Budget 2020 (Happy Fools day)

There was a dire need to address the economic concerns of India and there is something for everyone in this budget. India is one of the world’s fastest-growing economy and this budget in 2020 is aimed at pumping more business and investments in the country.

It is said that size matters, but the longest speech in budget history did not guarantee Nirmala Sitharaman success. Her second budget had no big fiscal stimulus, several protectionist duties, and few convincing steps to revive a slowing economy. Disappointed investors sent the Sensex crashing 1000 points.

The tax on cigarettes has been raised yet again, but not the tax on beedis. Tobacco kills, whether in cigarettes or beedis. True, the beedi industry employs many people, but if you must employ some people to kill others, maybe better ways can be found.However, the Sitharaman approach of depending more on non-tax revenue than borrowing to finance capex is a positive move. It will help cut market interest rates.

The dividend distribution tax has been abolished and all dividends will now be taxed fully in the hands of shareholders. This will raise the earnings per share of corporations, and benefit high-dividend companies. The markets hoped for the abolition of long-term capital gain tax but in vain.

By shifting the burden of tax on dividend from payer to payee the government has, perhaps unintentionally, told companies to cut their dividend payout ratios.I think it’s entirely possible that total tax collected from dividends will actually decrease because many investors who receive dividends are not required to pay any income tax and also because dividend payout ratios should decline.Dividend distribution tax had other advantages. No collection costs. No leakages. By shifting the burden to payees, both collection costs and tax leakage will increase.that’s because the difference between the tax rate on dividends and capital gains is now very significant. Therefore, investors should prefer capital gains over dividends. And many (though not all) shareholder-friendly companies should also think similarly.By making these changes, the government is effectively (and perhaps unintentionally) nudging companies to retain earnings

Coming to the positives of the Budget (i) Education reforms (ii) Strengthening MSMEs for Economic Growth (iii) Digital India for new Economy (iv) Employment Oriented Education 

Now in the Personal Tax front Individuals opting to pay tax under the new lower personal income tax regime will have to forgo almost all tax breaks they were claiming in the current tax structure. The important tax breaks that will not be available under the new tax regime include Section 80C (Investments in PF, NPS, Life insurance premium etc.), Section 80D (medical insurance premium), tax breaks on HRA (House Rent Allowance) and on interest paid on housing loan. Tax breaks for the disabled and for charitable donations will also go. Therefore, it is not clear as to whether the new personal tax regime will really bring substantial tax savings for most.

In Nutshell New Income Tax Slabs Are like I love You But as a friend (LMAO).

There was not much done to boost rural consumption, neither was there a push for infrastructure. The modest stimulus through personal tax rate cut seems to be a double edged sword. You want rs 2.1 trillion from disinvestment and you do nothing to keep the market buoyant and keeping hurting the investor sentiment.