Finance minister Nirmala Sitharaman in budget 2020 had announced the launch of a new personal income tax regime which can help the middle-class save taxes and also scrapped dividend distribution tax (DDT) with a slew of measures to boost the Indian economy suffering from a slowdown.
Budget 2020 was also the longest budget speech by any finance minister that lasted for 160 minutes.
Finance Minister Nirmala Sitharaman said the government intends to remove all income tax exemptions in the long-run.
Individuals opting for taxation under new rates will not be entitled to exemption/deductions including under Section 80C and 80D, LTC, housing rent allowance, the deduction for entertainment allowance, professional tax, and interest on self-occupied/vacant property.
The 30 percent slab, which was stuck for nearly a decade at Rs. 10 lakh, has finally moved to Rs. 15 lakh – an increase of a whopping 50 percent under the new regime. Income up to Rs 5 lakh is now exempted from tax, and lower tax rates apply on income between Rs 5 lakh and 15 lakh if taxpayer don’t claim deductions.
The FM has proposed a new slab structure wherein individuals can save taxes provided deductions and exemptions are not availed, an option has been provided to the taxpayer to pay tax as per existing slabs by availing deduction/exemptions.
Nirmala Sitharaman halves customs duty on import of newsprint, lightweight coated paper to 5 percent. The budget has provided an outlay of Rs 8,000 crore for quantum computing over five years to break into this technology. Customs duty increased on footwear and furniture.
Sitharaman said direct taxes are the lowest, simplest, and smoothest. FM also proposed a scheme to bring down litigation indirect taxation scheme; 4.83 lakh direct cases pending in various appellate forums. Vivad se Vishwas’ scheme for direct taxpayers whose appeals are pending at various forums.
Registration of charity institutions to be made completely electronic, donations made to be pre-filled in IT return the form to claim exemptions for donations easily. 15th Finance Commission has cut state share of central taxes by one percentage point to 41 percent. Tax on Cooperative societies proposed to be reduced to 22 percent plus surcharge and cess, as against 30 percent at present.
Income Tax Act to be amended to enable faceless appeal. The budget proposes deferment of tax payment by employees on ESOPs from startups by five years. Around 70 of more than 100 income tax deductions and exemptions have been removed, in order to simplify the tax system and lower tax rates.