Budget 2020: What's in store and what are the challenges
Union Budget 2020: Finance Minister Nirmala Sitharaman has quite a task ahead of her as she prepares to present Union Budget 2020 in the Lok Sabha on Saturday (February 1). The economy is not in the best of shapes. International Monetary Fund (IMF) has already slashed India's growth forecast from 6.1 per cent to 4.8 per cent. Prices of goods are high and the common man is looking at Budget 2020 just as he is at his own pocket.
Budget 2020: Finance Minister Nirmala Sitharaman has quite a task ahead of her as she prepares to present Union Budget 2020 in the Lok Sabha on Saturday (February 1). The economy is not in the best of shapes. International Monetary Fund (IMF) has already slashed India's growth forecast from 6.1 per cent to 4.8 per cent. Prices of goods are high and the common man is looking at Budget 2020 just as he is at his own pocket. The situation is tough indeed. But it will not be a first time when the Indian economy defies everything and rises again.
Here's what to expect from Budget 2020 in some key areas:
Personal Income Tax Slab:
This is something that directly affects everyone's pocket. So common man is always all ears for any change in Income Tax rates lest they affect his or her own budget.
Experts are saying that Finance Minister Nirmala Sitharaman may tweak income tax slabs. Currently, if your annual income is up to Rs 2.5 lakhs ( Rs 3 lakhs in case of senior citizens) you don't have to pay any taxes.
Here are the current income tax slabs
| Income Slab | Income Tax |
| Upto Rs 2.5 lakh | Nil |
| Upto Rs 2.5 lakh to 5 lakh | 5 per cent of (Total income minus Rs 2.5 lakh) + 4 per cent cess |
| Rs 5 lakh to 10 lakh | Rs 12,500 + ( 20 per cent of total income minus 5 lakh) + 4 per cent cess |
| Rs 10 lakh and above | Rs 1,12,500 + 30 per cent of (total income minus Rs 10 lakh) + 4 per cent cess |
India has been hit by huge banking scams as well as rising NPAs. This has hit the Indian economy as well as India's image abroad. Liquidity is under stress and credit growth for the banking sector has taken a hit amid adverse economic conditions. Non-Banking Financial Companies (NBFC crisis) has made the situation worse.
It's good news for the common man as it is widely expected the minimum income slab may be increased from Rs 2.5 lakh. The committee formed to look into Direct Taxes has recommended a massive overhaul of personal income tax slabs. If indications are anything to go by, Nirmala Sitharaman might make the big announcement in her budget speech.
Also, there are chances that Dividend Distribution Tax (DDT) and Long Term Capital Gains Tax will be revised.
Dividend Distribution Tax is a tax levied on dividend that you get from the company the share/s of which you hold.
Capital Gains Tax is the tax levied on profit you get by selling assets like shares, gold etc.
Real Estate:
Buying own house is a dream for everyone. Real estate market has been down. This has meant that homes are more affordable to economically weaker sections. There has been a fierce demand from real estate companies that the sector be granted the status of an industry. However, the ailing sector means that number of projects have been stalled and thousands of home-buyers have not got possession of homes they've already paid for.
The government has publically committed that it will provide housing to all by the year 2022. For this the government needs to rejuvenate the sector. The government needs to make drastic reforms.
In November 2019, Sitharaman announced Alternative Investment Fund (AIF) of Rs 25,000 crore for the real estate sector. Central government also pumped in Rs 10,000 crore. In Budget 2020, the government may set a timeline to release these funds.
Defence:
Defence of Indian territory and India's interests is something that can never be compromised. In her maiden budget last year (interim budget) Finance Minister Nirmala Sitharaman had allocated less than 2 per cent of India's GDP for Defence Sector. Such allocation was the lowest since 1962, the year when India-China war took place.
Pakistan spends 3.5 per cent of its GDP on Defence while the same number for China is 4 per cent. Indian armed forces including Indian Army, Indian Navy, Indian Air Force are in dire need of modernisation.
In such a scenario, experts are stressing that the Defence sector should be allocated more funds.
Banking:
India has been hit by huge banking scams as well as rising NPAs. This has hit the Indian economy as well as India's image abroad. Liquidity is under stress and credit growth for the banking sector has taken a hit amid adverse economic conditions. Non-Banking Financial Companies (NBFC crisis) has made the situation worse.
Higher credit growth is crucial as it means that demand and investment in the economy is intact. Higher credit growth is even more crucial now as it is symbolic of higher demand and investment in the economy.
Banks are expecting that the government starts lending to provide a much-needed stimulus for boosting capital expenditure and investment cycle.
More steps are necessary to address the crisis in NBFC sector
Market leaders are expecting Modi-government to bring back Financial Resolution and Deposit Insurance (FRDI) Bill. The bill has already generated some controversy.
Fiscal deficit:
The government's fiscal deficit touched 132.4 per cent of the full-year target at December-end mainly due to slower pace of revenue collections, official data showed on Friday. In actual terms, the fiscal deficit or gap between expenditure and revenue was Rs 9,31,725 crore, the data released by the Controller General of Accounts (CGA) showed. The government aims to restrict the gap at 3.3 per cent of the GDP or Rs 7,03,760 crore in the year ending March 2020.
(With agency inputs)
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