New Delhi, Feb 1 : Finance Minister Nirmala Sitharaman on Saturday slashed income tax for individuals, abolished dividend tax for companies and announced record spending in agriculture and infrastructure sectors to pull out the economy from its worst slowdown in more than a decade.
The cut in income tax rates, which would help save about Rs 31,000 a year in tax for persons with annual income of up to Rs 17 lakh, was however conditioned on current exemptions and deductions including standard deduction for Rs 50,000 as well as the waiver earned on payment of up to Rs 1.5 lakh in tuition fee of children, and contribution towards insurance premium and provident fund, being given up.
She raised import duty on a variety of products ranging from tableware and kitchenware to electrical appliances to footwear, furniture, stationery and toys to boost domestic manufacturing while at the same time provided funds to help farmers set up solar power generation units and set up coal storages to transport perishables.
Alongside, the limit of insurance cover in case of bank failure on deposits was increased to Rs 5 lakh from Rs 1 lakh and a sale of government stake in the country’s largest insurer Life Insurance Corporation (LIC) announced.
Presenting her second budget in Parliament, Sitharaman said the 2020-21 Budget was aimed at boosting incomes and enhancing purchasing power, stressing that the economy’s fundamentals were strong and inflation was well contained.
For farm and rural sectors, she allocated Rs 2.83 lakh crore and fixed Rs 15 lakh crore target for giving agriculture credit. Another Rs 1.7 lakh crore spending was planned for transport infrastructure and Rs 40,740 crore allocation was made for the energy sector.
In doing so, the government will miss its deficit target for the third year in a row, pushing shortfall to 3.8 percent of GDP in the current fiscal as compared to 3.3 percent previously planned. The fiscal deficit target for the coming fiscal year starting April 1 has been fixed at 3.5 percent.
Sitharaman, who cut tax paid by companies to its lowest in September last year, proposed new tax slabs of 15 percent and 25 percent in addition to the existing 10 percent, 20 percent and 30 percent. The new slabs would be for individuals not availing certain specified deductions or exemptions.
Under the proposed I-T slab, annual income up to Rs 2.5 lakh is exempt from tax. Those individuals earning between Rs 2.5 lakh and Rs 5 lakh will pay 5 percent tax. A 10 percent tax will be charged on income between Rs 5 and 7.5 lakh, 15 percent, 20 percent and 25 percent on next Rs 2.5 lakh each and 30 percent on income above Rs 15 lakh.
“Currently, annual income up to Rs 2.5 lakh is exempt from income tax. While a 5 percent tax is charged for income between Rs 2.5 and 5 lakh. 20 percent for income between Rs 5 lakh and Rs 10 lakh and 30 percent for those earning above Rs 10 lakh.
“The new tax regime shall be optional for taxpayers,” she said.
Sitharaman accepted the demand of the industry to reverse the taxability of dividends back to the recipients, making equity investment more attractive. Now, dividends will be taxed in the hands of recipients, a move that will cause Rs 25,000 crore dent to her coffers.
Also, she deferred taxes for ESOPs in the hands of employees which will be an important decision for the employees to own shares in the employer without getting worried about organising cash to pay taxes. This will also provide greater flexibility to the employers and employees in the structuring of their employment prospects.
One proposal that could be become contentious was tax being imposed on Indian citizens abroad if they are not taxable in their home country.
For the next fiscal, she pegged net borrowings of Rs 5.45 lakh crore and doubled target of raising revenue from the sale of government stake in PSUs to Rs 2.1 lakh crore.
India now 5th largest economy globally: Sitharaman
New Delhi, Feb 1 : India is now the fifth largest economy in the world and the Central government debt has reduced to 48.7 percent of GDP from 52.2 percent in March 2014, Finance Minister Nirmala Sitharaman said on Saturday.
Presenting the Union Budget for 2020-21, she said growth of 7.4 percent was surpassed in 2014-19 with average inflation of 4.5 percent.
Sitharaman also listed out various welfare schemes like affordable housing, direct benefit transfer (DBT) and Ayushman Bharat.
Govt intends to remove all income tax exemptions in long run: FM
New Delhi, Feb 01 : After slashing income tax rates for individuals on condition that they give up exemptions and deductions, Finance Minister Nirmala Sitharaman on Saturday said the government intends to remove all I-T exemptions in the long run.
Speaking at a press conference after presenting her second budget in the Lok Sabha, she said income tax cuts follow reduction in corporate tax rates in September last year.
The minister said additional capital will be provided to public sector banks as and when required.
Her budget speech did not provide for any specific number for additional capital.
The finance minister said improvement in revenue generation gives hopes of lowering fiscal deficit to 3.5 percent of GDP in the next fiscal from 3.8 percent in the current.
Disinvestment Secretary T K Pandey said big ticket stake sale will happen in the next few months and that he was confident of achieving the Rs 2.10 lakh crore target set for the next financial year.
He said an expression of interest (EoI) for sale of government stake in Bharat Petroleum Corp Ltd (BPCL) will be issued shortly.
The Cabinet had approved sale of government stake in BPCL in November last year.
