ANALYSIS OF BUDGET 2020

Guided by-
Prof. Dr. TINA MURARKA
Analyzed by-
Mikhil Pranay Singh
Sunidhi Shahdeo
Uttam Khalkho
Barmeshwar Adishesh
This year's Budget centres around three ideas-
1) Aspirational India
- Agriculture, Irrigation and Rural development
- Wellness, Water and Sanitation
- Education and Skills
2) Economic development
- Industry and Commerce
- Infrastructure
- New Economy
3) A Caring Society
- Women and Child Social Welfare
- Culture and Tourism
- Environment and Climate
• FY21 agriculture allocation ₹1.38 lakh crore
• FY21 rural development allocation ₹1.23 lakh
crore
• FY21 agriculture and rural allocation ₹2.83
lakh crore
• FY21 agriculture credit target ₹15 lakh crore
• FY21 education allocation at ₹99,300 crore
• FY21 healthcare allocation at ₹69,000 crore
• FY21 transport infra allocation at ₹1.7 lakh
crore
• Budget 2020 removed 70 exemption from
personal income tax
Finance Minister announced these schemes for
AGRICULTURE sector
• Civil Aviation Ministry to launch 'Krishi Udaan'
for agricultural exports
• Krishi Udaan will be launched by Civil Aviation
Ministry to transport agri-products to national
as well international destinations
• The total allocation for Swachh Bharat mission
is 12,300 crores for FY20-21
• Nirmala Sitharaman said the NDA government
is "committed to Open Defecation Free (ODF)
plus in order to sustain ODF behavior and to
ensure no one is left behind."
• FM Nirmala Sitharaman on Agriculture:
• NBFC’s & co-operatives active in credit
• NABARD refinance scheme to be strengthened
• Agri credit target ₹15 lakh crores
• Eligible PM KISAN beneficiaries covered under
KCC
• Finance Ministry will allocate ₹2.83 crore for
agriculture and irrigation. ₹1.23 lakh crore will
be allocated to rural development, panchayati
raj
• Finance Minister Nirmala Sitharaman shared
measures to be taken to help farmers
• 1) Government is expanding 'PM Kusum
Scheme' to 20 lakh farmers to set up solar
pumps
• 2) Government will set up solar power units
- For education sector:
• 150 higher education institutions to offer
apprenticeship diplomas by March 2021.
Government will promote 'Study In India'
initiative.
• New education policy to be announced soon
• Govt to provide ₹99,300 crore for educational
sector in FY21
• By 2030, India will have largest working age
population in the world. This population
needs both job and life skills.
• About 150 higher educational institutions will
start apprenticeship embedded courses
• Special bridge courses to improve skill sets of
those seeking employment abroad
• Ind-SAT to be conducted in Africa and Asia
under study in India programme
• Allocation of Rs 99,300 crore for the
educational sector in 2020-21
• Allocation of Rs 3,000 crore for skill
development
• Skill India initiative
• Government proposed ₹3,000 crore for 'Skill
India' to provide relevant skill training to the
youth in the country.
• "There is a huge demand for teachers,
paramedical staff and caregivers in foreign
countries. However, their skills do not match
in accordance to demand by employers. So
proposal of ₹3,000 crore for skill
development.
• For health sector:
• Union Budget 2020 provided an
additional ₹69,000 crore for the health sector
• Finance Minister proposed to attach a medical
college to a district hospital in PPP model
- TB harega desh jeetga
• The government is committed to eliminating
tuberculosis by 2025.
• "The government will launch "TB harega desh
jeetga" (TB will be defeated and the country will
win) campaign to eliminate tuberculosis by 2025,"
• Ayushman Bharat
• Union Budget 2020 allocated ₹69,000 crore
for healthcare sector. Out of the total
amount, ₹6,400 crore will be sanctioned for
Ayushman Bharat Yojna.
• Ayushman Bharat scheme provides health
assurance cover of up to ₹5 lakh per family
and is targeted to cover over 10 crore poor
and vulnerable families.
• For Railways
• -The railways got a budgetary allocation
of ₹70,000 crore and an outlay for capital
expenditure amounting to ₹1.61 lakh crore
• -The budget also proposed setting up of a large
solar power capacity alongside the rail tracks on
land owned by the railways.
• -Redevelopment of four stations and operation of
150 passenger trains would be done through the
public-private-partnership (PPP) mode.
• -It also announced introduction of more Tejas
type trains which will connect iconic tourist
destinations.
• Subsidy
• -Food subsidy seen at ₹1.15 trillion ($16.18
billion) in 2020/21
• -Petroleum subsidy seen at ₹409.15 billion
($5.76 billion) in 2020/21
• -Fertiliser subsidy ₹713.09 billion ($10.03
billion) in 2020/21
• Manufacturing
• -Scheme focused on encouraging manufacture
of mobile phones, electronic equipment and
semiconductor packaging to be introduced
• -To encourage private sector to build Data
Centre Parks throughout the country
• - ₹80 billion ($1.13 billion) over five years to be
provided for quantum technologies and
applications
• -Milk processing capacity to be doubled by
2025
• Infra sector: ₹100 lakh crore to be invested on
infrastructure over the next 5 years
• National Infrastructure Pipeline:
• -Rs. 103 lakh crore worth projects; launched
on 31st December 2019
• -More than 6500 projects across sectors, to be
classified as per their size and stage of
development
• ₹1.7 lakh crore for transport infrastructure
• Finance Minister Nirmala Sitharaman
proposes to provide ₹1.7 lakh crore for
transport infrastructure in 2020-21
• -Transport sector
• Cente to provide 20% equity for Bengaluru
Suburban Transportation Raj
• 100 more airports to be developed by 2024 to
support Central government's "Udaan"
scheme
• More airports, highways
• -India to develop 100 more airports by 2024
• -India to monetize over 6,000 km of highways
in 12 lots by 2024
• -India to privatize at least one major port.
• -Govt to launch ₹18,600 crore worth
Bengaluru Suburban Transportation project.
• Central government is planning to construct
• -2500 access control highway
• -9000 km eco-development corridors
• -200 coastal and port roads
• -2000 km strategic highways
• -Delhi-Mumbai expressway and 2 other
corridors will be completed by 2023
• DISINVESTMENT
• Government to sell govt stake in IDBI Bank to
private investors
• -Government plans to sell stake in LIC through
IPO, said Nirmala Sitharaman
• -FY21 fiscal deficit target pegged at 3.5% of
GDP
• FY21 divestment target pegged at ₹2.1 lakh
crore
• ₹9,000 crore for the welfare of senior citizens
• Union Finance Minister Nirmala Sitharaman
announced that the Centre this year has
allocated ₹9,000 crore for the welfare of senior
citizens.
• Also, the government has allocated ₹53,700
crore for the uplift of Scheduled Tribes,
and ₹85,000 crore for the welfare of Scheduled
castes and Other Backward Classes.
• Power to power sector
• -India to provide ₹273 billion or promotion of
industry and commerce
• -Firms operating old thermal power plants
advised to shut units if emission norms not
met
• -India to allocate ₹44 billion for clean air
incentives in cities with over 1 million people
• Connecting India
• -Finance Minister Nirmala Sitharaman
said ₹6,000 crore allocated for BharatNet
programme
• - Around 1 lakh gram panchayats to be linked
with BharatNet this year
• -To clean air and pollution free cities
• Power plants with emissions above prescribed
limits will be asked to close down.
• India's commitment towards tackling climate
change made at Paris conference kick starts
from January 1, 2021.
• FM said ₹4,400 crore has been allocated for
states that work towards clean air.
• -Say 'no' to pollution:
• Govt will encourage states which formulate
plans for air pollution scheme soon. ₹4,400
crore allocated for 2020-21: Sitharaman
• - ₹8,000 crore allocated over 5 years for
National Mission On Quantum Technology.
• -Your money becomes safer
• -Deposit insurance coverage increased to ₹5
lakh from the existing ₹1 lakh.
• Markets: A dividend distribution tax for
companies will be scrapped, entailing a
revenue loss of ₹250 billion
• -Excise duties: Tax on cigarettes and other
tobacco products to be increased
• The government raised fiscal deficit target to
3.8% of the GDP from 3.3% pegged earlier for
2019-20 due to revenue shortage.
• The Centre this year has allocated ₹9,000 crore
for the welfare of senior citizens.
• Also, the government has allocated ₹53,700
crore for the uplift of Scheduled Tribes,
and ₹85,000 crore for the welfare of
Scheduled castes and Other Backward Classes.
• On DDT
• Dividend Distribution Tax to be removed,
companies will not be required to pay DDT,
dividend to be taxed only at the hands of
recipients at applicable rates
• Things that will become dearer
• -Customs duty on walnuts raised to 100% from
30%
• -Customs duty on autos and auto parts raised
by up to 10%
• -Customs duty on platinum and palladium cut
to 7.5% from 12.5% for certain purposes
• -Nominal health cess of 5% on import of
medical devices
 Change in Definition of Residential
Status
 Proposed to reduce the time of stay in India from 182
days to 120 days for an Indian citizen or person of
Indian origin to become resident in India.
 Consequently, it is proposed to relax the provision of
“resident but not ordinarily resident” so that a
resident who has been non-resident in seven out of
ten previous years would be resident but not
ordinarily resident. It is also proposed to provide that
an Indian citizen who is not liable to tax anywhere
would be deemed to be resident in India.
 Start-ups
 Start-ups have emerged as engines of growth
for our economy.
 Start-ups generally use Employee Stock
Option Plan (ESOP) to attract and retain
highly talented employees.
 ESOP is a significant component of
compensation for these employees.
 Currently, ESOPs are taxable as perquisites at
the time of exercise.
 Start-ups
 This leads to cash flow problem for the employees
who do not sell the shares immediately and
continue to hold the same for the long-term.
 Boost to the start-up ecosystem,
 Ease the burden of taxation on the employees by
deferring the tax payment by five years or till they
leave the company or when they sell their
shares, whichever is earliest.
 Start-ups
 An eligible Start-up having turnover up to 25 crores is allowed
deduction of 100% of its the profits for three consecutive
assessment years out of seven years if the total turnover does not
exceed 25 crore rupees.
 Increase the turnover limit from existing Rs.25 crore to
Rs.100 crores.
 Moreover, considering the fact that in the initial years, a start-up
may not have adequate profit to avail this deduction,
 Extend the period of eligibility for claim of deduction from the
existing 7 years to 10 years
Medium, Small and Micro Enterprises
(MSME)
 Turnover of more than one crore rupees are required
to get their books of accounts audited by an
accountant.
 In order to reduce the compliance burden on small
retailers, traders, shopkeepers who comprise the
MSME sector,
 Raise by five times the turnover threshold for
audit from the existing Rs. 1 crore to Rs.5 crore.
 Boost less cash economy & increased limit shall apply
only to those businesses which carry out less than 5%
of their business transactions in casCAhN
 Affordable Housing
 For realization of the goal of ‘Housing for All’ and
affordable housing, in the last budget an additional
deduction of up to one lakh fifty thousand
rupees for interest paid on loans taken for
purchase of an affordable house.
 The deduction was allowed on housing loans
sanctioned on or before 31st March,2020.
 More persons avail this benefit and incentivize the
affordable housing by extend the date of loan
sanction for availing this additional deduction by
one more year.
 Charity institutions
 Charitable institutions in the society, the
income of these institutions is fully exempt
from taxation.
 Further, donation made to these institutions is
also allowed as deduction in computing the
taxable income of the donor.
 Currently ,Taxpayer is required to fill the
complete details of the donation in the
income tax return for availing deduction.
 Charity institutions
 Simplify the compliance for the new and
existing charity institutions,
 The process of registration completely
electronic under which a unique registration
number (URN) shall be issued to all new and
existing charity institutions.
 Facilitate the registration of the new charity
institution which is yet to start their
charitable activities.
 Faceless appeals
 Maximum governance is provided with minimum government
 Greater efficiency, transparency and accountability to the assessment
process, a new faceless assessment scheme has already been
introduced.
 Currently, most of the functions of the ITD from the filing of return,
processing of returns,issuance of refunds and assessment are
performed in the electronic mode without any human interface.
 Amend the Income Tax Act so as toenable Faceless appeal
on the lines of Faceless assessment.
 No Dispute but Trust Scheme– ‘Vivad
SeVishwas’Scheme
 Last budget, Sabka Vishwas Scheme was brought in to
reduce litigation in indirect taxes. It resulted in settling
over 1,89,000 cases.
 Currently, there are 4,83,000 direct tax cases
pending in various appellate forums i.e.
Commissioner (Appeals), ITAT,High Court and
Supreme Court.
 Under the proposed‘Vivad SeVishwas’scheme,
a Taxpayer would be required to pay only the amount
of the disputed taxes and will get complete waiver of
interest and penalty provided he pays by 31st March,
2020.
 No Dispute but Trust Scheme– ‘Vivad
SeVishwas’Scheme
 Those who avail this scheme after 31st
March, 2020 will have to pay some
additional amount.The scheme will remain
open till 30th June,2020.
 Taxpayers in whose cases appeals are pending
at any level can benefit from this scheme.
 Taxpayers will make use of this opportunity to
get relief from vexatious litigation process.
 Instant PAN through Aadhaar
• Ease of the process of allotment of PAN, soon
we will launch a system under which PAN
shall be instantly allotted online on the basis
of Aadhaar without any requirement for filling
up of detailed application form.
 INDIRECT TAXES : GST
 Simplified return shall be implemented from the 1st
April, 2020.This is under pilot run.
 It will make return filing simple with features like SMS
based filing for nil return, return pre-filling,
 Improved input tax credit flow and overall
simplification.
 Refund process has been simplified and has been
made fully automated with no human interface.
 Electronic invoice is another innovation wherein
critical information shall be captured electronically
in a centralized system
 INDIRECT TAXES : GST
 Aadhaar based verification of taxpayers is being
introduced will help in weeding out dummy or
non-existent units.
 Dynamic QR-code is proposed for consumer
invoices.
 GST parameters will be captured when payment
for purchases is made through the QR-code.
 System of cash reward is envisaged to incentivise
customers to seek invoice.
 INDIRECT TAXES : GST
 Deep data analytics and AI tools are being used
for crackdown on GST input tax credit,
refund, and other frauds and to identify all
those who are trying to game the system.
 Invoice and input tax credit matching is being
done wherein returns having mismatch more
than 10 percent or above a threshold are
identified and pursued.
 INDIRECT TAXES : Custom Duty
• Ease of doing business. India’s quantum leap in
the Trading Across Border parameter of Ease
of Doing Business rankings by the World Bank
is a testimony to these efforts. India’s rank on
this parameter improved from 146 to 80 in
2018 and further to 68 in 2019. Measures
have also been taken for providing a level
playing field to our domestic manufacturers,
particularly the MSME sector and for securing
borders.
 INDIRECT TAXES : Custom duty
 Certain exemptions are being withdrawn.
Remaining custom duty exemptions shall be
comprehensively reviewed by September, 2020
for taking a view on their relevance.
 Changing times and ease of doing business.
INCOME TAX
• FM Nirmala Sitharaman today in Budget 2020
proposed new income tax slabs and lower rates.
These income tax rates are optional and are
available to those who are willing to forego some
exemptions and some deductions.
• Pensioners, job starters, entrepreneurs to gain
from new income tax regime
• Opting for the new tax rates proposed in the
budget could be beneficial for job-starters,
pensioners, entrepreneurs and those taxpayers
unable to claim available deductions and
exemptions under the current tax structure
On income tax
• The cut in income tax rates, which would help
save ₹1,820 to ₹20,300 a year in tax for
persons with annual income of above ₹10
lakh, was however conditioned on foregoing
current exemptions and deductions, including
standard deduction for ₹50,000 as well as the
waiver earned on payment of up to ₹1.5 lakh
in tuition fee of children, and contribution
towards insurance premium and provident
fund.
• Tax payers have the option to choose between
the existing income tax regime and a new
regime
• New regime has slashed income tax rates and
new income tax slabs but no tax exemptions
• Which tax regime would be beneficial, i.e.,
result in lower tax payable for each individual
is likely to depend on his/her income
composition and investments done
• Here is the new income tax slabs
• 0 - 2.5 lakh - exempted
• ₹2.5 lakh - ₹5 lakh - 5%
• ₹5 lakh - ₹7.5 lakh - 10% (20% earlier)
• ₹7.5 lakh - ₹10 lakh - 15% (20% earlier)
• ₹10 lakh to ₹12.5 lakh - 20% (30% earlier)
• ₹12.5 lakh - ₹15 lakh - 25% (30% earlier)
• No change in tax rates above ₹15 lakh
 Changes in Tax Proposals
 Concessional corporate tax rate of 15 per cent to
new domestic companies in manufacturing and
power sector.
 Tax concession for sovereign wealth fund of
foreign governments and other foreign
investments.
 Tax benefits to Start-ups by way of deduction of
100 per cent of their profits are enhanced by
increasing turnover limit and period of eligibility.
 CORPORATE TAX
 New companies in the manufacturing
@15%
 Existing companies in the manufacturing
@22%
 Any other Companies or body corporate pay
tax as old tax structure
 Dividend DistributionTax
 Currently, companies are required to pay Dividend
Distribution Tax (DDT) on the dividend paid to its
shareholders at the rate of 15% plus applicable
surcharge and cess in addition to the tax payable
by the company on its profits.
 It has been argued that the system of levying DDT
results in increase in tax burden for investors and
especially those who are liable to pay tax less than
the rate of DDT if the dividend income is
included in their income.
 Dividend DistributionTax
 Increase the attractiveness of the Indian Equity
Market and to provide relief to a large class of
investors, FM propose to remove the DDT and
adopt the classical system of dividend taxation
under which the companies would not be
required to pay DDT.
 The dividend shall be taxed only in the hands
of the recipients at their applicable rate.
 Allow deduction for the dividend received by
holding company from its subsidiary.
 The removal of DDT will lead to estimated
annual revenue forgone of Rs.25,000 Crore.
• Personal tax simplified
• -For income between ₹12.5 lakh to 15 lakh, the
income tax rate will be 25%
• -For income more than 15%, it will attract an
income tax will be charged at 30%
• -Personal tax rates reduced
• -Individuals have to pay 10% income tax for
income between ₹5- ₹7.5 lakh
• -For income tax between ₹7.5 lakh- ₹10 lakh, he
or she will have pay 15%
• -Those earning ₹10 lakh- ₹12.5 lakh, will be
charged 20% income tax
• -Central government on Saturday proposed an
outlay of ₹27,300 crore for the development of
industry and commerce during 2020-21
• Following tables show the difference in tax under old and
new regime on same levels of taxable income for individuals
below 60 years of age:
• On Rs 5 lakh: So, there will be no difference in tax payable as no
tax has to be paid.
• On Rs 7.5 lakh:
On Rs 10 Lakh:
• The common and popular deductions are:
• Exemption u/s 80C – Up to Rs 1.5 lakh
• Exemption u/s 80D – Up to Rs 25,000 (For senior
citizens Rs 50,000)
• Tax rebate u/s 87A – Up to Rs 12,500 on taxable
income up to Rs 5 lakh
• Deduction on Home Loan interest – Up to Rs 2
lakh
• Additional deduction on Home Loan interest on
affordable houses u/s 80EEA – Up to Rs 1.5 lakh
• Deduction on Auto Loan interest for purchase of
electric vehicle u/s 80EEB – Up to Rs 1.5 lakh
• Old Tax Regime vs New Tax Regime
• The question is whether the old tax regime is
better than a new tax regime for the common
man, any change in tax slab directly or
indirectly impact the common man, so it is
very important to understand the advantages
and disadvantage of your choice.
• Whether a taxpayer can pick and choose
between the two tax regimes every financial
year as per his/her convenience and income
for that year. The answer to this question is,
yes you can.
• Which Tax Regime is better?
• Some of the case studies at the different
scenario’s for the salaried individual at
different salary levels under the current tax
regime and the new proposed tax regime.

• Scenario A – What If a salaried employee not

claiming any deduction.
• Looking at the above case New Tax regime
looks attractive but “If the salaried individual
claim deductions under section 80C, 80D, HRA
exemption, LTA exemption and deduction of
interest paid on housing loan taken for self-
occupied property up to permissible limits,
The selection criteria will change”.
• Scenario B -In case Salaried individuals
claiming most commonly
deduction/exemptions, considering INR 1.5
Lakhs u/s 80C and INR 25,000 u/s 80D.
• It is very clear in case all kinds of
deduction/exemption change the complete
scenario of the tax system for the individual.
Only in the case above INR 15 Lakhs + the
taxpayer will get benefited from the new
regime.
• PROS OF OLD TAX REGIME
• You can take all the exemption and deductions
benefits as usual.
• If you are under higher tax slab Old regime is
FAR better option. It will allow you to deduct
all exemption.
• Old not only save Tax but also enhance your
wealth corpus
• Income above INR 5 Lakhs bound you to pay
tax in New regime, but under Old regime, all
deductions and exemptions filter your taxable
income and drag you out from tax.
 CONS OF OLD TAX REGIME

• Old Regime conditionally force to use

exemptions to save tax, otherwise, you have
to pay Tax.
• There are lots of sections which required
additional tax knowledge which is bit difficult
for other stream people.