What Is A Budget?
Budget is the nation’s annual financial statement presented by the country’s finance minister. The Union budget is the event which is the most awaited in India. Retailers, manufacturers, stockbrokers, investors, common man, consider it as important. It gives us a detailed account of the government’s expenditure and income. All the government ministries, bodies, union territories, and states, put together their plans, expenses, and revenue for the year and present it to the finance minister. The finance minister takes the advice of various financial bodies, businessmen, stakeholders, and economists to plan the budget.
Once the government writes down its estimate of the year, it decides about spending.
Importance of knowing the budget: It informs the people on how the government plans to earn and spend. The financial statement reflects the current status of the country’s economy. Union budget helps in controlling the economic fluctuations. It ensures proper handling of inflation (rise in the costs) and deflation (reduction in prices), thus maintaining financial stability.
The recent estimate of the International Monetary Fund (IMF) for the fiscal year’s GDP (Gross Domestic Product) growth is 4.8%. The forecast is low, with nearly twelve million workers joining in work every year. There has been an economic slowdown in India. Many sectors are facing a crisis. Joblessness is high. This has thus been an important event that was awaited by many people and is essential for the citizens of India to know and understand.
5 Major Changes In Budget 2020 :
1) There are significant changes within the NRI taxation.
The new fiscal bill expected to dodge the abuse (anti-abuse) of the provisions of the previous taxation. It had been declared to tax the individuals who might mishandle the low taxes or tax-exempt locales by moving their salary of Indian source. There was a lot of disarray among the NRI’s, which was additionally common within the media. Here are a couple of myths and the realities of the new change:
▪ Myth: NRI status is in risk
Reality: The minister of finance, Nirmala Sitharaman proposed corrections in Section 6 of Income Tax Right 1961, which discusses the tax residency status for the incomes in India. The past basis to consider an individual as a non-inhabitant Indian (NRI) was expanded from 182 to 240 days of remain in another country. Previously, the individual needed to live in another nation for a half year to be considered as NRI. Though now, the individual needs to remain for eight months in a foreign country.
▪ Myth: Anyone who is working abroad and is an Indian will have to pay tax.
Reality: An NRI will have to pay in India if the person in question doesn’t pay taxes in their nation. The arrangement doesn’t plan to incorporate the residents who are bonafide labourers in different countries. Pay earned by NRI’s will not be taxed except if it is obtained from Indian business or profession. In a public statement, the Central Board of Direct Taxes (CBDT) explained the fact that the bonafide workers abroad do not have to pay taxes if they meet the criterion mentioned.
▪ Myth: It’ll burden NRI’s salary from tax-exempt countries
Reality: It won’t burden earnings by NRI in tax-exempt nations won’t burden. Those Indians who are bonafide labourers in different countries, including the Middle East and the individuals who are not obligated to pay tax in these nations will not pay in India.
The next amendment in section 6 of ITR is a resident of India who continually voyages, will not be considered as an inhabitant of some other nation, for tax purposes. They would be considered as an occupant of India and the person’s global income in such cases is taxable.
2) Introduction of the new income tax regimen was one pot the major changes of budget 2020:
New vs Old slabs
There are four tax slab rates in the old tax regime. Whereas, the new tax regime has seven tax slab rates (income tax slabs).
The tax slab, which is a new introduction, is optional. The new tax slab offers lesser tax rates than the old tax slab.
The budget 2020 proposed that citizens can choose between the old and the new tax slabs. They can continue with the old tax slab or shift to the new one.
According to the old tax slab, the tax rates are 5% for the tax slab of 2.5 Lac- 5.0 Lakhs. 10% for the tax slab of 5.0 lakhs to 7.5 lakhs. 15% for the tax slab of 7.5 lakhs to 10 lakhs. 20% for the tax slab of 10 lakhs to 12.5 lakhs. 25% for the tax slab of 12.5 lakhs to 15 lakhs. And 30% for the tax slab of above 15 lakhs.
According to the new tax slab rates, the tax rate of 5% applies to the tax slab of 2.5 lakhs to 5 lakhs, 20% for the tax slab of 5 to 10 lakhs, and 30% tax rate applies to the people under the tax slab of 10 lakhs and above.
The old tax-slab is beneficial for people who earn around 12.5L and below 15L. People with an income range between six lakhs to nine lakhs, and do not apply for tax exemptions or other deductions might benefit from the new tax slab.
3) It reduced the number of exemptions under the new tax regime:
They removed approximately 70 tax deductions.
The basic exemption limit under the old tax-regime was three lakhs for senior citizens and five-lakhs for super senior citizens. Whereas, under the new tax regime, the tax exemption limit is the same for everyone, that is, 2,50,000 for all taxpayers.
The ability to claim deductions was provided in the old tax regime, and the new tax regime does not allow any deductions. However, certain deductions (tax breaks) like, the rebate under the section of 87A, standard deduction on rent received, agricultural income, life insurance income to the beneficiary, retrenchment compensation, voluntary retirement scheme are allowed. The tax breaks like investments under section 80C, home rents, interest on house loans, travel allowance, medical insurance, interest received through savings bank, and the interest on the educational loans are not allowed.
The banks allowed to mention interest paid on home loan for tax exemption in the old regime. The new regime doesn’t permit it. However, the citizens can choose to continue the old slab, which comes with several tax exemptions and deduction.
4) Organizations will not require to pay Dividend Distribution Tax (DDT):
The companies had to pay DDT of about 20.35%. It was tax-free for the investors in the stock market. After the announcement of the budget 2020, the companies are relieved from paying the DDT, and the investors with dividend income have to mention it while filing the tax return.
It’ll deduct a 10% TDS(The Tax Deducted at Source) if the dividend of five-thousand and above, and given to the investor, in a fiscal year.
Also, they are to give ten per cent as tax, as announced in the budget 2020.
5) The insurance cover of bank deposits increased from one-lakh rupees to five-lakhs for each depositor. The Deposit Insurance and Credit Guarantee Corporation (DICGC), also hiked the deposit insurance limit according to the budget 2020, from 4th February 2020. This eve insured that people don’t shift their fixed deposits(FD) to the private banks, which are already huge.
These are the five major changes in the budget of 2020 for the financial year 2020-2021. The Parliament made several other changes in terms of allocation of budget for initiatives such as Skill-India, Connecting-India, anti-pollution programs, etc.