Hon’ble Finance Minister, Smt. Nirmala Sitharaman presented the Union Budget 2020-21 in the parliament on 1 Feb 2020. Summarizing her outlook for 2020-21 in her own words; “Our people should be gainfully employed, our businesses should be healthy; for all minorities, women and people from SCs and STs, this Budget aims to fulfil their aspirations.” The three prominent themes for the Budget this year were Aspirational India, Economic Development and Caring Society.

The Finance minister also pointed out that the budget is to further bolster the income and purchasing power of the people with a key focus on doubling farmers income by 2022.

Here are some key highlights from the budget:

Easing Foreign Direct Investments (FDI) and Foreign Portfolio Investments (FPI)

• 100% tax concession provided for the income of specified Sovereign Wealth Funds (SWF) for their investments in infrastructure projects.
• The abolishment of Dividend Distribution Tax (DDT) is likely to spur investments in infrastructure projects
• Increase in limits for FPIs in corporate bond from 9% to 15% of the outstanding stock will make India an attractive investment destination.
• Steps would be taken to enable sourcing External Commercial Borrowings (ECBs) and FDI to deliver higher quality education and enable greater inflow of finance to attract talented teachers, innovate and build better labs across the country.

Reducing Cost of Capital for Businesses and Infrastructure

• National Pension System (NPS) Trust for government employees to be separated from Pension Fund Regulatory Authority (PFRDAI) to enable the establishment of a Pension Trust by the employees other than Government.
• Selling of balance holding of Government of India in IDBI Bank to private, retail and institutional investors through the stock exchange is proposed.
• Eligibility limit for Non-Banking Financial Companies (NBFCs) for debt recovery under 'The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act' (also known as SARFAESI Act) has been reduced to an asset size of INR 100 cr from the existing INR 500 cr or loan size of INR 50 lakhs from the existing INR 1 cr.
• Deposit Insurance Coverage increased to INR 5 lakh per depositor.
• New debt-based Exchange-Traded Fund (ETF) mainly proposed for government securities.
• Non-Resident Indian (NRI) investors would be able to invest in specified categories of government securities.

New Scheme for Mega Factories in Advanced Technology Areas

• Technology clusters harbouring testbeds to be scaled up and small-scale manufacturing facilities to be established.
• National Mission on Quantum Technologies and Applications has been proposed with an outlay of INR 8,000 cr over a period of five years
• Knowledge Translation Clusters would be set up across different technology sectors.

Structural Reforms

• National Logistics Policy to be launched for creation of a single-window e-logistics market and focus on employment, skills and making competitive MSME ecosystem
• INR 6,000 Cr to be allocated to Bharat Net programme in 2020-21 to provide all ‘public institutions’ at Gram Panchayat level with digital connectivity.
• Providing energy sovereignty through KUSUM and input sovereignty through Paramparagat Krishi Vikas Yojna (PKVY).
• Provided 16 action points for adopting sustainable cropping patterns and bringing in more technology in the agriculture sector.
• Viability gap funding has been proposed for setting up of hospitals in the PPP mode and warehouses at the block level.
• A Village storage scheme has been proposed to be run by SHGs to provide farmers with good holding capacity and reduce logistics cost.
• Financing of Negotiable Warehousing Receipts (e-NWR) which has crossed more than INR 6,000 cr to be integrated with e-NWR.
• A national cold supply chain to be built for perishables (inclusive of milk, meat and fish) through ‘Kisan Rail’ and ‘Krishi Udaan’ which are to be launched by Indian Railways and Ministry of Civil Aviation respectively.

Augmentation and Modernisation of Infrastructure

• Four railway stations to be redeveloped and operations of 150 passenger trains to be done via PPP mode inviting participation from private players
• More Tejas type trains have been planned to connect iconic Indian tourist destinations.
• 100 more airports to be developed by 2024 under the UDAAN Scheme.
• Efforts to be made in the direction of replacing conventional energy meters with prepaid smart meters in the next 3 years
• The National Gas Grid to be expanded to 27,000 km from the existing 16,200 Km.
• The National infrastructure pipeline with projects worth INR 103 lakh cr was announced during the budget. Moreover, it was mentioned that INR 22,000 cr has already been provided to support the infrastructure pipeline.
• International bullion exchange to be set up at GIFT City to facilitate gold trading by international market participants.
• Jal Vikas Marg on National Waterway-1 to be completed. 890km Dhubri-Sadiya connectivity to be done by 2022. Moreover, PM Modi has conceptualised the ‘Arth Ganga’ to invigorate economic activity along river-banks

Entrepreneurship and MSMEs

• Invoice financing to be extended to MSMEs through TReDs.
• Scheme to provide subordinate debt for MSME entrepreneurs
• A scheme of INR 100 cr to be anchored by EXIM bank and SIDBI to handhold MSMEs for technology upgradations, R&D and business strategy in export markets.
• The turnover threshold limit for a tax audit of MSMEs to be increased to INR 500 Lakhs from an existing INR 100 Lakhs
• Startups to be given 100% exemption on corporate tax for 3 consecutive years out of the first 10 years (previously 7 years) from incorporation, if the turnover in any of the year is < INR 1,000 mn (previously < INR 250 mn).
• 15% concessional corporate tax rate to be extended to new domestic companies engaged in the generation of electricity to give a boost to the manufacturing sector
• Simplified GST returns to be applicable from 1 April 2020 which will fully automate the refund process.

Tax Proposals

• Co-operative societies have been offered an optional tax concession rate of 22%, down 8% from the existing 30%. In addition to this, these co-operatives are proposed to be exempted from Alternate Minimum Tax if they opt for above concessional tax rate.
• Health cess to be imposed on the import of medical equipment.
• Tax regime simplified, removal of 70 exemptions and deductions
• Exemption from Social Welfare Surcharge has been proposed
• Changes in the Basic Custom Duty have been proposed
• The income of sovereign wealth funds, including the wholly-owned subsidiary of Abu Dhabi Investment Authority (ADIA), has been exempted, subject to the specified conditions - DDT has been abolished; tax incidence will be shifted to the recipient at applicable rates

Caring for Society

• Equipped more than 6 lakh Anganwadi workers with smartphones to upload the nutritional status of more than 10 cr households
• A new task force has been proposed to recommend lowering MMR and improving nutrition levels. INR 3,56,000 cr has been allocated for nutrition-related programmes for the financial year 2020-21
• Mission Indradhanush has been expanded as a part of Government’s holistic vision of healthcare that translates into wellness for the citizens. This mission aims to cover 12 diseases, including 5 new vaccines.
• Jal Jeevan Mission has been launched for focused safe water. INR 3.6 Lakh cr has been allocated in support of the mission.
• Government has launched the ‘TB Harega Desh Jeetega’ campaign towards its strong commitment to ending Tuberculosis by 2025
• Jan Aushadhi Kendra scheme has been expanded to all districts offering 2000 medicines and 300 surgical by 2024.
• Government has allocated INR 69,000 cr (inclusive of INR 6,400 cr) for Prime Minister Jan Arogya Yojana (PMJAY). There are more than 20,000 empanelled hospitals under PM Jan Arogya Yojana.
• Government has allocated INR 12,300 cr for Swatch Bharat Mission.
• Along with waste management, focus on liquid and greywater management.
• New education policy to be soon announced. Government has further proposed INR 93,300 cr for the education sector in 2020-21 and INR 3,000 cr for the skill development.
• 150 higher educational institutions will start apprenticeship embedded degree/diploma courses by March 2021. Special bridge courses to be designed by Ministries of Health and Skill development together with professional bodies to improve skill sets of teachers, nurses, para-medical staff and caregivers.

This blog has been authored by Kanika Verma