Union Budget 2020 was presented by our FM. Did it meet our expectations?
A man resided in a desert along with his Camel. The conditions that were already harsh were slowly getting worse, and it was tough for both of them to sustain. The camel had faithfully serviced his master for long so, it had high hopes that the master would take good care of it. Finally, a day came when they had to start their journey in order to shift to the nearest city.
Before starting the long journey, the camel had to eat in bulk and the Camel expected a satiating treat. But, alas! The man offered some Cumin seeds (Jeera in Hindi) to the camel and started the journey. Now imagine the desert as economy, the man as the government and the camel as common people.
The Tax Slab Mirage
Have you bought branded clothes during an *Up to 50% OFF Sale? When you read the terms and conditions in detail you might not find the offer as attractive as you found it in the first glance. That’s exactly what happened as income tax slabs were amended in Union Budget 2020. Read on to find out what exactly happened.
Post announcing the amendments in income tax slabs, Finance Minister Nirmala Sitharaman told the house that new tax slabs are optional. This means, if an individual wants to pay taxes as per earlier slabs, he/she can continue to do so whereas if the individual wants he/she can shift to the new slab.
There’s a reason behind this. The earlier tax slabs offered benefits of deductions such as under section 80C, LTC etc. Now, if you wish to forgo these benefits, you can switch to the new income tax slabs.
The Corporate Swirl
Big corporates might have been waiting eagerly for the budget and we’re pretty sure that they might have been equally disappointed as individuals. Some of the “Important Steps” taken by the government for the corporates are – slight revision in corporate tax (more or less as it is), Decriminalization of civil offences and removal of DDT.
Out of all the measures, only removal of Dividend Distribution Tax is the one which will benefit the corporates directly as they won’t have to pay it any more. The DDT will now be taxed at the receiver’s end based on the tax slab the receiver falls in.
Now again, the receiver of dividend will either forgo the ELSS deduction and pay higher tax or take the deduction and pay tax at a higher income tax rate based on his slab. So, basically everything almost remains the same as before.
Market Understands Everything
As the Union Budget 2020 was being presented, the market went up nominally for some time but ultimately came down drastically. In fact, Sensex tanked by almost 1000 points and Nifty went down by 300 points by the end of the day. The way announcements were made in the budget, it was like ‘Beating the Bush’ going on and post interpretation of it was clear that benefit is directly being given to the corporates or individuals either.
The market is smart enough to detect what’s actually useful and what’s not. So, when the government tried putting cumin seeds the Camel’s mouth (mentioned at the beginning of this newsletter), the market rejected it.Now, that’s all about the budget that was announced on Saturday. Whether your expectations were fulfilled or not, you would be a better person to decide that.