A budget, the release of which was followed by the worst stock market crash in 11 years. Here is how budget 2020 was described.
Observing superficially , the government has reduced the income tax rates.
Whereas earlier you had to pay an income tax of 20% in the slab of 5 lakhs to 10 lakhs and 30% tax above 10 lakhs. But now a tax of 10 % needs to be paid in the slab of 5 lakhs to 7 lakhs and a tax of 15 % needs to be paid for 7.5 lakhs to 10 lakhs slab, 20% needs to be paid for 10 lakhs to 12.5 lakhs slab , 25% for 12.5 lakhs to 15 lakhs and 30% tax to be paid for a slab of above 15 lakhs ( that is similar like before )
So now you would think that the income tax rates between 5 lakhs to 15 lakhs have been reduced but it is not what it looks like , it’s a type of hyperbole because the government has said that there would be no exemption in this new tax rate nor there would be any deductions. Whereas , there used to be deductions in the prior tax rates.
For example , if you invest money in EPF, PPF or ELSS, then there used to be deductions on the income tax due to which you paid less tax, overall.
Now the fact is government have given you an option – you can either use the new tax rates or use the same old tax rate system.
Now the question comes in our mind , “ which one would save the money – new one or the old one? “
So this depends on individual to individual as to what deduction you already make use of and which ones you want to use and how much your income is. So you have to individually calculate the which system is better for you – the new one or the old one and this makes the entire tax system even more complicated.
Although our government had said that they are simplifying the income tax system but this has become even more complicated due to it.
Furthermore , an education cess of 4% is imposed on your income tax which is still applicable like it was done before .
So all in all , the fact remains that there has been a mere negligible difference on income tax rates but, overall the entire system has become more complicated.
A good news is that deposit insurance has been raised from 1 lakh to 5 lakhs. When the PMC bank scam happened , the biggest demand of the people was to insure that their money kept in bank is secure and the government has fulfilled the promise to some extent. If you now deposit up to 5 lakhs in bank, then it would remain saved up.
Education and health
In the 2019 budget , government had earmarked approximately Rs. 95,000 crore for education. This year there is a slight increase. The government has increased it slightly and has set it at 99,300 crore rupees. Also, the government has said that they are assigning 3,000 crore rupees for skill development this year. A new , unique thing that the government has brought in the field of education is that they are now promoting Online Degree courses. Until now you could have learned online but now universities can now award their complete degree online which is a huge advantage for underprivileged students.
The government had allocated Rs. 62,000 crore for health care in Budget 2019 , but this year it has been set at Rs. 69,000 crore after a small increment .
In the field of agriculture , the Government has allocated Rs. 2.83 lakh crores this time. A 16 point action plan has been unveiled and promises have been made yet again of doubling the farmers’ income by 2022.
Furthermore , they have said that 20 lakh farmers will be provided with funds under the Kusum Yojana due to which the farmers will be enabled to install stand alone solar pumps in their fields. Though it is great step taken by the government but how far it actually gets implemented is yet to be seen.
To promote FDI and investment , the government has further reduced the corporate income tax. Earlier it was 25% but now it is mere 22%. This is one of the lowest tax rates for companies in Asia. And this is only 15% for the new manufacturing companies.
DDT – Dividend Distribution Tax ( the money that is earned by the companies and then distributed to the shareholders on the basis of per shareholdings) earlier , it was taxed but now it has been abolished. Also, in order to stop tax harassment, the government has decriminalized tax offences which will break through the pervasive fear in companies.
The government has also decided in budget 2020 that IDBI bank will be sold completely , it will be completely privatized. Furthermore, some percent stakes of one most profitable government companies LIC (life Insurance Corporation ) will be kept on public offerings by the government. Although this doesn’t amount to privatization exactly but a lot of people believe that it is the first step towards the privatization of LIC and lot of people are upset by this.
If you want to send more than Rs. 7 lakhs outside of the country , then the government has introduced a new tax of 5% on it. This is a huge disadvantage for the students who are studying abroad because their parents send them the money to study abroad ,so even that money would now be taxed. And , in a way this is a double taxation. First you are paying the tax on the money you earn and then if you want to send your money abroad to your family members or friends , then that would be subject to more tax.
The definition of NRI has also been changed now. Earlier, you would be an NRI if you are staying outside India for more than 183 days but now 246 days.
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