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Budget 2020 Live: FM Sitharaman Revises Personal Income Tax Slabs, Scraps DDT; Announces LIC IPO

Catch Finance Minister Nirmala Sitharaman’s Union Budget 2020 decoded live here.

Union Finance Minister Nirmala Sitharaman, holding a folder containing the Union Budget documents, poses for photographers along with her deputy Anurag Thakur and a team of officials, outside the Ministry of Finance, North Block. (PTI)
Union Finance Minister Nirmala Sitharaman, holding a folder containing the Union Budget documents, poses for photographers along with her deputy Anurag Thakur and a team of officials, outside the Ministry of Finance, North Block. (PTI)

Budget 2020 Live Coverage | How Will Budget 2020 Impact Your Finance?

Key Highlights From FM's Post Budget Speech Press Conference

Finance Minister Says:

  • Have Not Said No Money For Recap After PSB Amalgamation
  • If Capital Need Arises Along With PSB Amalgamation, Will Consider
  • Private Investment Was Not Happening At Desired Pace
  • GST Revenues Were Not At Par With Expectations
  • Had To Ramp Up Government Spending In 2019, Hence Deficit Change
  • Revenue Generation Improvement Gives Confidence On FY21 Deficit
  • Divestment Groundwork Done In FY20 Will Reflect In FY21
  • Government's Intent Is Not To Harass Taxpayers
  • Tax Charter Meant To Honour Honest Taxpaying Entrepreneurs
  • Addressed Real Estate's Needs With 1-Year Extension Of Sops
  • Those Who Want To Continue Availing Exemptions Can Stay With Old Regime
  • Want To Remove Income Tax Exemptions In The Long-Run
  • Ideal Situation Would Have Been Scheme With No Exemptions
  • Want To Bring Rates Down, Ease Complications That Exist In Compliance
  • Optional Approach Similar To That Done With Corporate Tax Changes
  • New Personal Tax Regime Meant To Simplify Structure

Revenue Secretary Says

  • More Than 4.9 Lakh Cases Are In Dispute
  • Settlement Post-Mar. 31 Can Be Done With Small Fee Over Tax Amount
  • Non-Resident Status Now After 240 Days Overseas, Vs 182 Earlier
  • Donation To Charitable Trust Not Deductible Under New System
  • Exemption On Payment Received From NPS Retained
  • Exemption On Retirement Gratuity Retained
  • Retained Retirement Benefit Exemptions In New System
  • Total Of 120 Exemptions To Income Tax Existed
  • Donation To Charitable Trust Not Deductible Under New System

Finance Secretary Says

  • Timeline On LIC IPO To Be Given A Later Point
  • Revenue Generation Improvement Gives Confidence On FY21 Deficit
  • PSB Mergers To Yield Synergy Savings Of Rs 1,900 Crore

DIPAM Secretary Says

  • Some Of The Big-Ticket Disinvestments Will Spill Over Into FY21
  • Expect Expressions Of Interest For BPCL Very Soon

Budget Impact: Sensex Drops Nearly 900 Points; Nifty Falls To Below 11,700

Indian stocks extended declined to trade at day’s low.

The S&P BSE Sensex fell 2.1 percent or 880 points to trade below 40,000-mark and the NSE Nifty 50 fell 2.2 percent 11,697. The broader markets represented by the NSE Nifty 500 Index fell 2.3 percent.

The market breadth was tilted in favour of sellers. About 1,293 stocks declined and 443 shares declined on National Stock Exchange.

Ten out of 11 sectoral gauges compiled by NSE traded lower, led by the NSE Nifty Realty Index’s 7 percent fall. On the flipside, the NSE Nifty IT Index was the only sectoral gainer, up 0.7 percent.

Budget 2020 Live: FM Sitharaman Revises Personal Income Tax Slabs, Scraps DDT; Announces LIC IPO

Budget 2020 Impact: VS Parasarathy Says Budget Will Return Consumer Confidence

Mahindra & Mahindra’s VS Parasarathy expects Budget 2020 to return confidence to consumers and benefit auto and auto ancillary markets. While there were no specifics for the industry, an improvement in overall sentiment will be seen, he said.

I think this budget takes a lot of small and important steps in the the right direction. Great thing is, there are no negatives as far as this is concerned. I think this budget is a very big positive for that part of the industry. Hopefully this starts the virtuous loop. 
VS Parasarathy, CFO, Mahindra Group

Budget 2020 Impact: Marcellus Investment's Saurabh Mukherjea Says FIIs Will Return

The LIC listing and ambitious disinvestment target are linked. The FMCG stocks are roaring due to the middle class getting roughly Rs 10,000 in tax cuts. Also, the FIIs will come back to buy the high-dividend paying stocks as they benefit immediately.
Saurabh Mukherjea, Co-Founder, Marcellus Investment Managers

However,on the negative side, the budget gave no relief to the NBFC sector, he pointed out. “That's obviously a big deal as the ecosystem is challenged at the moment,” reasoning the equity market’s negative reaction.

The request to the Reserve Bank of India to extend the MSME restructuring window was a little worrisome, he added. “This is basically saying the government does not have the money to recapitalise the state-owned banks and therefore asking RBI to kick the can down the road.”

Budget Impact: ITC Slides After Budget Proposes To Raise Excise Duty On Tobacco, Cigarettes

Shares of the FMCG company declined after the budget proposed to raise excise duty on tobacco and cigarettes.

Budget 2020 Live: FM Sitharaman Revises Personal Income Tax Slabs, Scraps DDT; Announces LIC IPO

Budget Impact: Sensex Down Over 400 Points; Nifty Slips Near 11,850

The market recovered partially, after reaching the day’s low post Finance Minister Nirmala’s budget speech today.

Arundhati Bhattacharya Says Deposit Insurance Negative For Banks

Speaking about the Rs 5 lakh deposit insurance, Arundhati Bhattacharya said along with that, depositors must also be aware that this will mean paying a much larger premiums by the banks. "The cost of servicing accounts will rise accordingly,” she told BloombergQuint.

“On infrastructure fund, I was keen to see one unified authority,” Bhattacharya said. However, the creation of an authority for all investment proposals is a step towards this, she said.

The former SBI Chairman expressed her approval over the government’s decision to take LIC public, saying “For anyone in the finance sector, it’s going to stare them in the eye. It’s in the right direction. I congratulate the government for taking such a step”.

When asked about the budget’s ability to retract India from its current state of slowdown, Bhattacharya said, "If you're looking for the big, bold things that's going to quickly release animal spirits, I don't see that".

India FY21 Divestment Target Set At Rs 2.1 lakh Crore

The budget has set the divestment target at Rs 2.1 lakh crore for the upcoming fiscal year, according to the government document.It has maintained the current year gross borrowing at Rs 7.1 lakh crore.

Key Budget Numbers:

  • India sees FY21 food subsidy at Rs 1.15 lakh crore
  • FY21 fertiliser subsidy at Rs 71,300 crore
  • India to net Rs 90,000 crore from stake sale in banks, finance institutions
  • India to spend Rs 61,500 crore on rural employment programme in FY21
  • India sees Rs 89,600 crore dividend from RBI, PSU banks in FY21
Budget 2020 Live: FM Sitharaman Revises Personal Income Tax Slabs, Scraps DDT; Announces LIC IPO

Budget 2020: Related Coverage

Budget Impact: Sensex Down Over 700 Points; Nifty Slips Near 11,750

Indian stocks declined to trade at day’s low as long-term capital gains tax remains.

The S&P BSE Sensex fell 1.64 percent to 40,023 and the NSE Nifty 50 slid 1.85 percent to 11,736. The broader markets represented by the NSE Nifty 500 Index fell 1.93 percent.

If you’re looking for the big, bold things that’s going to quickly release animal spirits, I don’t see that.
Arundhati Bhattacharya, Former Chairman, SBI
Budget 2020 Live: FM Sitharaman Revises Personal Income Tax Slabs, Scraps DDT; Announces LIC IPO

Budget 2020: FM Announces The 'Vivad Se Vishwas' Scheme

The Finance Ministry announced the ‘Vivad Se Vishwas’ scheme for tax litigations under which, only the disputed tax amount will have to be paid on or before March 31, 2020. No interest or penalty will be charged. People who pay after this deadline, but before June 30 will have to pay some charge, Sitharaman said during her speech.

  • ‘Vivad Se Vishwas' Scheme To Reduce Direct Tax Litigation
  • To Amend the Income Tax Act To Enable Faceless Appeal
  • Under Scheme, Assessee To Pay Only Tax Amount, Not Interest, Penalty
  • March 31 Deadline For Paying Tax Claim, Avoid Interest, Penalty
  • Those Who Avail After March 31 But Before June 30 Will Have To Pay Some Extra Amount

Plan To Hike FPI Limit In Corporate Bonds: FM Nirmala Sitharaman

The government plans to increase the investment limit of foreign portfolio investors in corporate bonds from 9 percent to 15 percent, Sitharaman said.

The finance minister said certain government securities will be open for foreign investors.

She also proposed debt-exchange traded funds comprising mainly government securities, while stating that Rs 22,000 crore has already provided as support to infrastructure project pipeline.

To address liquidity constraints of NBFCs and housing finance corporations, a partial credit guarantee scheme will be launched by the government, she added.

Government Defers ESOP Tax In Boost To Startups

The government proposed to defer tax on Employee Stock Option Plan to a period of 5 years/leave the company/sell their shares (whichever is earlier), to help startups retain talented employees and boost the startup ecosystem.

Opinion
Budget 2020: Government Asks RBI To Extend MSME Restructuring Scheme Till March 2021

Budget 2020: India To Abolish Dividend Distribution Tax

The Dividend Distribution Tax will be done away with, said Sitharaman. The dividend from investment in a company will now be taxed in the hands of the recipient, at whichever tax bracket the person falls under.

The deduction allowed for dividends received by holding company from a subsidiary.

This will further make India an attractive destination for business.
Nirmala Sitharaman, Finance Minister

So far, companies were required to pay DDT at 15 percent, though including surcharge and cess put the effective rate at 20.56 percent. DDT was introduced in 1997 at a 7.5 percent flat rate in an effort towards efficient tax collection.

Opinion
Budget 2020: Government Abolishes Dividend Distribution Tax

India To Cut Personal Income Tax Rates

The government proposed to lower personal direct tax in today's budget speech.

In order to provide significant relief to individual taxpayers and to simplify the income tax law, I propose to introduce a new personal income tax regime where rates will be significantly reduced for the individuals who forego certain exemptions.

New Personal Income Tax Regime

  • 10 percent: Rs 5 – 7.5 lakh (Versus earlier 20 percent)
  • 15 percent: Rs 7.5 – 10 lakh (Versus earlier 20 percent)
  • 20 percent: Rs 10 – 12.5 lakh (Versus earlier 30 percent)
  • 25 percent: Rs 12.5 – 15 lakh (Versus earlier 30 percent)
  • 30 percent: Above Rs 15 lakh (Continued at 30 percent, No Exemptions)
Budget 2020: To Amend Income Tax Act To Enable Faceless Appeal.

In the new tax regime, the benefits will be accrued depending upon the exemptions a person avails of, Sitharaman said, adding that switching to the new regime is optional for taxpayers.

The government has estimated Rs 40,000 crore in forgone revenue under the new tax revenue, she added.

"It was surprising to know that currently more than 100 exemptions of different nature are provided in the Income Tax Act. No wonder the code was like this." Sitharaman said that she has removed 70 of those codes while the remaining will be examined in the coming year to further simplify the personal tax system.

Opinion
Budget 2020: Government Cuts Income Tax Rates For Those Willing To Give Up Exemptions

BIG NUMBER: GOVERNMENT PEGS FY20 FISCAL DEFICIT AT 3.8%

India’s central government