This is the second part of the Budget 2020 analysis. If you wish to read the first part, you should click here.
The government’s main focus is to make India “Business Friendly” and the government did make some announcements in that direction. It is expected to boost investment in the economy but will that investment be enough to revive growth is questionable! Also, the government did bring new tax scheme for the consumers but the conditions with which it comes will not make many taxpayers happy! Overall, the government has brought in a “not so growth-stimulating” budget. Have a look at the provisions to understand what the biz world got!
DDT abolished; dividend to be taxed in the hands of the recipient- The finance bill has abolished the dividend distribution tax (DDT) and proposed to tax the dividend in the hands of shareholders/unitholders based on their applicable income tax slab rate. This might lead to companies giving more dividend which is expected to increase the purchasing power of consumers in turn. The cooperative tax rate has also been slashed to 22% with 10% surcharge and 4% cess. Minimum Alternative Tax has been exempted.
Rationalization of provisions for startups- The benefit of three-consecutive-year profit exemption for a startup can now be availed within a period of 10 years beginning from the year in which it is incorporated (v/s seven years earlier). The turnover limit for eligible startups has increased from existing INR250m ton INR1.0b.
Deferment of ESOPs taxability in case of start-up employees- This is a welcome relief in case of ESOPs granted by start-ups wherein five-yearn deferment on tax liability will be provided from the date of allotment of shares. However, in the interim period, if employee sells shares/exits the organization, the same will be taxable in the year of sale/exit.
These steps are in the direction of making India a start-up hub and invoking that “entrepreneurial spirit” and are expected to prove effective as well!
Industry and Commerce:
- FM proposed setting up an Investment Clearance Cell to offer end to end support to Investors which is a good initiative but the performance actually depends on its implementation.
- Electronic manufacturing units will be promoted to attract investment, a new scheme will be launched for mobile manufacturing.
- National Technical Textiles Mission has been set up with a fund of INR 1480 Crore which is a good step.
- The Unified Government Procurement system is to be boosted as the government will make it mandatory to buy services from this platform!
- In total, 27300 Crore has been allocated for the development of Industry and Commerce which in my opinion is not enough to bolster the growth we need!
- MSME will now need to get their accounts audited till 5 Crore. Earlier it was 1 crore
- IT Act will be amended to allow faceless appeals in addition to assessment which is a good initiative.
- NIP will be launched which is a portal for keeping a record of all infrastructure projects of the government, currently with a worth of INR 103 lakh crore.
- National skill development Agency to focus on infra-related courses as the construction industry is expected to bring in more jobs.
- There will be accelerated development of highways. NDA has always been in love with highways as always!
- Overall 1.7 Lakh crore has been allocated for Transport and Infrastructure. Indian economy sure needs more!
- One good initiative by the government is its newly found focus on AI and Machine learning. Data Center Parks have been proposed across India to link 100,000 panchayats. 8000 Crore INR has been allocated to Quantum Technologies itself which is commendable!
The government has again come up with some good initiatives but will the funds provided for them be enough or not-we are yet to know! To know what happens to the trade of India and what do you get as an Indian Consumer, read the third part of the analysis!
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