Union Budget 2020-21

UNION BUDGET 2020-21

BUDGET 2020-21 STANDING ON THREE PILLARS :

ASPIRATION , ECONOMIC DEVELOPMENT & CARING SOCIETY

One more budget of Modi Government may be viewed as Bold and pragmatic budget for creating path for US$ 5 trillion economy with ease of living.

The budget has kept the basic macro strategy intact. On the one hand it provides thrust to rural economy, on the other, it focuses on simultaneously enabling measures to transform India.

The budget removes structural bottlenecks which were hampering investments and takes steps to boost investments.

Main Highlights of the budget:

1.    Total estimated Budget expenditure at Rs. 30.42 lakh cr.

2.    Defence spending Rs. 3.37 lakh cr.

3.    Agricultural and Rural Development expenditure at Rs. 2.83 lakh cr.

4.    Tax revenue estimated at Rs. 22.46 lakh cr.

5.    Expenditure for Jal Jeevan Mission at Rs. 3.60 Lakh cr.

6.    Education sector allocation Rs. 99,300 cr.

7.    Launch of national infrastructure pipeline with Rs. 103 lakh cr.

8.    Electrification of 27,000 km of tracks.

9.    Insurance on Deposit with Bank increased from Rs. 1 Lakh to Rs. 5 Lakh.

10. Disinvestment target of Rs.2.10 lakh cr.

11. In the budget government has given choice to tax payer for opt out slab rate applicable for normal income other than Long Term Capital Gain and Short Term Capital Gain from equity oriented investments which is chargeable at specific rate. 

 Taxable Income Slab (Rs.)

Existing Tax Rates (with benefit u/s 80C upto 1.50 lakh)

New Tax Rates (without benefit  u/s 80C)

0 - 2,50,000/-

NIL

NIL

2,50,000/- - 5,00,000/-

5 %

5%

5,00,000/- - 7,50,000/-

20%

10%

7,50,000/- - 10,00,000/-

20%

15%

10,00,000/- -12,50,000/-

30%

20%

12,50,000/- -15,00,000/-

30%

25%

Above 15,00,000/-

30%

30%

12. The biggest announcement was the removal of Dividend Distribution Tax (DDT) which was an additional tax paid at the company’s level. Instead, shareholders will now have to discharge taxes on dividends received. This is win-win situation, because for major part of the recipient it is taxed at lower rate and now foreign investor can also take credit of the same in their country of residence.

13. One good thing that has happened in this budget is a proposal to incorporate Charter of Tax Payers Rights in the Income Tax Act itself. Government has given mandate to CBDT to adopt tax charter. This will create trust between taxpayer and administration and efficiency of delivery system of the Income Tax Department.

14. Finance Act 2020 has also introduced TCS (Tax collected at source) for remittance under Liberalized Remittance Scheme (LRS). Same will be applicable in case of following remittance:

01. TCS @ 5 % is required to be collected if the amount of remittance is INR 7 lakhs or more during the Financial Year.

02. However, in case of remittance is to be made from loan obtained from Financial Institution than only 0.50 % is required to be deducted.

Non- Resident Indians (NRIs)

1.    Important change in definition of  NRIs :

Finance Act, 2020 has incorporated important amendments to determine residential status of Non Resident Indian. And as such it will become effective from 1st April, 2020.

 

      Finance Act, 2020 enacts following amendments:

 

(a)    Resident of India

 

Existing definition for residential status has remained the same but they have introduced couple of new additional clause/conditions based on income for the purpose of determining the residential status of the NRIs. Same has been explained here under :

 

As per existing definition an Individual is said to resident of India in Financial Year if :

(i) his stay in India 182 days or more during such year :

or

(ii) his stay in India totaling to 60 days or more in relevant year in addition to his stay totaling to 365 days or more in immediately preceding 4 years.

 

However second condition of 60 days stay does not apply to NRIs visiting India and as such 182 days or more stay in India will be applicable to NRIs.

 

(b)  Deemed Resident of India

 

 (i) in case NRIs having taxable income in India exceeding INR 15 lakhs  than he will be treated as resident of India if his stay in India totaling to 120 days or more  in relevant year in addition to his stay totaling to 365 days or more in immediately preceding 4 years.

 

(ii)   In case of Indian Citizen (having Indian Passport) if he is having taxable income in India of more than 15 lakhs (including income earned from the business /profession operated/controlled from India)

                                                                                             AND

he is not liable to tax in any other country on the basis of his domicile, residency etc. than he will be treated as deemed resident of India for the said Financial Year.

 

 2.    IMPORTANT CLARIFICATIONS :

 

01. Definition has mentioned taxable income hence income earned from  NRE Fixed Deposit as well as NRE saving account  and also interest income from FCNR deposit will not included while calculating limit of taxable income INR 15 lakhs.

 

02. It has also been enacted in the Finance Act, 2020 that if NRIs becomes resident on account of

(i). his stay of more than 120 days but less than 182 days and having taxable income in India exceeds INR 15 lakhs or

(ii). in case of deemed residence -

his global income will not be liable to tax in India except that much of income which has been earned from the business carried on or controlled from India.

(iii) Further in case of deemed resident, one is not required to report his foreign assets while filing Income Tax Return in India.

3.    NRI's can invest in specified Government securities -An attractive Investment Opportunity.

4.    FPI can invest up to 15% of the outstanding stock of Corporate Bonds.- Earlier it was 9%.

5.    In case of income from Royalty and Fee for Technical Services, if TDS has been deducted then NRI's are not required to file Income Tax Return.

In a nutshell the budget is a good start as it tries to put forth a series of far-reaching reforms aimed at energizing the Indian economy-through a combination of short term, medium term and long term measures. And it is welcome move to make sure investors feel safe while putting their savings and resources in India. 


Nita R Dhruva
Femaonline.com.
Email.:rajesh@femaonlline.com,keynote@nribanks.com
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613

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