Budget 2020: Income Tax Relief For Individuals

Finance Minister Nirmala Sitharaman presented an all-inclusive and visionary budget laying down the roadmap to make India a $5 trillion economy by 2025. The budget extensively focused on reviving agriculture by increasing target for agriculture credit to a whopping 15 lakh crore. Till now, this has been the highest target for agricultural loans.

It should be noted that in the past six quarters the economy has witnessed sharp decline, from 8.1 per cent in 2018 to 4.5 per cent in 2019.

In a bid to boost consumption, Sitharaman introduced simple yet revolutionary tax slabs, aimed at providing relief the salaried class. Here’s a look at the new effective tax-slabs soon-to-be-effective

Annual income range

1) Rs 5 to 7.5 lakh tax reduced from 20 per cent to 10 per cent

2) Rs 7.5 to 10 lakh tax reduced from 20 per cent to 15 per cent

3) Rs 10 to 12.5 lakh reduced from 30 per cent to 20 per cent

4) Rs 12.5 to 15 lakh reduced from 30 per cent to 25 per cent

This effectively means that a person earning Rs 5 lakh annually has no tax burden. This also means that a person earning Rs 15 lakh per annum will pay Rs. 1.95 lakh instead of Rs. 2.73 lakh without deductions. The Finance Minister reiterated her commitment to simplify the tax regime, and proposed a tax charter to protect individuals from tax-filing harassment.

In a bid to boost infrastructure, Budget 2020 proposed 100 per cent tax concession to sovereign wealth funds for investing in infra projects. However, while there were high hopes for the housing sector, Sitharaman chose to maintain a status quo. Besides providing tax relief to commoners, Sitharaman also increased insurance cover for bank deposits from Rs 1 lakh to Rs 5 lakh. This move has finally succeeded in meeting the long-standing demand of the average Indians who seemed rather helpless in the wake of PMC bank fiasco.

While the listing of LIC can be termed as a bold decision on her part, her silence on divestment raised eyebrows. A little more focus was required on the divestment front.

On the other hand, markets reacted on a rather violent note in the absence of LTCG tax removal. Benchmark indices BSE Sensex and NSE Nifty tanked several points. While Sensex dropped by more than 900 points, Nifty slipped even less than 11,700 points.

The only consolation for markets seems to be the government’s commitment to maintain fiscal deficit at 3.5 per cent of GDP. However, the markets are expected to recover soon as soon as the effects of budget sink in.

Overall, Budget 2020 can be termed as progressive and pro-people. It can be said that the government has provided a stimulus to the economy in the form reduction in personal taxes. 

The author is the Founder, Investonline.in