Major takeaways from Nirmala Sitharaman’s Budget 2020 speech: Income tax slabs, allocations, and more

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Are you wondering about the significant features of the recently presented budget for the FY 2020-21? Do you think how the major implications of the newly introduced reforms will impact your or your business? If yes, then you are in the right place.

Notably, this will be the second budget since the NDA government came back to power in 2019. Though there were no significant speculations before the budget, it was expected that it would revolve around Economic Development, Infrastructure Development, and Healthcare Services. 

Beginning with the education sector, the Finance Minister announced that the total allocation would be Rs 99,300 crores, and the new education framework will be revealed soon. 

As per the reports by ETV business news, a significant highlight in the budget speech was the Income Tax reform, as the finance ministry made some changes which we will discuss later in this article. The economic survey has projected the economic growth to be around 6%-6.5% for the upcoming financial year, beginning April 1st.

Railways took the lion’s share of Rs. 70,000 crores with a capital expenditure which will amount to Rs. 1,61,000 crores. The Finance Minister announced that the new Tejas trains would connect manor tourist attraction cities.

The New Income Tax Slabs

ETV Business news reported that the FM announced changes in the income tax slabs for those earning up to Rs. 15 lakhs per year. Those falling in the income category of Rs. 5 to 7.5 lakhs will now have to pay their income tax at the rate of 10%. 

For those falling in the Rs. 7.5 to 10 lakhs bracket, the new income tax rate is 20%. Similarly, those earning Rs. 10 to 12.5 lakhs per annum will also attract a lower tax bracket of 20%. Finally, those in the Rs. 12.5 to 15 lakh bracket will have to pay their income tax at the 25% rate. 

However, the finance minister also announced that it would depend upon the taxpayer that whether they want to pay their taxes as per the existing standards or by the new rates as the new tax rates will attract losing some subsidies and benefits of the current tax regime.

We have summed up the new tax slabs in the following table:

0 – 2.5 lakh – exempted

Rs.2.5 lakh – Rs.5 lakh – 5%

Rs.5 lakh – Rs.7.5 lakh – 10% (20% earlier rate)

Rs.7.5 lakh – Rs.10 lakh – 15% (20% earlier rate)

Rs.10 lakh to Rs.12.5 lakh – 20% (30% earlier rate)

Rs.12.5 lakh – Rs.15 lakh – 25% (30% earlier rate)

Rs.15 lakh and above – no changes in the tax slab

The manufacturing sector also got a fair share with new schemes focusing on encouraging the manufacture of mobile phones, electronic equipment and semiconductor packaging.

Sector-wise subsidy allotment

Rs. 1.15 trillion allotted to meet the food subsidy needs of FY 2020/21 through the various governmental schemes. Petroleum subsidy in 2020/21 seen at Rs. 409.15 trillion and the fertilizer subsidy at Rs. 713 billion. 

The Finance Minister announced an allotment of Rs. 273 billion for industry and commerce promotion in the country. Also, India will be allocating Rs. 44 billion for the clean air incentives, which have the population exceeding 10 lakhs.

A significant share went to the transport sector and for the airports.

The Finance Minister announced in her speech that India will develop a hundred more airports and will also monetize 6000 kilometers of national and state highways in twelve lots by 2024. India also has plans to privatize at least one major seaport around the same year. 

The budget news brought a major relief came for the corporate as the government has planned to scrap the Dividend Distribution Tax as they will be now taxed at the hands of recipients only at applicable rates.