The prominent theme of Budget 2020 was the ease of living with improved Governance, such as improved savings for an average household, benefits to MSMEs through enhanced threshold and composition limits thus converting the Indian society to aspire for a better standard of living coupled with greater economic development and care. However, the fine print does not support this theme.
- Digital revolution will go a long way to help improve Governance, however the system glitches are still being noticed while filing returns, etc and is far from being said simple.
- An increased outlay in Education, Health and Family welfare will contribute to improving the welfare of the society.
- An increase in the Insurance coverage for deposits from 1 lakh to 5 lakhs per depositor, will help re-instill confidence in Bank Fixed Deposits on the assumption that Bank interest rates would help beat inflation.
- Bulk of the rupee receipts i.e. 64% is expected to be attained through various modes of taxation. Individual salary tax payers will be the worst hit as more complexities have been introduced in the form of alternate Income Tax slabs with the removal of exemptions and deductions.
- While dividend distribution tax has been done away with in the hands of corporates, it will increase the tax outflow and bureaucratic burden of maintaining records and offering the same for tax in individual returns.
- Removal of the Insurance premium exemption will have a major negative effect on the growth of the sector since Insurance policies were normally offered based on such exemptions.
- Normally such deductions particularly u/s 80C of IT Act acted as a booster for family savings and growth of the associated Financial Services Sector. The removal will have a dampening effect on such savings and sector growth. It would also have an impact on the proposed IPO of LIC.
- Removal of reduction of interest on Section 24 of the Income Tax Act in respect of self-occupied vacant property is self-defeating the purpose of affordable housing/boosting the real estate sector.
- Looks like the Indian personal tax system is moving towards the American system of income being taxed without exemption/deduction, file return of income and claim credit for taxes paid.
- Reduction of tax for Corporates will not help savings and spur consumption which is the need of the hour.
- A quick back-end calculation shows that the old IT tax rates with all the deductions helps save more.
- Improved spends on infrastructure, if implemented and executed well can help boost the economy but will Fiscal deficit be curtailed?
(The writer is the MD & CEO of Quantum Mutual Fund)
Published 04 February 2020, 08:27 IST