Union Budget 2020-2021 has introduced Parity amongst individual Taxpayers - The Fearless Indian
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Union Budget 2020-2021 has introduced Parity amongst individual Taxpayers

  • Fearless Indian
  • February 7, 2020
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Finance Minister Nirmala Sitharaman presented the Union Budget for FY 2020-21. In a marathon 159 minute Budget Speech she has offered the option of lower I-T rates but without exemptions, promises a charter of rights for tax-payers and sought to make the tax administration more transparent.
So far 100- odd exemptions currently exist out of which government plans to do away with some 70 exemptions. I welcome the Government move. The individuals who have money could make investments of Rs. 1.50 lakh eligible under 80-C and could avail some more exemptions. This system is disadvantageous to the taxpayers who were not in a position to save. They did not have enough income and above it, they are made to pay higher taxes, because they could not avail the exemptions. On the other side individuals having higher incomes could save more and could avail higher exemptions and were paying less taxes. This certainly was creating a disparity making the system inequitable. Doing away with the exemptions will certainly bring parity and equity amongst the taxpayers.
Five Tax Slabs have been introduced in the budget( New Regime) with reduced tax rates: i) Rs. 5 lakh to Rs. 7.5 lakh -10%, ii) Rs. 7.5 lakh to Rs. 10 lakh- 15% iii) Rs. 10 lakh to Rs. 12.5 lakh – 20%, Rs. 12.5 lakh to Rs. 15 lakh – 25% & above Rs.15 lakh- 30%.
The option available in the budget to avail option to go for the old regime with exemptions has made some complications. It may be suggested that those people who fall in lower income brackets up to Rs.7.5 lakh may opt for Old method. But it is better to invest less in 80 C instruments than compared to earlier. By doing so, people are left with more liquid cash which they can spend. Senior citizen should not opt for long period investments. Say no to new method. ii). People earning above Rs. 7.5 lakh annually may be advised to shift to New method. Because, tax benefit is small and they unnecessarily invest more to save small tax. Such people can spend more and help the economy to pick up. As such tax burden is lowered on them.iii). All other high-income groups may be advised to go for New method. With lower tax rates, they can spend more, and create value addition to economy in terms of giving employments and fresh investments.
It is expected that this option will be withdrawn in next Budgets. In place of Dividend Distribution Tax on companies, now dividend will be added to individual’s income, which is an adverse impact on taxpayers.
Union Budget 2020-21, set the fiscal deficit target for financial year 2020-21 at 3.5 per cent, at higher than the previous target of 3.0 per cent, The additional fiscal space is to be funded by aggressive disinvestment, asset monetization and telecom revenue targets, optimistic tax-buoyancy assumptions and some tightening in overall expenditure, adding that the space created is being used to fund capital expenditure (capex) and rural sector spending to support consumption. The government has aimed at some measured moves in the budget to bolster growth. Most of these, however, are not expected to provide a short-term boost.

There is some support to growth, but nothing substantial in the short term. However, the government is still eyeing the long-term and has, therefore, pushed capex. The multiplier impact of this will be positive.

This is a pragmatic Budget. There are many stimulants in it. The Deposit Insurance has been raised to Rs, 5 lakh, Income Tax Relief is provided especially up to taxable income up to Rs. 15 lakh by reducing tax rates, nearly Rs. 1 lakh crore has been provided towards education. An allowance of Rs. 8,000 crore is made for futuristic fields such as artificial intelligence and quantum computing. To address the needs of rural areas agriculture will get Rs. 15 lakh crore credit next year. It has done well to outline 16-point plan-enhancing warehousing facilities, reducing wastage, rationalizing fertilizer usage, getting self-help groups involved in storage, connecting the farmer to the end consumer, and so on.
The Defence budget is Rs. 3.37 lakh crore which is 1.5% of the projected GDP for 2020-21.
Allocation to Healthcare is Rs.69,000 crore.
Except for the people having very high-unrealistic expectations, this is a wonderful Budget.

-Ashok Mahadeo Rane
Ex-Chief Manager,
Central Bank of India

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