Detailed Analysis of Budget 2020-21
Hi friends and welcome to this podcast by Angel One.
Doston at the beginning of every year, India ki finance minister India ka national budget announce karti hain. You might have already gone through the conversations around budget 2020-21.
Lekin isse pehle ki next year ka budget announce ho, it will be great to stay in loop with the conversation going on around the budget right now.
Kyunki coming month, yani Feb 2021 mein next year ka budget announce kiya jayega, and private aur public entities ne already budget recommendations dena shuru kar diye hain.
Toh shall we start? Alright, let’s dive in!
Doston before we dive into the budget, let’s take a look at the national economy in general. 2018 se 2019 ke period mein GDP growth 6.8% par thi. Following year, GDP growth fell down to 5%. Lekin 2020 se 21 ke period mein growth forecasts have been set to 6.5% - ye national economy ke liye ek achcha sign hai.
You must already be familiar with the allocations made in last year’s budget. Lekin there are some major highlights, that you shouldn’t miss on. Check these out:
Sabse pehle baat karte hain startups ki. 2020 ke budget mein startup activity promote karne ke liye kai measures liye gaye hain. Firstly, startups ko behtar early life seed funding provide karke ideation aur development support provide karane ka objective hai. Saath hi, Indian government Intellectual Property ke protection ke liye ek portal develop karne ke plan me hai - startups ko encourage kiya ja raha hai ki wo is portal ko use karke apne unique products aur services ko IP rights ke zariye protect karen - this will promote a healthy startup environment in India. But this is not all - startup activity boost karne ke liye financial support bhi provide ki jaa rahi hai - for example, the limit of turnover for startups to claim a tax holiday has been increased 3 fold, and Employee stock ownership plan ke chalte, startup employees can now defer tax liability for five years, or until they leave the company.
Sounds cool, right? Chalte hain next point ki oor - which is about taxes.
Doston 2020-21 ke budget mein kuch important tax revisions kiye gaye the. Firstly, ecommerce operators like amazon, jo indian sellers ke items ko sell kar rahe hain, unhe sold goods par 1% tax pay karna hoga. Saath hi, dividend distribution tax ki liability company se individual par shift kar di gayi hai. Iska matlab ye, ki the 15% DDT that companies had to pay on dividends will now be removed, and the individual receiving the dividends will bear the tax liability.
There is another cool concept to pay attention to - and that is, SEP. Let’s check it out.
SEP stands for Significant economic presence. Ye basically un companies se result karta hai, jo market mein present hain, lekin invisible hain. These are usually tech giants like amazon, ya fir google - jo India mein business kar rahe hain, lekin their activity remains limited to the internet, aur ye companies country mein physically present nahi hain. G-20 OECD mein is topic par discussions chal rahe hain, aur jab tak ispar global consensus nahi milta hai, tab tak India ne SEP ke regarding taxation aur business rules withold kar rakhe hain.
Okay, so we have looked at what’s in the budget for startups and on taxation. Ab baat karte hain IT sector ke baare mein Information Tech aur Business Process management companies ke liye kai saare updates hain. In fact, 2020 budget mein technology par heavy focus dekhne ko mila. To begin with, India ne agle 5 saal mein quantum computing par 8000 crore spendings ke liye allocate kiye hain - ye fund computing research mein jayega, and India aims to be a quantum computing pioneer in the future. Saath hi, data center parks establish karne ke liye bhi provisions banaye jaa rahe hain. These factors will make it easier to business in India. Saath hi, electronics manufacturing push karne ke liye manufacturing clusters setup aur improve kiye jayenge. All in all, there is a theme that we see here - and that is the push towards smart business and smart tech. Tech ke topic par ek aur baat: India ke governance system ko bhi digitally connect karne ka plan hai - iske tehat, India ke 1,00,000 gram panchayaton ko fibre internet ke saath online connectovoty di jayegi. In addition, medium aur small sized businesses ko aur competitive banane ke liye ek e-logistics portal set up kiya jayega, which will create more jobs.
Doston stock market investors ke liye bhi ek interesting provision diya gaya hai. Budget 2020-21 mein ek nayi entity, jiska naam hoga Investment Clearance Cell -- will now provide end-to-end support for investors, including pre-investment advisory. Investment clearance Cell will also be responsible for clearances at the state and national levels.
Now, there is an important news for the common earning person too. Doston, last budget mein ek nayi income tax scheme present ki gayi thi, jiske under income tax 7 different income tax slabs ke across different rates par charge kiya jayega. You might already be aware that in the current regime, there are only three slabs. Going forward, income tax payers can choose to opt for the new regime, lekin iske saath they will also see a drawback. In naye tax slabs mein agar aapi income 15 lakhs se zyada hai, toh you will be paying as much tax as in the current regime. But agar aapki income 15 lakhs se kam hai, toh aapko nayi regime mein lower rates ka benefit milega.
Is regime mein ek critical drawback rahega deductions - kyunki, naye tax slabs ko opt karne ke baad aap kai saare common deductions claim nahi kar sakoge. Whether you net taxes will be lesser or higher, is something that your CA will be better positioned to tell you about. Is naye tax structure se government will forego a revenue of over Rs. 40,000 crores.
And lastly, economy ko further stimulate karne ke liye, the government is also going to grant 100% deductions on foreign direct investment made towards infrastructure improvements. However, is proposal ke according, the funds invested will be subject to a lock-in period of 3 years. In addition, manufacturing mein 15% tax rate ka concession ab power aur electicity segment ke liye bhi apply hoga. The government plans to attract investment in electric and power companies with this move.
However, 2020-21 ke budget mein kai elements criticize bhi kiye gaye the. Dekhte hain, with these 4 points: Media mein analysts ne India ke declining GDP growth rate ko kuch serious concern dikhai hai. Despite the measures that the government is taking to stimulate manufacturing and the markets in general, next year ka 6.8% growth target kuch unfeasible dikhai de raha hai. COVID pandemic ke slowdown se bhi growth rates affect hue hain, and the lockdowns significantly shook the numbers up.
Foreign direct investment ko stimulate karne ke liye measures litye gaye hain, lekin analysts are doubtful, as to whether these will result in more funds flowing into the country. That is because, foreign investors also look for the stability of the currency of target investment, and if this stability cannot be maintained, then FDI investors ke liye India will not look like an appealing market in the long run.
Infrastructure projects mein investments plan kiye gaye hain. Lekin in investments ka direction unclear hai, to a great extent. Saath hi, infrastructure projects se economy stimulate karne ka objective will remain largely unattained, agar in investments ko sahi projects tak ek urgent time-frame mein pump nahi kiya jaata.
Kuch experts ne naye projects par tax rates cut karne ka suggestion diya hai - not for one or two sectors, but for all the sectors and all projects. Covid pandemic ka economic slowdown combat karne ke liye indirect tax rate cuts se bhi consumption fuel kiya jaa sakta hai, but cutting the tax rates.
Toh doston, these are some of the concerns that were raised about last year’s budget. In concerns ke chalte finance ministry ke liye naye recommendations bhi diye jaa rahe hain.
Aane waale saal ke budget se kai naye expectations hai - but whether these expectations will be fulfilled or not is simply a matter of time.
Keey yourself on top of news updates - because the next year’s budget will be out soon, and analysing with the right context can help you take some rewarding decisions in the market and outside it too.
Stay tuned to our upcoming podcasts, or visit www.angelone.in to stay in the loop! Until then, goodbye from Angel One, and happy investing!