Budget 2020 announced several steps for individual tax payers, corporate, agriculture & MSMES and Start-upS along with sustainaBle development goals, women and child development to name a few. real estate expectations of an immediate recourse failed to find a mention.
By: sapna srivastava
The stock markets reactions—with a near-1,000 points slump—was an extreme reaction to the day the Budget was announced. The big growth boosting measures were missing and there were not many concrete or radical changes in terms of fund allocation to various schemes.
The Budget 2020-21 has taken a balanced focus on all the sectors in an effort to boost the economy and has steered steering clear of drastic stimulus packages. This also, means the multiplier effect will be muted.
TAX PAYERS TIGHTROPE WALK
The new individual’s income tax system puts in more money in the hands of consumers. The option to follow the old tax regime to avail deductions remains. This may help in boosting consumer demand, but subdues incentive to buy real estate. In addition, this only makes the tax structure “more complicated”. Similarly, to make Indian equity market more attractive, the removal of dividend distribution tax (DDT) does provide relief to companies, but this translates into higher tax impact on investors with no relief in terms of long-term capital gains tax as well.
FINANCIAL SECTOR IN DOLDRUMS
Most importantly any measures to strengthen the financial institutions were absent from the budget announcements. A ?70,000 crore capital boost for the public sector banks (PSBs) has been along with the consolidation of the PSBs and strengthening their governance but, the specifics of this have not been spelled out.
The consumers can take relief in the fact that the budget has hiked the bank deposit insurance in scheduled commercial banks to ?5 lakh per depositor per bank from the current limit of ?1 lakh. Overall, the financial and banking sector measures like the reform of PSBs will take time and are unlikely to provide any immediate boost to the economy.
SOME GOOD NEWS
The budget this time has focussed on more allocations towards the education sector, the transport sector and continued thrust on agriculture. The budget also had some significant announcements for MSMEs and the start-up community. Apart from other benefits, in order to reduce the compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector, the turnover threshold for audit from the existing Rs 1 crore has been raised to Rs 5 crore. Likewise to give a boost to the start-ups, the FM has eased the burden of taxation on the employees by deferring the tax payment on ESOPs by five years in addition to other incentives for the companies. A wide-ranging measures towards spurring economic development, digitisation, smart cities, start-ups, tourism, infrastructure and foreign investment among other sectors has brought some cheer to the country.
REAL ESTATE LEFT GASPING
The Budget 2020 has given a more long term vision with some cascading benefits due to the provisions for other sectors. Apart from the personal income tax relief, increase in the circle rate limit and sops for affordable homes, there have been no quick fix measures to plug the downfall in real estate. The restructuring of existing loans, along with measures to improve liquidity and further lowering home loan rates, taxes and stamp duties remain unfulfilled. Scrapping of DDT has also puts at risk fund-raising plans of developers through REITs. In addition, key expectations of - industry status, single window clearances and reinstatement of Input Tax Credit in GST remain elusive.
In conclusion, this is not a big bang budget but has taken small steps towards giving a fillip to the economy. What remains worrisome, is the conspicuous absence of word “slowdown” in 2 hours 43 minutes of budget speech - one of the longest in recent history. Contrary to Finance Minister Nirmala Sitharaman's conservative approach, economists had expected some direct measures to spark demand to reach Government’s optimistic targets for FY21.
