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Structural shift towards overall economic development’
Key theme of this budget is overall economic development through empowering common people, boosting prospect of start-up and MSMEs and attracting foreign capital. The most important feature of this budget is enabling environment of doing business through taking the structural shifts in the right directions. Latest tabled budget touched almost all sectors related concerns and proposed initiatives to keep economic momentum in line with the long term growth vision of attaining Rs5 trillion GDP by FY25. Govt proposed fiscal deficit at 3.3% in FY20 factoring Rs90,000 crore dividend from the RBI. Focus enhanced on garnering foreign capital as the budget proposed sovereign borrowings taking advantage of improving credibility of the country on the global level. Budget is more like a socialite one with a view empowering wide section of the population like villagers, farmers & poor people, alternatively high net worth individual will have to pay more tax as surcharge tax increased 3-7% for individual having annual income more the Rs2 crore. MSMEs remained key focused sector as among other key announcements one is to increase the 25% corporate tax limit to companies having upto Rs400 crore of turnover from earlier Rs250 crore which will benefit 99.3% of all companies incorporated in country. The budget has proposed Rs70,000 crore of recapitalization for PSBs which is in line with expectation, the move will address the liquidity as well as interest transmission concerns. On NBFCs crisis, the govt has proposed steps to reduce risk aversion and increase lending to NBFCs. Govt announced partial guarantee to PSBs buying the stressed assets of financial sound NBFCs along with easing FPIs norms for investments in NBFCs’ debt papers. Now the RBI will regulate the housing finance companies in place of NHB. One crucial factor related to capital market is to increase the public shareholding in listed companies, the move is likely to enhance the free float of market and diversified the index weight towards others sectors from BFSI. Continue to tackle the black money mess and to boost digitalization, the budget proposed a TDS of 2% on cash withdrawals exceeding Rs1 crore in a year from a bank account. Increase in excise duty of Rs1 on petrol and diesel is viewed negatively as the automobile sector has already been under pressure.
Key Budget announcements
• Proposed Rs100 lakh crore investments in infrastructure over the next five years
• Proposed Rs70,000 crore recapitalization of PSBs
• One time six months' partial credit guarantee to PSBs for first loss of up to 10% for purchase of high-rated pooled assets of financially sound NBFCs.
• RBI to regulate housing finance companies
• Corporate tax on companies with turnover up to Rs400 crore reduced to 25%.
• Govt sets Rs1.05 lakh crore divestment target for FY20.
• Proposed fiscal deficit at 3.3% for FY20 v/s 3.4% in FY19.
• Listed companies shall also be liable to pay additional tax at 20% in case of buyback of shares.
• Proposed 35% of minimum public shareholding in the listed companies.
• Start-ups won't be subject to scrutiny on angel tax.
• Additional Rs1.5 lakh income tax deduction on home loan interest paid for buyers of affordable homes till March 2020.
• Proposed increase in income tax surcharge on individual earning Rs2-5 crore by 3%, and 7% on those earning above Rs5 crore per annum.
• Budget proposes to borrow abroad in foreign currency to fund govt borrowing. • Additional excise duty of Re 1 on petrol and diesel to be imposed.
• PAN and Aadhaar cards would soon be interchangeable.
• The govt will bring a new national educational policy and Rs400 crore has been provided for world class institutions.
• Import duty to be hiked on gold and precious metals to 12.5%, from current level of 10%.
• To boost ‘Make in India’ the govt proposed to launch of a scheme to invite global companies through a transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as Semiconductor Fabrication (FAB), Solar Photo Voltaic cells, Lithium storage batteries, Solar electric charging infrastructure, Computer Servers, Laptops, etc. The govt will provide them investment linked income tax exemptions under section 35 AD of the Income Tax Act, and other indirect tax benefits.
• The budget proposed to increase custom duty on certain items with the objectives of securing borders, achieving higher domestic value addition through make in India, reducing import dependence, protection to MSME sector, promoting clean energy, curbing non-essential imports, and correcting inversions. Further, to provide domestic industry a level playing field, basic customs duty is being increased on items such as cashew kernels, PVC, Vinyl flooring, tiles, metal fittings among others.
• Capital expenditure outlays of Railways are around Rs1.5 to 1.6 lakh crores per annum. The budget proposed to use Public-Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services.
• To make electric vehicle affordable to consumers, govt will provide additional income tax deduction of Rs1.5 lakh on the interest paid on loans taken to purchase electric vehicles.
• Considering the importance of start-ups in employee generation, the budget proposed that the issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department.
• To commercialize the ability to launch satellites and other space products at globally low cost, a Public Sector Enterprise viz. New Space India Limited (NSIL) has been incorporated as a new commercial arm of Department of Space to tap the benefits of the Research & Development carried out by ISRO
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