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Union Finance Minister Nirmala Sitharaman’s second Budget speech on Saturday sought to make up in length and breadth for what it couldn’t deliver in the form of an effective stimulus for India’s fast-slowing economy.







Steps to be taken to enable sourcing external commercial borrowings and FDI in higher education. Centre to provide viability gap funding to set up hospitals in PPP mode under Ayushman Bharat.


Budget 2020-21 proposes a new income tax structure for individuals willing to forego exemptions and deductions.

Under the new structure, income of

₹5 lakh-₹7.5 lakh will attract 10% tax,

₹7.5 lakh-₹10 lakh 15%,

₹10 lakh-₹12.5 lakh 20%,

₹12.5 lakh-₹15 lakh 25% and

above ₹15 lakh 30%.

Income up to ₹5 lakh will remain exempt from tax.

Tax payers can opt for the new rates if they give up almost all tax exemptions and deductions they enjoy under the current regime, akin to the conditional tax rate cuts announced for corporates last September.

Most exemptions used by salaried employees on account of leave travel allowance, house rent allowance, housing loan repayments, savings instruments such as PPF and LIC, as well as the standard deduction will cease to be available.

The Finance Minister said this could result in savings of ₹78,000 for someone earning ₹15 lakh and not availing any incentives in the existing regime.

Tax practitioners noted that the new regime would only be attractive for non-salaried taxpayers or those who don’t avail any exemptions as of now. For many taxpayers who avail benefits, the difference in tax outgo may not be substantial.


Abolished the Dividend Distribution Tax.

Dividend will now be taxed only in the hands of the investors.

This would come as a relief for companies and capital market participants who have been lobbying hard for the removal of DDT at the company level, which, they felt led to double taxation as such payouts are also taxed at the investor level.

Currently, companies are required to pay 15% tax plus applicable surcharge and cess on the dividends. Further, investors that receive more than ₹10 lakh as dividend in a financial year have to pay 10% tax on such income.


Finance Minister Nirmala Sitharaman on Saturday proposed that cooperative societies be given an option to be taxed at 22% plus surcharge, albeit without any exemptions.

Presenting the Budget, the Finance Minister said cooperative societies played an extremely important role in the country’s economy by facilitating access to credit, procurement of inputs and marketing of products to their members.


Customs duty on a range of articles like household goods, electrical appliances, auto parts, footwear, furniture and some mobiles phone parts has been raised in the Union Budget.

This has been done keeping in view the interests of the MSME segment, to facilitate ease of doing business, secure trade borders and to keep uncontrolled dumping under check.

Duty on toys, tricycles, scooters, scale models and dolls has seen a steep increase from 20% to 60%.

The customs duty on the import of food processing products has been raised to 100%, while the levy on auto and auto parts has been raised by up to 10%.

The Budget also proposes reduction in customs duty on raw materials and inputs imported by domestic manufacturers. The duty of 10% on fuel, chemicals and plastics would be fully removed.


With an aim to boost listing of bonds at IFSC exchange, the government has proposed to reduce the withholding tax rate to 4% from 5% on interest payment on bonds listed on the bourse.

Withholding tax is levied by countries on interest or dividends paid to a person who is resident outside that country.


With the objective of enhancing the efficiency of the delivery system of the Income Tax Department,  Central Board of Direct Taxes to adopt a Taxpayers’ Charter.

The charter, which would enumerate taxpayer’s rights, would be incorporated in the Income Tax Act through suitable amendments, the Minister said.

The Budget also proposed several other steps to smoothen the administration of the IT regime, including enhancing the use of technology.

This amendment would take effect from April 1, 2020.

A provision for e-appeal has also been included as part of the drive to impart greater efficiency, transparency and accountability to the assessment process.

The e-appeal scheme would help in “eliminating the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible.”


To give a boost to the start-up ecosystem, the Budget proposes to defer tax payment on income earned from Employee Stock Option Plans (ESOPs) by five years or till employees leave the company or when they sell their shares, whichever is earliest.

As per the Finance Bill, it applies to employees of the companies which qualify as eligible start-ups under Section 80-IAC, and to be eligible under Section 80-IAC, start-ups have to get a certificate from an inter-ministerial board.

The ESOP is a significant component of compensation and during formative years, start-ups take this route to attract and retain talent. Currently, ESOPs are taxable as perquisites at the time of exercising the option.


Tax will be imposed on Indian citizens abroad if they are not taxable in their home country.

The impact of lower tax rates on demand creation may not be too high, and removing tax exemptions that spur financial savings could dent an already falling savings rate.


The Fifteenth Finance Commission, in its interim report tabled in Parliament on Saturday, has recommended maintaining States’ share in the divisible pool of tax collections at virtually the same level of 42% set by its predecessor, for 2020-21.

To factor in the changed status of the erstwhile State of Jammu and Kashmir, the rate at which funds may be shared with the States has been reset to 41%. This is after ‘adjusting one percentage point for the needs, including special ones of the two new union territories of J&K and Ladakh,’ the Commission noted in its report.

The Commission would submit its final report to the President during the latter part of the year, that would include the devolution formula proposed between the Centre and the States for the five-year period from 2021-2022 till 2025-2026. The interim report was submitted to provide a formula for 2020-21 alone.


Railways to set up ‘Kisan Rail’ through PPP. More Tejas-type trains to connect major tourist destinations.

Railways would set up a Kisan Rail programme through public-private partnership to build a seamless national cold supply chain for perishables, including milk, meat and fish. Refrigerated coaches would be built in express and freight trains as well, she said.

Krishi Udaan scheme would be launched by the Civil Aviation Ministry on international and national routes, in a move that would help improve value realisation especially in the northeast and tribal districts.

Delhi-Mumbai Expressway to be completed by 2023.


To boost farm incomes and the rural sectors, the Finance Minister allocated ₹2.83 lakh crore and fixed ₹15 lakh crore target for agriculture credit, along with 16 new and renewed measures. Another ₹1.7 lakh crore was allocated for transport infrastructure and ₹40,740 crore for the energy sector.


Government has decided to go for a 0.5% deviation from fiscal deficit targets under the Fiscal Responsibility and Budget Management law to end 2019-20 with a 3.8% deficit and a promise to attain a 3.5% deficit in the coming year.

Union Finance Minister Nirmala Sitharaman cited Section 4 (2) of the Fiscal Responsibility and Budget Management (FRBM) Act that provides for a trigger mechanism for a deviation from the estimated fiscal deficit on account of structural reforms in the economy “with unanticipated fiscal implications”.

Increase in fiscal deficit will put pressure on inflation, which is on the rise. The Reserve Bank of India will not have much scope for further rate cut,” said the treasury head of a large public sector bank.


Government has set a massive target of ₹2.1 lakh crore disinvestment — 223% higher than the revised estimates for the current year.

The government is planning to sell a part of its stake in the Life Insurance Corporation of India through an initial public offering, which could turn out to be the biggest such offering domestically.

“The government now proposes to sell a part of its holding in LIC by way of Initial Public Offer (IPO),” Finance Minister Nirmala Sitharaman said in her Budget speech.

The stake sale of LIC is crucial for the government to meet its ambitious disinvestment target for the financial year 2020-21.

For LIC to be listed, the government has to first change the LIC Act since it says the capital of the insurance behemoth will be wholly subscribed by the Government of India.

If listed, LIC has to be more transparent in disclosure. The insurer has to make quarterly disclosures to the stock market about their financial performance.

“Liberties that the government can take with a company that is 100% owned by them [government] can’t be taken even if 10% is privately owned. They have to disclose all the related party transactions,” said a former LIC chairman.


The government has decided to increase the insurance cover for bank deposits to ₹5 lakh from ₹1 lakh, Finance Minister Nirmala Sitharaman said in her Budget speech.

This is the first time since 1993 that the deposit insurance cover has been raised.

The Finance Minister assured that there was a robust mechanism in place to monitor the health of all Scheduled Commercial Banks and that depositors’ money was safe.

The present premium rate is 10 paise for a deposit of ₹100.

The premium paid by the insured banks to the DICGC is required to be borne by the banks themselves and is not passed on to the depositors.

The DICGC insures all bank deposits such as savings, fixed, current and recurring.

Deposits not covered by the Corporation include those of foreign governments and of Central/ State governments, deposits of State Land Development Banks with State cooperative banks, inter-bank deposits, deposits received outside India and those specifically exempted by the DICGC with the prior approval of the banking regulator.


The government on Saturday proposed to set up an international bullion exchange at IFSC in GIFT City, which will lead to better price discovery of gold, create more jobs and enhance India’s position in such market.

“With the approval of the regulator, GIFT City would set up an International Bullion Exchange(s) in GIFT-IFSC as an additional option for trade by global market participants,” Finance Minister Nirmala Sitharaman said while presenting the Budget for 2020-21.

This will enable India to enhance its position worldwide, create jobs and lead to better price discovery of gold, she added.

The country’s only International Financial Services Centre (IFSC) is in GIFT City near Ahmedabad in Gujarat.

IFSC has the potential to become a centre of international finance and high-end data processing, the Minister added.

IFSC has 19 insurance entities and 40 banking entities.


GIFT City is a global financial and IT services hub, a first-of-its-kind in India, designed to be at par with globally benchmarked business districts. It is supported by state-of-the-art infrastructure encompassing all basic urban infrastructure elements along with an excellent external connectivity.


As part of the reforms to the financial markets, especially the bond market, the government has proposed increasing the investment limit for foreign portfolio investors (FPIs) in corporate bonds, opening certain government securities for non-resident investors and launching a new debt exchange traded fund (ETF) comprising primarily of government securities.

Union Finance Minister Nirmala Sitharaman on Saturday proposed that the limit for FPIs’ purchases of corporate bonds, currently capped at 9% of the outstanding stock, would be increased to 15%.

The Minister also proposed opening specified categories of government debt securities to non-resident investors.

Separately, the Budget proposes amending the relevant laws to extend commodity transaction tax on products introduced in the commodity derivatives markets late last year.


A National Logistics Policy, which will clarify the roles of the Union Government, State governments and key regulators, will be released soon by the Union government, Finance Minister Nirmala Sitharaman said on Saturday.

Presenting the Union Budget 2020-21, she said the policy would create a single window e-logistics market and focus on generation of employment and skills and make MSMEs competitive.

India’s logistics sector is highly fragmented and the aim is to reduce the logistics cost from the present 14% of the GDP to less than 10% by 2022. The logistics sector, with a market size of $160 billion, is very complex, involving than 20 government agencies, 37 export promotion councils, 500 certifications and 10,000 commodities.

It also involves 12 million employment base, 200 shipping agencies, 36 logistics services, 129 ICDs, 168 CFSs, 50 IT ecosystems and banks & insurance agencies. Further, 81 authorities and 500 certificates are required for export and import.

The Indian logistics sector provides livelihood to more than 22 million people and improving the sector will facilitate a 10% decrease in indirect logistics cost, leading to a growth of 5 to 8% in exports. Further, it is estimated that the worth of Indian logistics market will be around $215 billion in the next two years, compared to about $160 billion at present.


Finance Minister Nirmala Sitharaman on Saturday announced an allocation of ₹6,000 crore under the BharatNet programme to enhance broadband connectivity in rural areas, while also proposing a new policy to allow private players to set up data parks in the country.

New technologies such as analytics, machine learning and Artificial Intelligence (AI) found a lot of emphasis in Budget 2020. In fact, the Finance Minister stated at the start of her speech that she had been mindful of presenting the Budget against the backdrop of a proliferation of technologies, especially analytics, machine learning, robotics, bio-informatics and AI.

New business models

The new economy, she said, was based on innovations that disrupt established business models. AI, the Internet of Things, 3D printing, drones, DNA data storage, quantum computing, etc., were rewriting the world economic order. “India has already embraced new paradigms such as the sharing economy with aggregator platforms displacing conventional businesses. The government has harnessed new technologies to enable direct benefit transfers and financial inclusion on a scale never imagined before,” Ms. Sitharaman said.


Finance Minister Nirmala Sitharaman in her Budget on Saturday announced a National Technical Textiles Mission, which is expected to give a thrust to production of a wide variety of textiles used in sectors such as healthcare, infrastructure, automobiles, defence, and agriculture.

The ₹1,480-crore Mission, which will be implemented from 2020-21 to 2023-24, aims at positioning India as a global leader in technical textiles.

The last time the sector received focus was a few years ago to set up six centres of excellence across the country.

With the need to create a domestic base for raw material production, push for manufacture of high-end technical textile products, boost investments, and increase per capita consumption, there is a need for such a Mission.

Another major announcement in the Budget, which is expected to give a thrust to the polyester fibre sector, is abolition of anti-dumping duty on PTA (Purified Terephthalic Acid). This is the raw material for production of polyester fibre.


The Union Budget has made a major reduction in the annual allocation for financial assistance to Nepal. Apart from Nepal, aid to African countries has also been reduced.

The 2019-20 Budget had allocated ₹1,200 crore to projects in Nepal but Saturday’s numbers show that India has allocated only ₹800 crore to the projects under way in Nepal for 2020-21. The development is likely to cast a shadow on the work that India partners in the crucial Himalayan neighbour which has in recent months showed warmth towards China.

Substantial cut

The Budget also showed substantial reduction for “other developing countries” that will now receive ₹120 crore compared to last year’s allocation of ₹150 crore.

Similar reduction was also noticed in the African department where ₹350 crore has been allocated for next year in comparison to last year’s ₹450 crore. Allocation for Latin American countries has increased and currently ₹20 crore will be spent on diplomacy with the region which is a favoured area of new Foreign Secretary Harsh Vardhan Shringla.

The figure for Sri Lanka has also been trimmed from previous year’s ₹205 crore to ₹200 crore.

Disaster relief, a chosen area of the Modi government, has also received a jolt with only ₹20 crore being allocated compared to last year’s ₹30 crore.

Bhutan tops chart

Bhutan, the usual recipient of the largest share of Indian aid, continues in the top rung with ₹2,884.65 crore. Financial support for Afghanistan continues to remain the same at ₹400 crore.



Finance Minister Nirmala Sitharaman on Saturday said 100 more airports will be developed by 2025 to support the UDAN scheme, aimed at better regional connectivity.

Presenting the Budget, Ms. Sitharaman said ₹1.7 lakh crore had been provided for transport infrastructure in 2020-21.


  • Also known as the Regional Connectivity Scheme, It aims to develop the regional aviation market
  • Interested air line and helicopter operators can start operations on hither to uncovered routes by submitting proposals to the Implementing Agency. They can opt for Viability Gap Funding and other concessions.
  • The Operator submitting the Original proposal will have the first Right to Refusal on matching the lowest bid in case his original bid is with in 10% of the lowest bidder.
  • The successful bidder would then have exclusive rights to operate the route for a period of three years.
  • The selected air line operator will have to provide a minimum of 9 and maximum of 40 seats on the UDAN flights for operations through fixed wing aircraft and a minimum of 5 and maximum of 13 seats on the flights for operations through helicopters.
  • On each such route the minimum departures will be three per week and maximum of seven departures per week.
  • The fare for one hour journey on fixed wing aircraft of approx 500km and for 30 minute on a helicopter has been capped at 2500 rupees with proportionate pricing for routes of different lengths/ stages/flight duration.



Union Finance Minister Nirmala Sitharaman on Saturday proposed a budgetary allocation of ₹70,000 crore for the Indian Railways, with overall capital expenditure of ₹1.61 lakh crore for the next financial year in the Union Budget.

While the capital expenditure for 2020-21 saw an increase of a mere 3% from ₹1.56 lakh crore (revised estimates) for 2019-20, the Budget promises increased investment for passenger amenities and safety-related works, including track renewals, level crossings and road over/under bridges.

Finance Minister Nirmala Sitharaman proposed setting up a large solar power capacity alongside the rail tracks, on the land owned by the railways, besides re-development of four stations, operation of 150 passenger trains via public-private partnership mode and introduction of more Tejas type trains to iconic tourist destinations.

The Railway Board has said that the third ‘corporate’ train to be run by IRCTC will run between Indore and Varanasi, and is likely to begin operations mid-February. The train, which will have the same rakes as those of the Humsafar Express, will run three days a week — two days via Lucknow and one day via Allahabad. The overnight train will have sleeper coaches.


The Union Budget has allocated ₹22,000 crore to the power and renewable energy sector in 2020-21 with an aim to improve the financial health of power distribution firms and boost the use of solar power.

The government plans to expand the national gas grid from the present 16,200 km to 27,000 km. Further reforms will be undertaken to facilitate transparent price discovery and ease of transaction.

The Finance Minister promised to provide concessional income tax rate of 15% for new power companies.

“Reduction in corporate tax rate to 15% for new power generation will help new investments in renewable power. Prepaid smart metering and freedom to choose power supplier will lay the ground to bring competition in the sector and give consumers a choice.


The Road Transport and Highways Ministry saw an increase of 10% in its budgetary allocation, but a large chunk of it is through monetisation of national highways by the NHAI.

Accelerated development of highways will be undertaken. This will include development of 2,500 km of access control highways, 9,000 km of economic corridors, 2,000 km of coastal and land port roads and 2,000 km of strategic highways

The government also aimed to make sea ports more efficient through the use of technology. Ms. Sitharaman announced that at least one major port would be corporatised and then listed on the stock exchanges. The allocation for the Ministry of Shipping has seen an increase of 18% from ₹1,523 crore last year to ₹1,800 crore.


There is cheer for science in the Budget, with key scientific departments receiving an across-the-board increase of 10% or more.

The Department of Biotechnology (DBT) posted the largest increase, with an outlay of ₹2,786 crore, a 17% increase from the ₹2,381 crore it spent last year.

The Department of Science and Technology got a 14% hike, at ₹6,301 crore, over its expenditure last year, the Earth Sciences Ministry posted a 14% hike at ₹2,070 crore and the Council of Scientific and Industrial Research got a 10% hike at ₹5,385 crore.

Overall, the science Ministries received ₹16,542 crore, 13% more than what was spent last year.

The civilian science Ministries work on budgets that are much lower than, say, the Department of Atomic Energy that got ₹18,228 crore and the Department of Space that got ₹13,479 crore.

The DBT has embarked on projects to map the genes of Indians as well the genetic structure of every plant variety. Another official said the government’s expenditure on science had nearly doubled since 2014.


Despite a slowdown in the rural economy and the need to stimulate rural demand, the Centre has slashed budgetary allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme by ₹9,500 crore for the coming year.

Finance Minister Nirmala Sitharaman announced ₹61,500 crore for the scheme in 2020-21, a 13% drop from the 2019-20 revised estimates of ₹71,000 crore.

MGNREGS, which provides 100 days of unskilled work for every rural household, helps generate rural employment and provides a social safety net. Before the Budget, a number of economists had suggested that putting money directly into the hands of rural consumers at the bottom of the pyramid would be needed to create liquidity and spur consumption demand.


The Department of Space (DoS) gets a proposed 8% increase in the outlay for fiscal 2020-21, a year when it plans to send out expensive missions such as a third trip to the moon and a test flight ahead of an actual astronaut mission.

The Budget allocation has increased to about ₹13,479 crore, from about ₹12,473 crore that was earmarked in the Budget for 2019-20.

The department’s nodal Indian Space Research Organisation (ISRO) overshot that budget and spent about ₹666 crore more than its share for the year. Revised estimates for 2019-20 put the total Space spending at about ₹13,139 crore.

At a news conference on January 1, ISRO Chairman and DoS Secretary K. Sivan had said the department had sought about ₹14,000 crore for the coming fiscal. Chandrayaan-3, the country’s second attempt to land near the south pole of the moon and planned for the turn of 2020, would cost about ₹600 crore, he had said.




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