Budget 2020 and How it Impacts the Common Man

Every year when the Finance Minister stands up to deliver the AnnualUnion Budget, he carries on his shoulders a burden of expectations, hopes, and wishes of more than a billion people. After all, the budget not only traces the economic roadmap for the country but also impacts each one of us. From personal income tax to goods and services getting cheaper or expensive, the Annual Union Budget plays a direct role in tweaking of our own financial planning for the year ahead.

Here is a look at how Budget 2020 impacts each one of us as ordinary citizens ranging from changes to our personal tax liabilities to opening up of investment potentials for the year ahead.

Personal Income Tax The one big takeaway from the Annual Union Budget 2020 is the rolling out of new optional personal income tax structure. Income Tax assesses can now opt for a lower income tax rate provided they are ready to forego the tax exemptions on offer with current tax structure. The Finance Minister has left the final decision to choose the current or the new tax structure to the individual. While any tax rate cut is often lapped up as good news, the glass may be half full or half empty depending on the way you look at it. The choice to choose the preferred tax structure must be exercised keeping in mind that the government is planning on a no exemption route for the future.

Annual income	Tax slab with current rate (with deductions)	Tax slab with new rate (without any deductions)
0       - Rs. 2.5 Lakhs	Nil	Nil
Rs. 2.5 Lakhs to Rs. 5 Lakhs	5%	5%
Rs. 5 Lakhs to Rs. 7.5 Lakhs	20%	10%
Rs. 7.5 Lakhs to Rs. 10 Lakhs	20%	15%
Rs. 10 Lakhs to Rs. 12.5 Lakhs	30%	20%
Rs. 12.5 Lakhs to Rs. 15 Lakhs	30%	25%
Above Rs. 15 Lakhs	30%	30%

But keep in mind, if you opt for the taxation under new rates you will no longer be entitled to any deductions including under Section 80C and 80D, HRA, professional tax etc.  Hence for each individual tax payer, any move to adopt the new regime minus the deductions or staying with the old regime must be done after effectively calculating the benefits at hand.

Investments and DDT While both short and long term capital gains tax were left untouched, the Finance Minster removed the Dividend Distribution Tax (DDT) for companies while making it liable for individual investors. On the one hand, this is likely to attract more foreign investors as DDT cut cures the problem of non-availability of credit for foreign investors in their home country. On the other hand, dividends will now be added to your annual income, and taxed at the marginal slab rate. Additionally,all resident Indian non corporate tax payers will need to pay a 10% tax on dividends excess of Rs 10 Lakh a year. A TDS of 10% will also be deducted by mutual funds paying out dividend if the dividend payout exceeds Rs. 5000 for the year.

PSU disinvestment opens up investment options As an economic road map, the government is looking at disinvestment in various PSUs. For example the FM has announced plans to sell a part of government's stake in Life Insurance Corporation of India (LIC) through an upcoming IPO. This opens up new investment opportunities for ordinary citizens to enhance their investment bouquet and be part of the growth economy.

Non taxpaying NRIs to be taxed in India If you are an NRI not liable to pay tax in any other country, the budget has introduced a clause making your global income taxable in India. What's more,there is also a proposal to reduce the maximum period of stay in India to 120 days from the current 182 days for individuals to be categorized as non resident Indians (NRIs).

More assured guarantee on bank FDs Bank fixed deposits continue to be one of the popular investment option irrespective of age, gender, and financial plans. Recently the irregularities in few co-operative banks had ushered in a sense of panic amongst investors especially housewives and senior citizens. In an attempt to reassure investors, the FM has announced an increase in the deposit insurance guarantee from Rs 1 lakh to Rs 5 lakhs, an increment after almost 27 years.

Affordable housing projects likely to gain momentum If you have been waiting on the sidelines to buy your own house, the coming year is likely to be a good one. In her Budget speech, the FM has extended the affordable housing approval deadline for developers to avail tax holiday for such projects. As a result, expect more builders to join in and roll out more affordable housing schemes in the near future. Conclusion: Even without any big ticket announcements, Budget 2020 has ample opportunity to tweak your personal financial budget to reap some benefits.