By Jatin Verma Budget 2020-21
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Budget 2020-21
By
Jatin Verma
©Jatin Verma All Rights Reserved. https://www.jatinverma.org
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Union Budget 2020-2021: Introduction
Agriculture, Irrigation and Rural Development
16 Action points to Focus on Farmer’s Income, Storage, Blue Economy and Animal Husbandry
Wellness, Water and Sanitation
Education & Skills
Infrastructure
National Logistics Policy
Smart meters
Suburban rail for Bengaluru
Boost for affordable housing
Road Sector
Railways
Investments
International Bullion Exchange
Cut in Withholding tax
Investment Clearance Cell
Reforms in the bond market
MSME Sector
Custom Duty Raised
Threshold of turnover for Audit of MSMEs
NIRVIK Scheme
National Technical Textiles Mission
New Economy
Proposals for Leveraging Data
Proposals for Start-ups
Proposals for Quantum Technology
Environment & Climate Change
For clean air
For Tiger and Elephant conservation
For Climate Change mitigation
Solar units on fallow and Railway land
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Culture & Tourism
Government’s Disinvestment Drive
Direct Tax Regime
Personal Income Tax
Vivad Se Vishwas’ Scheme (No Dispute But Trust)
Faceless Appeals
Instant Pan Through Aadhaar
Taxpayer’s Charter
Dividend Distribution Tax
Concessional Tax Rate For Electricity Generation Companies
Tax Concession For Foreign Investments
Concessional Tax Rate Cut For Cooperatives
Indirect Tax Regime 33
GST (Goods and Services Tax)
Health Cess
Issues related to Free Trade Agreements
Union Budget 2020-2021: Analysis
Budget Glossary
Annual Financial Statement
Budget Speech
Stages in enactment of Budget
Budget Accounts
Budget Deficits
Finance Bill
Appropriation Bill
Cut Motions
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Union Budget 2020-2021: Introduction
The first Union Budget of the third decade of the 21st century has been structured on the overall
theme of “Ease of Living.” The Finance Minister said that the Union Budget Aims:
• To achieve seamless delivery of services through Digital governance.
• To improve physical quality of life through the National Infrastructure Pipeline.
• Risk mitigation through Disaster Resilience.
• Social security through Pension and Insurance penetration.
The budget is woven around three prominent themes:
• Aspirational India in which all sections of the society seek better standards of living, with
access to health, education and better jobs.
• Economic development for all, indicated in the Prime Minister’s exhortation of
“SabkaSaath, SabkaVikas, SabkaVishwas”.
• Caring Society that is both humane and compassionate, where Antyodaya is an article of
faith.
The three broad themes are held together by Corruption free - policy-driven good governance
&
Clean and sound financial sector.
Source: India Budget
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Agriculture, Irrigation and Rural Development
16 Action points to Focus on Farmer’s Income, Storage, Blue Economy and Animal
Husbandry
Budget 2020 proposed 16 action points focusing on doubling Farmers income, Horticulture sector, Food
storage, Animal Husbandry and Blue economy.
• The government allocated 2.83 lakh crore rupees for agriculture and allied activities, irrigation
and rural development in 2020-21 budget.
• Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) to be
expanded to provide 20 lakh farmers in setting up standalone solar pumps.
o Farmers who have fallow or barren land will be helped to set up solar power generation
units and also sell surplus power to the solar grid and make a living out of barren land.
• Connect and sell to grid: enable farmers to set up solar power generation capacity on their
fallow/barren land and to sell it to the grid.
• Resource efficiency: Resource efficiency can be achieved by encouraging balanced use of all kinds
of fertilizers and Zero Budget Natural Farming (ZBNF).
• Market connectivity: The budget also proposed integration of negotiable warehousing receipts (e-
NWR) and National Agricultural Market (e-NAM).
• “Jaivik kheti” Portal: Budget 2020 proposed to strengthen online national organic products.
Storage and Logistics:
• Seamless national cold supply chain: To promote storage infrastructure and reduce wastage of food
grains.
✓ “KISAN RAIL” : Kisan Rail Scheme of trains with refrigerated coaches for farm produce.
✓ “KRISHI UDAAN”: It will be launched by the Ministry of Civil Aviation on
international and national routes to help improve value realisation, especially in the
Northeast and tribal districts
• At Block Level: Warehouse Creation Through Viability Gap Funding on a PPP Model.
• National Bank for Agriculture and Rural Development (NABARD) will create warehouse
facilities for food crops at block / taluka levels. While state governments will provide the land for
the facilities, they will be constructed on a public-private partnership (PPP) model.
• The proposed storage facilities at villages under Dhaanya Lakshmi Village Storage Scheme will be
run by women self-help groups (SHG).
✓ DHAANYA LAKSHMI is a 'Village Storage Scheme' run by women's self-help groups.
✓ The aim of the scheme is to provide holding capacity for farmers. This will help Women
in villages and the rural part of the country to retain their status as "Dhaanya Lakshmi".
• Setting up of storage facilities at villages as part of the Creation of Backward and Forward Linkages
(CBFL) under the Pradhan Mantri Kisan Sampada Yojana (PMKSY).
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About Scheme for Creation of Backward and Forward Linkages(CBFL)
• The objective of the scheme is to provide effective and seamless backward and forward integration
for the processed food industry by plugging the gaps in supply chain in terms of availability of raw
material and linkages with the market.
• Financial assistance is provided for setting up of primary processing centers/ collection centers at
farm gate and modern retail outlets at the front end along with connectivity through insulated/
refrigerated transport.
• It is applicable to perishable horticulture and non-horticulture produce such as fruits,
vegetables, dairy products, meat, poultry, fish, ready to cook food products, honey, coconut, spices,
mushroom, retails shops for perishable food products etc.
• It is implemented by agencies/ organizations such as Govt./ PSUs/ Joint Ventures/ NGOs/
Cooperatives/ SHGs / FPOs / Private Sector / individuals etc.
• The Ministry has engaged Technical Agencies(TAs) for assisting farmer/ producer groups
including Farmer Producer Companies, Farmer Producer Organization, Self Help Groups to facilitate
their participation under the Scheme.
About Pradhan Mantri Kisan Sampada Yojana (PMKSY)
• It is a central sector scheme for Agro-Marine Processing and Development of Agro-Processing
Clusters.
• It is a comprehensive package for the creation of modern infrastructure with efficient supply
chain management from farm gate to retail outlet.
• It will not only provide a big boost to the growth of food processing sector in the country but also
help in providing better returns to farmers.
• The following schemes will be implemented under PM Kisan SAMPADA Yojana :
✓ Mega Food Parks
✓ Integrated Cold Chain and Value Addition Infrastructure
✓ Creation/ Expansion of Food Processing/ Preservation Capacities (Unit Scheme)
✓ Infrastructure for Agro-processing Clusters
✓ Creation of Backward and Forward Linkages
✓ Food Safety and Quality Assurance Infrastructure
✓ Human Resources and Institutions
Animal Husbandry:
• Aim is to eliminate Foot and Mouth disease, brucellosis in cattle and peste des petits ruminants
(PPR) in sheep and goat by 2025 and to increase coverage of artificial insemination from 30 percent
to 70 percent.
• Facilitate doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025.
Agriculture credit:
• Setting agriculture credit target of rupees 15 lakh crore for the year 2020-21.
• All eligible beneficiaries of Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) will be covered under
Kisan Credit Card (KCC) scheme.
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It enables farmers to purchase agricultural inputs such as seeds, fertilisers, pesticides, etc. and draw cash
to satisfy their agricultural and consumption needs.
Horticulture:
• Marketing and export: For better marketing and connectivity cluster basis approach will be adopted
and emphasis would be given to one product one district.
Blue Economy:
• Raising fish production framework: for development, management and conservation of marine
fishery resources and promotion of algae, seaweed and cage culture that will assist in raising fish
production to 200 lakh tonnes by 2022-23.
• Development of fisheries sector: Rural youth in coastal areas to work as 'Sagar Mitras' in fisheries
extension. 3,477 Sagar Mitras and 500 fish-farmer producer organisations will work as sagar mitra.
Co-operative Federalism:
• Encourage those state governments who undertake implementation of Model Agricultural Land
Leasing Act, 2016, Model Agricultural Produce and livestock Marketing (Promotion and Facilitation)
Act, 2017 and Model Agricultural produce and Livestock Contract Farming and services (Promotion
and Facilitation) Act, 2018.
Model Agricultural Land Leasing Act of 2016 -
It is an Act proposed by NITI Aayog to permit and facilitate leasing of agricultural land, to improve
agricultural efficiency and equity, access to land by the landless and semi - landless poor, occupational
diversity and for accelerated rural growth and transformation.
Model Agricultural Produce and Livestock Marketing Act of 2017: It is seen as a major agriculture
marketing reform to help farmers directly connect with the different buyers and enable them to discover
the optimum price for their commodities.
Model Agricultural Produce and Livestock Contract Farming and Services Promotion and
Facilitation Act of 2018 - The Model lays emphasis on protecting the interests of farmers, considering
them as the weaker of the two parties entering into a contract.
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Wellness, Water and Sanitation
The Union Budget proposed an outlay of about ₹69,000 crore for the health sector in the 2020-2021 Budget.
• In it, ₹6,400 crore are earmarked for the Centre’s flagship health insurance scheme, Prime
Minister Jan Arogya Yojana (PMJAY).
• The Ministry of Health and Family Welfare gets ₹65,011.8 crore up from ₹62,659.12 crore in 2019-
20.
• The Ministry of AYUSH has been allocated ₹2,122.08 crore while there is an allocation of ₹2,100
crore to the Department of Health Research.
Medical Infrastructure
A proposal to Viability Gap funding window for setting up hospitals in the PPP (private-public-
partnership) mode.
Impact
• Density of empanelled hospitals under PMJAY in Tier-2 and Tier-3 cities will improve.
• It will also cover Aspirational Districts.
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• It will also provide large scale employment opportunities to Youth.
Leveraging Technology in the healthcare Sector
• The Budget specifically mentioned the use of technology in the healthcare sector.
• Artificial intelligence and machine learning would be deployed to help detect and prevent diseases.
Human Resources in the Health Sector
Union Budget too has proposed setting up of medical colleges in existing district hospitals under the Public
Private Partnership (PPP) mode.
• The government will encourage large hospitals with sufficient capacity to offer resident doctors
diploma and fellow of National Board (DNB/FNB) courses.
• It will address the shortage of qualified doctors.
Medicines and Vaccines
• The expansion of the Jan Aushadhi Kendra Scheme to all districts was also announced.
✓ Also, Mission Indradhanush has been expanded to cover 12 such diseases, including five new
vaccines.
• A nominal health cess of 5% on imports of specified medical equipment is proposed.
Impact
• It will help in supporting health infrastructure.
• It will provide impetus to the domestic industry.
Focus on Non-Communicable Diseases
• Strengthening of the FIT India movement.
General Trends in the Healthcare Budget:
• Budget estimates show an appreciable increase of 3.75%, while there has been a 10% hike in the
allocation for the Department for Health Research.
• It indicates the strong focus of the government on the health sector.
• The Budget has realised the role of the healthcare sector.
✓ All in all, it has attempted to position health as a prime mover for the growth and development
of the country.
Critical Analysis of Healthcare Budget
• Appreciable Increase of 10% in allocation seems negligible when the Consumer Price Index is
hovering around 10%.
✓ More than half the increase will go in offsetting inflation.
✓ It also indicates that there is a long way ahead to achieve the target of allocating 2.5 percent
of our gross domestic product to health, envisaged by the Planning Commission in 2011.
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• A bridge course to bring in equivalence between skill sets of Indian Doctors to that with the
demand abroad, is deemed as an unnecessary burden.
✓ Given the fact that India already has a scarcity of doctors.
• The allocation towards those schemes which deal with Communicable diseases, remained
unchanged.
✓ It is a worrying trend given the NSSO survey which said that communicable diseases
were responsible for more illnesses among Indians than any other ailment.
✓ These diseases include malaria, viral hepatitis, jaundice, acute diarrhoeal diseases,
dysentery, dengue fever, chikungunya, etc.
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Education & Skills
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Infrastructure
In order to boost the transport Infrastructure in the country the Union Budget has provided for about Rs
1.70 Lakh Crore.
National Logistics Policy
The Govt will soon come up with a National Logistics Policy, the first such policy in India.
• It will delineate the roles of Union and State Governments and other key regulators.
• It will address the issues around predictability of regulations, registration of services providers,
regulation of multi-modal transport and performance standards for service delivery.
• It will create a single window e-logistics market and focus on generation of employment, skills
and make MSMEs competitive.
• The single window system will cut logistics costs, currently estimated at 13-14% of GDP, to 10%.
The draft policy released in 2019 had sought to optimize the modal mix (road-60%, rail-31%, water-9%)
to global benchmarks (road - 25-30%, rail - 50-55%, water - 20-25%) and promote the development of
multi-modal infrastructure.
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Smart meters
The Finance Minister in her Budget speech has urged the States and UTs to replace the conventional meters
with prepaid smart meters in three years.
Significance
• It will cut distribution losses and will set the stage for separating the carriage and content operations
of power distribution companies. (India’s average aggregate technical and commercial (AT&C) losses
are at 21.4%, pushing up the dues of discoms to power generating companies to ₹72,938 crore at the
end of November).
• Smart meters minimize human intervention in metering, billing and collection, and help reduce theft
by identifying loss pockets.
• This would give consumers the freedom to choose the supplier and rate as per their requirements.
National Infrastructure Pipeline
The Government announced funding fine print for the ambitious National Infrastructure Pipeline (NIP).
• Under the aegis of this initiative, the Govt aims to invest Rs 103 Lakh crore in around 6,500 projects
cutting across sectors such as power, including renewable, railways, urban development, irrigation,
mobility, education, health, water and digital sector.
• Rs 25 lakh crore worth energy projects have been lined up, around Rs 20 lakh crore in roads and nearly
Rs 14 lakh crore railway projects are in the works for the period of 2020-25. Urban infrastructure
schemes such as AMRUT, Smart Cities mission and affordable housing will need an investment of Rs.
16 lakh crores until 2025.
• The new pipeline consists of 39 percent projects each by the Centre and the States and the balance
22% by private sector.
• It will enable more infra projects, grow businesses, create jobs, improve ease of living, and provide
equitable access to infrastructure for all, making growth more inclusive.
• It is being seen as a road to a $5 trillion economy.
Suburban rail for Bengaluru
• 148 km long Bengaluru Suburban transport project at a cost of Rs 18600 crore has been proposed which
would have fares on metro model.
• Bengaluru will become the latest city to have its own suburban rail network after other major metro
cities like Delhi, Mumbai, Kolkata, Chennai, and Secunderabad.
Significance
• This will boost the transport infrastructure in Bengaluru which has turned out to be favoured
investment destination for the MNCs.
• According to a latest report, Bengaluru is the world’s most traffic congested city and the introduction
of the suburban rail network will help in providing relief from traffic congestion to the residents.
• It will promote faster connectivity, provide cheaper means of transport and will also
reduce environmental pollution.
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Issues
• The announcement was mostly a repetition of last year’s proposal while no concrete work has started
on the ground.
• Land acquisition in a densely populated urban area will remain a challenge and this may further delay
the project.
Boost for affordable housing
• In the budget 2019-20, an additional deduction of Rs 1.5 lakh for interest paid on loans taken for
purchase of affordable house was announced.
• The time limit to avail such benefits has been increased from 31 March 2020 to 31 March 2021. It
will give a boost to ‘Housing for All’ goals of the Govt.
Issues
• However, no measure was announced to boost demand in the Housing sector which remains subdued.
• Also, the removal of exemption under the new income tax regime on principal and interest for home
loans would be a dampener for the sector.
Road Sector
The total budget allocation has gone up from ₹83,015 crore last fiscal to ₹91,823.2 crore for the financial
year 2020-2021. Of this hike of ₹8,808 crore, as much as ₹5,809 crore is through investment in NHAI met
from monetisation of national highways.
• Development of 2,500 km of access control highways, 9,000 km of economic corridors, 2,000 km of
coastal and land port roads and 2,000 km of strategic highways are to be undertaken in the next fiscal.
• Delhi-Mumbai Expressway is to be completed by 2023 while the work on the 262-km-long
Bengaluru-Chennai Expressway will commence within six months.
✓ The six-lane, access-controlled expressway begins at Hoskote in Karnataka and ends at Outer
Ring Road near Chennai. The project, which is being implemented under public-private
partnership, is likely to reduce travel time between Chennai and Bangalore to four hours.
• 12 lots of highway bundles totalling ₹60,000 crore would be monetised before 2024. The Govt can
utilize these funds to build newer roads.
Railways
Budget 2020 allocated 70,000 crore for the Indian Railways, with overall capital expenditure of ₹1.61 lakh
crore for the next financial year.
• Safety related works: Budget 2020 also aimed for an increased investment for passenger amenities
and safety-related works, including track renewals, level crossings and road over/under bridges.
• Infrastructural development of railways:
✓ Development and renewal of railways: Construction of new lines and re-development of
four stations.
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✓ Construction of 148-km Bengaluru suburban transport project at a cost of ₹18,600 crore
will be started, which would have fares on the metro model.
✓ Track renewal and introduction of more Tejas type trains to iconic tourist destinations.
✓ Corporate Train: It will run by IRCTC between Indore and Varanasi.
✓ Operation of 150 passenger trains via public-private partnership mode.
✓ Setting up a large solar power capacity alongside the rail tracks.
• To improve Railway’s efficiency: Budget 2020 estimated the operating ratio to be 96.2% in 2020-
21.
✓ Operating ratio of 96.2% means that the Railways is spending 96.2 paise to earn 100 paise.
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Investments
International Bullion Exchange
To further utilise the potential of IFSC, GIFT city to become a centre for international finance and high-
end data processing, the setting up of an International Bullion Exchange at GIFT-IFSC has been
proposed.
Benefits
• It is a positive step towards making gold a mainstream asset class. With its unique locational,
infrastructural and regulatory advantages as an IFSC, GIFT city is well placed to build a fair, efficient
and transparent bullion trading ecosystem.
• It will serve as an additional option for trade by global market participants.
• An organised bullion trading system will benefit the entire supply chain particularly, small players
and exporters.
• It is expected to enable better gold price discovery, create jobs and enhance India’s position
worldwide.
GIFT-IFSC already has an approved Free Trade Zone for housing vaults, 19 insurance entities, 40 banking
entities, along with precious metals testing laboratories and refining facilities.
IFSC, International Financial Service Centre
Such centres deal with flows of finance, financial products and services across borders. It caters to
customers outside the jurisdiction of the domestic economy. It provides services like
• Fund-raising services for individuals, corporations and governments
• Asset management and global portfolio diversification
• Wealth management
• Global tax management and cross-border tax liability optimization,
• Risk management operations such as insurance and reinsurance
• Merger and acquisition activities among trans-national corporations
London, HongKong, Singapore etc are major International financial service centres. GIFT City in
Gujarat houses India’s first and only IFSC.
Cut in Withholding tax
The Govt has proposed to reduce the withholding tax rate to 4% from 5% on interest payment on bonds
listed on the IFSC exchange.
Withholding tax
• It is a tax levied by countries on income (interest and dividends) from securities owned by a
nonresident alien, as well as other income paid to nonresidents of a country.
Benefits
• The move will attract more international investors to the IFSC exchange.
• This announcement should greatly incentivise issuers to choose India INX as the preferred platform
for listing their international bonds and masala bonds.
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India INX has already listed a medium-term note (debt) programme worth $47 billion (about ₹3.33 lakh
crore) with a drawdown of $18.5 billion till date.
Investment Clearance Cell
• The Finance Minister has proposed to set up a special cell for granting hassle-free clearances to young
entrepreneurs starting new businesses.
• The proposed Investment Clearance Cell will provide “end to end” facilitation and support to create
more opportunities for youth and remove roadblocks.
• The support will include pre-investment advisory, information related to land banks and facilitate
clearances at Centre and at the state level.
• The cell will work through a portal.
The move will encourage entrepreneurship and will guide the youth to become ‘job creators’ instead of
becoming ‘job seekers’.
Reforms in the bond market
• The Govt has proposed to increase the investment limit for foreign portfolio investors (FPIs) in
corporate bonds, currently capped at 9% of the outstanding stock, to be increased to 15% of the
outstanding stock. This will bring in more flows from foreign investors.
• Certain government securities to be opened for non-resident investors apart from being available to
domestic investors as well.
• A new debt exchange traded fund (ETF) comprising primarily of government securities is to be
launched. This will follow the success of the Bharat Bond ETF.
• It will give retail investors access to government securities as much as giving an attractive investment
for pension funds and long-term investors.
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MSME Sector
Custom Duty Raised
• Customs duty is being raised on items like footwear (from 25% to 35% on footwear and from 15% to
20% on parts of footwear) and furniture (from 20% to 25%).
• Duty on toys and dolls is to see a steep increase from 20% to 60%.
• Duty on tableware and kitchenware of porcelain or china, ceramics, clay, glassware, padlocks,
brooms, hand-sieves, and combs has been increased from 10% to 20%.
Benefits
• This will protect the domestic MSME Industries producing such products from imports of cheaper
and low quality products, especially from China.
• These are labour-intensive industries hence their growth is crucial for sustaining existing
employment and generating newer ones.
• The Customs Duty mop-up for FY 2020-21 is seen at ₹1.38 lakh crore which will help Govt meet its
revenue targets.
Threshold of turnover for Audit of MSMEs
• The budget has proposed to raise by five times the turnover threshold for audit from the existing Rs. 1
crore to Rs. 5 crore.
• The increased limit shall apply only to those businesses which carry out less than 5% of their business
transactions in cash. It will boost the less-cash economy.
• It will reduce the compliance burden on small retailers, traders, shop-keepers who comprise the
Medium, Small and Micro Enterprise (MSME).
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NIRVIK Scheme
The Govt will implement NIRVIK Scheme (Niryat Rin Vikas Yojana) to be launched by ECGC (Export
Credit Guarantee Corporation of India) to enhance loan availability for small exporters and ease the lending
process.
• It will provide for high insurance cover, reduction in premium for small exporters and simplified
procedures for claim settlement post-shipment credit.
• The scheme is also called the Export Credit Insurance Scheme (ECIS) under which the insurance
guaranteed could cover up to 90% of the principal and interest. At present, the Export Credit
Guarantee Corporation provides credit guarantee of up to 60% loss.
Another scheme for exporters will be launched this year to reimburse taxes and duties paid by them to
digitally refund duties levied at the centre, state, and local levels.
It is expected to enhance accessibility and affordability of credit to small exporters and reduce liquidity
requirements. Hence, it will benefit the MSME sector.
National Technical Textiles Mission
The ₹1,480-crore National Technical Textiles Mission is launched in Budget 2020 to give boost to
technical textiles.
Technical or engineered textiles are defined as products that are used for functional purposes. These textiles
have applications in multiple areas of economic activity, such as aerospace, shipping, sports, agriculture,
defense and health care.
Need of the mission:
• Import-intensive: India imports a significant quantity of technical textiles worth USD 16 billion every
year.
• To increase productivity across various sectors like agriculture, horticulture and aquaculture fields,
better protection of military, para-military, police and security forces, stronger and sturdier
transportation infrastructure for highways, railways, ports and airports and in improving hygiene and
healthcare of the general public.
• Growing market size: the current trend of growth and various initiatives of the Government, domestic
market size of technical textiles is expected to cross Rs 2 lakh crores by the year 2020-21.
• Rising sector: Technical textiles hold immense growth opportunities both for the industries.
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• Strengthen supply chain: there is a need to create a domestic base for raw material production and to
push for manufacture of high-end technical textile products.
• To boost investments, and increase per capita consumption of technical textiles.
Aim of the mission: To give thrust to production of a wide variety of textiles used in a variety of sectors
and to position India as a global leader.
About the mission:
• The National Technical Textiles Mission is to be implemented from 2020-2021 to 2023-2024.
• There will be an empowered nodal office that will coordinate all the efforts and make the Mission
beneficial to the industry.
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New Economy
New technologies such as analytics, machine learning and Artificial Intelligence (AI) found a lot of
emphasis in Budget 2020
Proposals for Leveraging Data
• Data center park policy to allow private players to set up data parks in the country. It will enable firms
to skillfully incorporate data in every step of their value chains.
• Link 100,000 gram panchayats this year with Fibre to the Home (FTTH) connections through
Bharatnet. This will fulfill the vision of providing digital connectivity to all ‘public institutions like
Anganwadis, health and wellness centres, government schools, etc. at Gram Panchayat level.
• It is proposed to provide Rs. 6000 crore to the Bharatnet programme in 2020-21.
• New National Policy on Official Statistics would use the latest technology, including AI. It would
lay down a road map towards modernised data collection, integrated information portal and timely
dissemination of information.
Proposals for Start-ups
• Creation of a digital platform that would facilitate seamless application and capture of IPRs. A
Centre has also proposed to establish an Institute of Eminence for working on innovation in the
field of Intellectual Property.
• Knowledge Translation Clusters to be set up across different technology sectors including new and
emerging areas.
• Technology Clusters, with test beds and small scale manufacturing facilities for designing, fabrication
and validation of proof of concept to be established.
• Two National-level Science Schemes to be initiated to create a comprehensive database of mapping
India’s genetic landscape.
• A seed fund to support ideation and development of early stage Start-ups.
Proposals for Quantum Technology
• Providing outlay of Rs. 8000 crore over a period of five years for the National Mission on Quantum
Technologies and Applications.
• Quantum Technologies & Applications is one of the 9 missions of national importance, being driven
by the Prime Minister’s Science and Technology Innovation Advisory Council (PM-STIAC)
through the (Principal Scientific Advisor) PSA’s office to leverage cutting edge scientific research for
India’s sustainable development.
• The areas of focus would both be in fundamental science and towards developing technology platforms
in the Four (4) identified verticals viz., (i) Quantum Computing & Simulations; (ii) Quantum
Materials & Devices; (iii) Quantum Communications; & (iv) Quantum Sensor & Metrology.
• The Ministry of Electronics and IT has signed an agreement with Israel for joint research in 27
possible areas which includes quantum computing as one of the potential segments.
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Environment & Climate Change
For clean air
• Union Budget has allocated Rs 4400 crore for clean air in million-plus cities.
• However, the funds have not been allocated under the Environment ministry head which has an overall
sanction of Rs 3100 crore.
NCAP v/s the New Initiative
• In 2019, 28 of the 102 non-attainment cities qualified for a small grant of Rs 10 crore each under
National Clean Air Programme, NCAP.
• The NCAP is meant for only the non-attainment cities i.e. for cities not meeting the national ambient
air quality standards for particulate matter PM10 and PM2.5.
• So far the spending on NCAP has remained limited to expansion of air quality monitoring, source
assessment studies and dust-control measure. The new initiative is expected to go well beyond these
measures.
• Its budget will be nearly 10 times the current allocation of Rs 460 crore for pollution control, including
National Clean Air Programme (NCAP).
• The 2011 Census identified 46 cities with a population of more than a million. It is not yet clear if all
of them qualify for the funds; or only those identified as non-attainment cities as under NCAP.
Significance
• About 70 per cent of the cities monitored are critically polluted and 95 per cent Indians breathe air
that worse than World Health Organization;
• Some 1.2 million people die prematurely every year from air pollution-related diseases.
• The health risk is fairly equally distributed across India — not just cities but larger regions, like the
Indo-Gangetic Plain, are engulfed in a blanket of smog.
• The new initiative is expected to spearhead some real action to tackle the menace of air pollution.
For Tiger and Elephant conservation
• The budgetary allocation for the Integrated Development of Wildlife Habitats (IDWH), a centrally
sponsored scheme, has been increased from Rs 493.57 crore last year to Rs 532 crore.
• IDWH funds are used in programmes such as Project Tiger, Project Elephant and Development of
Wildlife Habitats (DWH).
• For Project tiger, it is Rs 300 crore while Project Elephant got Rs 35 crore.
Integrated Development of Wildlife Habitats, IDWH
• It is a Centrally Sponsored scheme launched during the 11th Five Year Plan.
• Under the scheme, financial assistance is provided to State/UT Governments for protection and
conservation of wildlife and its habitats in Protected Areas (PAs) as well as outside PAs and also for
the recovery programmes of the critically endangered species.
• The scheme has three components:
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1. Project Tiger
2. Development of Wildlife Habitats
3. Project Elephant
Issues
• However, the funds for other species like Great Indian Bustard, the Indian wolf and others that occupy
grassland habitats has been reduced.
• Non-forest ecologically important habitats and species continue to be neglected and all references to
wildlife habitats seem to really mean only forest habitats.
Way forward
• While the focus on Tiger conservation is laudable, there are at least a dozen needy species which
require a clear conservation plan and focused budgetary allocation.
• If separate budget heads are made for these species, rather than just clubbing them under DWH,
monitoring and accounting of the money allocated for these species can be done.
For Climate Change mitigation
• The launch of the Coalition for Disaster Resilient Infrastructure (CDRI) was reiterated.
• The Centre's plan to phase out of old coal-based thermal power plants was also highlighted.
• The budget estimate for the National Adaptation Fund has been kept to Rs 80 crore. It was Rs 100
crore in the budget estimate of 2019-20.
Concerns
• Rainfall and floods affected over six million hectares and caused crop loss in 4.9 million hectares in
2017, according to the latest government figures.
• Global warming is expected to reduce India’s wheat and rice production by up to 23 per cent and six
per cent respectively by 2050. The budget has ignored such impacts of climate change.
• No concrete plan for taking forward CDRI was announced.
Coalition for Disaster Resilient Infrastructure (CDRI)
• It is an international coalition of countries, UN agencies, multilateral development banks, the
private sector, and academic institutions, that aims to promote disaster-resilient infrastructure.
• It seeks to promote research and knowledge sharing in the fields of infrastructure risk management,
standards, financing, and recovery mechanisms.
• It is an Indian initiative launched by the Prime Minister Narendra Modi at the 2019 UN Climate
Action Summit in September 2019.
Solar units on fallow and Railway land
The Govt has proposed that barren lands of the farmers and the Railways will be used to set up solar
power plants. This will give farmers additional income even from the fallow lands.
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Issue
• The Govt has also targeted the same land for meeting its commitment of afforestation under UNCCD
at COP14 in New Delhi, for creating an additional carbon sink of 2.5-3 billion tonnes under UNFCCC,
and for restoring 21 mha of degraded land by 2030 under Bonn Challenge.
• Other proposal not finding mention
✓ The MoEFCC has been contemplating to set up a National Forest Board along with state
forest boards to undertake plantations on such non-forest areas.
✓ The idea is to bring various government departments like agriculture, railways and forest
together under the boards to facilitate the process of planting trees on areas outside
forests. However, it is yet to materialise and found no mention in the budget.
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Culture & Tourism
To make India an attractive destination for both international and domestic tourists, the Finance Minister
proposed to allocate Rs 2,500 crores in 2020-21 for the tourism sector.
• Besides tourism, Union Minister for Finance also proposed to allocate Rs 3,150 crore for the Ministry
of Culture while presenting the Union Budget 2020-21 in Parliament.
Proposal in the Budget
• In order to have well-trained resources in the disciplines of museology and archeology, the Budget
proposed to establish first Indian Institute of Heritage and Conservation with the status of a deemed
university to operate under the Ministry of Culture.
• In a major bid to revitalise tourism, the Budget proposed 8 new museums, which includes building
infrastructure around 5 Iconic sites, besides proposing renovation of 5 major museums across the
length and breadth of India.
The Union Budget proposed the following:
• 5 Archeological sites to be set-up/developed as Iconic Sites with on-site Museums at the
following locations:
✓ Rakhigarhi (Haryana)
✓ Hastinapur (Uttar Pradesh)
✓ Shivsagar (Assam)
✓ Dholavira (Gujarat)
✓ Adichanallur (Tamil Nadu)
• Maritime Museum to highlight Harappan Age at Lothal, Ahmedabad, by Ministry
of Shipping
• KOLKATA:
Indian Museum: Re-curation of the oldest museum in India as announced
by Prime Minister Narendra Modi in January 2020.
Numismatics and Trade Museum to be located in the historic Old Mint
Building
• Support for setting up Tribal Museum in Ranchi (Jharkhand)
• Renovation and re-curation of 4 more museums across India
Possible Impacts of Budget announcements
• Analysis and dissemination of scientific evidence: Acquisition of knowledge in disciplines such as
museology and archeology are essential for collecting and analysing scientific evidence of such
findings and for dissemination through high quality museums.
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• More Forex: India had moved up from rank 65 in 2014 to 34 in 2019 in the Travel & Tourism
Competitive Index (World Economic Forum). The Budget announcements will help in boosting Forex
further.
The growth of tourism directly relates to growth and employment. States have a critical role to play in the
development of the tourism sector in India. Therefore, State Governments expected to develop a roadmap
for certain identified destinations and formulate financial plans during 2021 against which specified grants
will be made available to the States in 2020-21.
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Government’s Disinvestment Drive
Announcements
• To sell a part of its holding in largest insurer LIC via initial public offering (IPO).
✓ LIC has been a port of call for various PSU funds raises in the past. Under the disinvestment
of LIC, there is a need that the government would also strengthen its governance policies.
✓ With less federal interference, LIC will be more accountable with strong governance
protocols, which will be a positive for its financial health.
✓ However, the sovereign guarantee element currently enjoyed by each LIC policyholder
might cease to exist after the IPO.
• To sell the government’s remaining stake in IDBI BankNSE. The government has 47% stake in the
bank, while 51% is owned by LIC.
• The government set a divestment target of Rs 2.1 lakh crore for FY21 compared with Rs 1.05 lakh
crore target for FY20.
Disinvestment in FY20
• Against the target for FY20,the government has divested Rs 18,094.59 crore so far this year.
• This year’s share sale included two IPOs namely Rail Vikas Nigam and IRCTC and also CPSE ETF
and Bharat 22 ETF.
✓ Bharat ETF is India’s first corporate bond exchange-traded fund (ETF)
✓ The ETF will be a basket of bonds issued by Central Public Sector Undertakings (CPSUs),
Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) other
government organizations.
• The government also sold enemy shares worth Rs 1881.21 crore.
About LIC
• Established by LIC India Act,1956, LIC is fully-owned by the central government.
• It has the highest market share in the life insurance segment in India.
• LIC policyholders enjoy a sovereign guarantee on the sum assured and the bonus declared. This
has been one of the main selling points for LIC policies.
• A large part of LIC's investment is in equities, bond market and government dominated instruments
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• LIC now also holds 51% stake in IDBI bank thus making it the only insurer in India to own a bank.
• Given that Sebi regulations need a minimum dilution of 10 per cent, it is unclear if there is enough
liquidity for such a large sized IPO.
• Disinvestment target for FY21 looks ambitious and the 3.5 per cent fiscal deficit projected is critically
dependent on this disinvestment target.
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Direct Tax Regime
Personal Income Tax
• The Union Budget proposes to bring a new and simplified personal income tax regime
✓ Income tax rates will be significantly reduced for the individual taxpayers who forgo certain
deductions and exemptions.
• The Union Budget for 2020-21 has proposed a combined cap of Rs 7.5 lakh for the employer’s
contribution to these three categories of payouts.
✓ They are provident fund, superannuation fund and National Pension Scheme (NPS).
Probable Impacts:
Simplification of Direct Tax regime
• It aims to provide significant relief to individual taxpayers and to simplify the Income-Tax law.
• Measures have been initiated to prefill the income tax return.
✓ So that an individual who opts for the new regime would need no assistance from an expert to
file his return and pay income tax.
✓ In the Budget, around 70 of the existing exemptions and deductions of different nature (more than
100) have been proposed to be removed.
✓ Remaining exemptions and deductions will be reviewed and rationalised in the coming years with
a view to further simplifying the tax system.
Informed choice for Taxpayers
• The new tax regime shall be optional for the taxpayers.
• Those who are not availing deductions, now have the option to opt for a new tax regime.
• An individual who is currently availing more deductions and exemptions under the Income Tax Act
may choose to avail them and continue to pay tax in the old regime.
• It may also widen the tax compliance by welcoming new entrants to the new tax regime.
Tax Benefit for Taxpayer
• In the new tax regime, substantial tax benefit will accrue to a taxpayer depending upon exemptions
and deductions claimed by him.
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✓ For example, a person earning Rs 15 lakh in a year and not availing any deductions etc. will
pay only Rs, 1,95,000 as compared to Rs, 2,73,000 in the old regime.
✓ Thus, his tax burden shall be reduced by 78,000 in the new regime.
✓ (S)he would still be a gainer in the new regime even if (S)he was taking deduction of Rs 1.5
lakh under various sections.
• On the other hand, each individual will have to do his/her own income calculations to figure out
which tax regime is more beneficial to him/her.
✓ For example, a person who has bought a long term life insurance policy may have to
continue paying the premium.
Move towards Equitable Tax Regime
• It seeks to move away from an inequitable direct tax regime.
✓ It is based on an analysis that 92 per cent of those filing I-T returns availed exemptions of less
than Rs 2 lakh.
✓ While the existing tax system has four tax slabs, the new one has seven tax slabs and offers
lower rates.
✓ In case of a flat tax rate, it becomes inequitable in the way that rich and poor are taxed in an equal
manner.
✓ Having a few tax slabs also becomes inequitable because there is a sudden jump and there will be
a tendency to understate income to get to a lower slab.
• The portion of salary (PF,NPS, Superannuation Fund) does not suffer tax at any point of time, since
the Exempt-Exempt-Exempt (EEE) regime is followed for these three funds.
✓ Thus lack of a combined upper cap was deemed as iniquitous. Hence a cap is introduced in the
budget.
Revenue Foregone
• The new personal income tax rates will entail estimated revenue forgone of Rs 40,000 crore per year.
• On the other hand, it may boost Private Consumption demand.
Vivad Se Vishwas’ Scheme (No Dispute But Trust)
There are 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals),
ITATs, High Courts and the Supreme Court.
• In the last Budget, Sabka Vishwas Scheme was brought in to reduce litigation in indirect taxes. It
resulted in settling over 1,89,000 cases.
Objectives:
• It aims at reducing vexatious litigations in the direct taxes payments.
• Taxpayers in whose cases appeals are pending at any level can benefit from this scheme.
Proposals:
• A taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver
of interest and penalty provided (S)he pays by 31 March, 2020.
st
• Those who avail this scheme after 31 March, 2020 will have to pay some additional amount.
st
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• The scheme will remain open till 30 June, 2020.
th
Faceless Appeals
A new faceless assessment scheme has already been introduced, known as e-assessment.
• E-appeals are aimed at taking the reforms initiated by the Government to the next level and to
eliminate human interface.
Objective:
• To impart greater efficiency, transparency and accountability to the assessment process
• To eliminate acts of Harassment by Tax officials.
✓ Eliminating the interface between the Commissioner (Appeals) and the appellant in the course of
appellate proceedings.
• Improving effectiveness by Use of Technology.
Instant Pan Through Aadhaar
In the last Budget, the interchangeability of PAN and Aadhaar was introduced.
Proposal
• It is proposed to launch a system under which PAN shall be instantly allotted online on the basis
of Aadhaar.
• There would not be any requirement for filling up a detailed application form.
Taxpayer’s Charter
The Union Budget proposed to amend the provisions of the Income-tax Act .
• The amendment mandates the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter.
• The details of the contents of the charter shall be notified soon.
Objective
• To maintain the trust between taxpayers and the administration in the Tax system.
• Clear enumeration of Taxpayer’s rights will enhance transparency and accountability leading to an
efficient tax administration.
Dividend Distribution Tax
The Union Budget proposed to remove the Dividend Distribution Tax.
• It further means that the dividend shall be taxed only in the hands of the recipients at their stipulated
rates.
• It has also proposed to allow a deduction for the dividend received by holding company from its
subsidiary.
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What is Dividend Distribution Tax ?
• A company, when earning profits, pays a sum out of those profits to the stockholders, known as
dividend. The tax levied on the dividend payments is termed as Dividend Distribution Tax.
What was the earlier mechanism to levy DDT?
• DDT was deducted at the time of the company distributing dividends, which means that it was
taxable at source, not at the hands of receiving shareholders.
• Currently, companies are required to pay DDT on the dividend paid to its shareholders at the rate
of 15% plus applicable surcharge and cess in addition to the tax payable by the company on its
profits.
• But, an additional tax was imposed on the shareholder, who in a financial year, received over Rs. 10
lakh in dividend income.
Probable Impacts
On Equity Market
• It may increase the attractiveness of the Indian Equity Market.
• It may provide relief to a large class of investors.
✓ Especially those investors who are liable to pay tax less than the rate of DDT, if the dividend
income is included in their income.
✓ In case of foreign investors too, non-availability of credit of DDT resulted in reduction of rate of
return on equity capital for them.
• It may result in making India an attractive destination for the purpose of Foreign Direct Investments.
✓ India ceases to be an outlier as currently, no other country in the world has a DDT regime.
On Tax Structure
The proposal for deduction of the dividend received by holding company from its subsidiary will remove
effects of Tax Cascading.
• The tax on dividends is a triple levy. Dividend basically means the distribution of a company's after-
tax profits.
• The tax paid by a company is the first level. DDT is the second level. The recently-introduced Super
Rich Dividend Tax — the 10% tax on anyone who earns dividend income of Rs 10 lakh or above — is
the third.
On Tax Compliance
However, there is a speculation that taxing the dividend in the hands of the shareholder would
compromise the objective of improved compliance.
On Revenue Receipts
The removal of DDT will lead to estimated annual revenue forgone of Rs. 25,000 crore.
• However it is being argued any loss whatsoever in revenue gets offset by the tax that shareholders pay.
Concessional Tax Rate For Electricity Generation Companies
The Union Budget proposes to extend the concessional corporate tax rate of 15% to new domestic
companies engaged in the generation of electricity.
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Probable IMPACTS:
On Investments in Power Sector - It may facilitate investment especially in the Electricity Generation
sector.
• The reduction in taxes for new companies in the generation sector will prompt existing power
companies to float special purpose vehicles that would be eligible for reduced tax at the rate of 15%
against the existing 30% rate.
On Inefficient Units of Generation - It will also encourage them to scrap old and inefficient plants and
use the land to set up efficient new units – in thermal, solar and hydel sectors among others.
On Renewable Energy - Given that the country is aiming for 175 giga-watt (GW) of installed renewable
generation capacity by 2022 from the current capacity of 86 GW.
• Lower tax rates may encourage fresh investments in the power sector, especially renewable energy and
transmission sectors.
On power tariffs
• It may reduce marginal cost of generation of electricity.
• By means of concessional Corporate Tax, Power generation firms will also be able to bid lower tariffs
in auctions thus reducing power tariffs for consumers.
Tax Concession For Foreign Investments
The Union Budget proposed to grant 100% tax exemption to the interest, dividend and capital gains
income in respect of investment made in infrastructure and other notified sectors before 31 March, 2024
st
and with a minimum lock-in period of 3 years.
Probable IMPACTS:
On Investments in Infrastructure and Priority Sector
• Sovereign wealth funds have a significant presence in India’s renewables, hydro, transmission and
distribution sector.
✓ This move may boost up the investment in the said sectors.
Withholding Tax
• It is a tax levied on income (interest and dividends) from securities that are owned by a Non resident
Alien.
• It is also levied on the other income paid to nonresidents of a country.
Reduced Cost of Foreign Funds
• The proposal to extend the period of concessional withholding rate of 5% for interest payments to
non-residents in respect of moneys borrowed and bonds issued up to 30 June, 2023 will reduce the
th
cost of foreign funds.
Concessional Tax Rate Cut For Cooperatives
The Union Budget proposed to provide an option to cooperative societies to be taxed at 22% + 10%
surcharge and 4% cess with no exemption/deductions.
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• These cooperatives are currently taxed at a rate of 30% with surcharge and cess.
• It also proposed to exempt these cooperative societies from Alternate Minimum Tax (AMT).
Probable Impacts:
• On parity with corporates
✓ It aims to bring parity between the cooperative societies and corporates by means of a Concessional
tax rate for Cooperatives
✓ Exemption from AMT will also bring parity with Corporate’s exemption from Minimum
Alternative Tax (MAT).
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Indirect Tax Regime
GST (Goods and Services Tax)
A simplified GST return will be implemented from the 1st April, 2020. This is under pilot run.
Significance: It will make return filing simple with features like SMS based filing for nil return, return pre-
filling, improved input tax credit flow and overall simplification.
Salient features:
• The refund process has been simplified and has been made fully automated with no human interface.
• Improving compliance and Aadhaar based verification of taxpayers: This will help in weeding out
dummy or non-existent units.
• Dynamic QR-code for consumer invoices: The GST parameters will be captured when payment for
purchases is made through the QR-code.
• A system of cash reward is envisaged to incentivise customers to seek invoice, the Finance Minister
said.
• Invoice and input tax credit matching is being done wherein returns having mismatch of more than
10% or above a threshold are identified and pursued.
• Electronic invoice: critical information shall be captured electronically in a centralized system. It will
be implemented in a phased manner starting from this month itself on optional basis. It will facilitate
compliance and return filing.
Health Cess
• To give impetus to the domestic industry, and to generate resources for health services, it is proposed
to impose a nominal health cess of 5% on imports of specified medical equipment.
• An increase is proposed in National Calamity Contingent Duty (NCCD) on Cigarettes and Tobacco
products. NCCD on Bidis remains unchanged.
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