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Union Budget 2020- Boon or Bane

Our FM Nirmala Sitharaman presented the longest-ever budget in India’s history, this Saturday. From a new tax plan to boost infrastructure expenditure to a 16 point plan for Agri, the government tried to revive the declining growth rate, even estimated nominal growth rate to be at 10 perc in GDP.

Leaders from opposition parties are describing this budget as ‘hollow’ but PM Modi welcomed it for its ‘vision and action’. Having said that, let’s have a look at key takeaways from Budget 2020-21:

  1. New Tax Plan Personally, I have a question, why? With new tax options available with taxpayers, it has only led to confusion so far. Nirmala Tai, what would you have us do- Spend more or Save more?

Now, let’s compare the old tax plan with a new tax regime at 2 income slabs of 10L& 20L p.a through a table below-

Though a new tax plan offers lower income tax rates it excludes deductions means the only way to save tax with the new plan is to not save anything and don’t have any home loan. I have rarely come across a person waging 10-20 lacs a year with no investments, no insurance, and no home loan. So it’s a bane for me.

  1. Increased Insurance on Bank Deposit- Definitely a boon, a very welcome move and much-needed measure required to save guard hard-earned money of individuals especially, old citizens lying at the bank. The cover is increased to 5 lacs from existing 1 Lacs, certainly going to boost confidence after PMC fiasco.
  2. Dividend Distribution Tax, DDT- Well, it certainly wasn’t what investors at Dalal Street had anticipated and it was followed by biggest losing streak on budget day. Investors were expecting or rather hoping roll back on LTCG tax introduced 2018 budget by then FM Arun Jaitley or maybe some cut in STT. They were disappointed on both fronts. The government has removed DDT on companies and now going tax its recipients. This move will certainly not go down with big investors.
  3. LIC IPO –  Life Insurance Corporation is going to be listed on NSE & BSE as the government’s disinvestment target is increased to 2.1 L Crore at the time when the government is struggling to achieve its last target of 1.05 L Crore for ongoing FY. Employees’ Union is not sure yet how to respond to that.

I have mentioned key takeaways from individual taxpayers or the investor’s points of view. An individual have to decide whether it’s boon or bane but clearly I had a better expectation.

No doubt the government has other plans as well to boost the economy and reviving agricultural growth through a 16- Point action plan and certainly have given a miss to manufacturing barring a 6K Crore allocation to BharatNet program and defense sector with lower than expected allocation.