Compiled by: Akshay Mehrotra, Co-Founder & CEO EarlySalary
With the target to achieve USD 5 trillion economies by 2025, Honourable Finance Minister Nirmala Sitharaman has presented Union Budget 2020 for the 5th largest economy of the world. The core objective of Budget 2020 is to provide “Ease of Living” to all citizens with three broad themes viz. Aspirational India, Economic Development for all and Caring India for both humane and compassionate, together with Corruption free, policy-driven good governance on one side and clean and sound financial sector on the other side.
Budget 2020 is focused at Ease of Living, with good governance and clear and sound financial sector, it not only emphasized on traditional areas like welfare of farmers, Infrastructure, Education, Skills Development, Women and Child Welfare, etc. but also will emphasis on new areas such as Solar and Technology oriented businesses, Data Centre Creation, Quantum Technologies, creation of Knowledge Transfer Cluster, Agri Tech sector, etc.
Budget 2020 has given relief to an individual by way of reduction in income tax rates, Extension of time limits pertaining to the tax benefits for affordable housing, increase in deposit insurance coverage, etc. along with a reduction of 70 exemptions and deductions. Corporate will be benefited from the abolition of the Dividend Distribution Tax, the inclusion of the Power Sector under the concessional corporate rate along the new domestic companies in manufacturing. Budget 2020 given relief to MSME’s by increasing the Turnover threshold for audit. Businesses will be benefited by Simplified GST return which shall be implemented from 1st April 2020 and fully automated Refund processes. Also, Budget 2020 reduced tax on cooperatives and on sovereign wealth funds of foreign governments and other foreign investments.
The following are the key takeaway for Start-up and Financial Sector from Budget 2020.
- To address the liquidity constraints of the NBFCs, the Budget 2020 has reduced the limit for NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 from INR 500 crore to asset size of INR 100 crore or loan size from existing INR 1 crore to INR 50 lakh.
- Increased limit and duration for eligible Start-ups with 100% tax benefits with turnover up to INR 100 crores (increased from 25 crores in current budget) of its the profits for three consecutive assessment years out of 10 years (increased from 7 years in current budget)
- To attract and retain better talent at Start-ups, Budget 2020 has proposed deferment of tax on ESOPs in the hands of employees by 5 years which will ease the burden of taxation on the employees.
- MSME focus and Bill discounting model will greatly boost lending models further.
- The new tax regime will reduce the tax burden on individuals and ensures more deposable income which will booster for the entire economy including Start-ups.
We expect Budget 2020 will act as a catalyst to the economic development of the country and to increase overall GDP growth to achieve a target of USD 5 trillion economies by 2025.