forces to surge demand and restore investor confidence. The day is not far of when India could boast of a 5 trillion economy, as envisioned by honourable PM,Shri Narendra Modi. I rest my case with an applause!