What Budget 2020 means for you as a Common Man?

The day of the annual budget speech is an important day for all Indians. The budget speech gives people an idea of their tax liabilities for the year. The budget speech also affects the prices of property, vehicles, electronic goods - therefore having an impact on people’s purchasing decisions.

The 2020 budget was awaited with even more anticipation than usual by the industry, the stock market, and the common man. The budget was expected to provide an impetus for expansion in the middle of a growth slowdown. The automobile sector, electronics sector, and the construction sector were looking for the government for a budget that would boost the sagging sales. The common man, on the other hand, was on the lookout for measures that would help boost savings and increase their purchasing power. Did the 2020 Budget deliver? Let’s find out.

Below are the 5 important takeaways for the common man from the 2020 budget:

  1. A new tax regime

    The finance minister announced a new tax regime. Under this optional new system, the taxpayers can get the following benefits:

    a) Lower tax rates - Tax rates have fallen for everyone earning less than 15 lacs per annum. Look at the table below to find out your new tax slab:

    Income Old Tax Rate Current Tax Rate
    Less than ₹2,50,000 Nil Nil
    ₹2,50,000 to ₹5,00,000 5% Nil
    ₹5,00,000 to ₹7,50,000 20% 10%
    ₹7,50,000 to ₹10,00,000 20% 15%
    ₹10,00,000 to ₹12,50,000 30% 20%
    ₹12,50,000 to ₹15,00,000 30% 25%
    ₹15,00,000 30% 30%
  2. b) Simplified tax code - The tax code has been simplified, and the finance minister has claimed that pre-filled tax forms will be provided so that the taxpayers do not need assistance from a CA to file their tax returns.

    There are, however, some caveats:

    a) Exemptions and Deductions are gone - If people choose to file returns under the optional new system, they will have to forego the tax exemptions and deductions which are in place under the old system. Therefore, certain people may get greater tax savings under the older system.

    There are, however, some caveats:

    ) Exemptions and Deductions are gone - If people choose to file returns under the optional new system, they will have to forego the tax exemptions and deductions which are in place under the old system. Therefore, certain people may get greater tax savings under the older system.

  3. DDT is gone

    DDT stands for Dividend Distribution Tax. At the end of every year, corporations distribute a percentage of their profits to their shareholders - this is known as the annual dividend. Before the 2020 budget, corporations had to pay a tax while distributing the dividend. The budget scraped this tax, thereby allowing corporations to pay healthier annual dividends to their shareholders from this year.

    Retail investors - people who look to supplement their income by investing a part of their disposable income in the financial markets - will have these earnings taxed as per the income tax slab they fall under.

  4. Tax deposit insurance limit goes up

    Before the 2020 budget, a sum of 1 lac from every Indian’s bank deposit was insured from the harshest of bank crises by the government of India.

    With this year’s budget, the government raised this limit five-fold - now 5 lacs from everyone’s bank deposits are insured by the government of India, and essentially protected from all sorts of economic shocks and bank crises. This should incentivize more people to put their hard-earned savings in banks.

  5. Travel will become easier

    To boost domestic travel, the government announced a 5-year plan to build 100 new airports and get 150 new passenger trains running on the tracks. India is a vast country and this will improve the inter-connectivity of its far-flung regions. The common man will now find it easier to travel to different parts of the country, whether for leisure or work. This infrastructural spending is part of the National Infrastructure Pipeline, which aims to spend 1 lac crore on construction projects to take India’s annual GDP to 5 trillion dollars.

  6. Some items will be more expensive

    There is a proposed hike in the custom duty for imported goods. The following imported items are slated to become more expensive in this financial year:

    a) Gemstones like ruby and emerald

    b) Furniture

    c) Coffee and tea makers

    d) Shoes

    e) Imported wall fans - Tax raised from 7.5% to 20%

Conclusion

This budget’s overall impact on the common man is a positive one. With a lower tax burden through the new tax slabs, many Indians will see a boost in their personal disposable income.

This is a good year to start investing that surplus income in financial markets. A trading account is an easy way to invest in financial markets. A trading account lets you find new investment options and allows you to keep track of all your open positions in one place. An online trading account also lets you execute trades without any delay.

IIFL offers one of the best trading accounts in the country. You can trade securities from the convenience of your home or office. IIFL further provides regular and comprehensive market research to its users to make sure they are ahead of, not behind, the trends. A new user can set up a trading account with IIFL in under 10 minutes, and start building a diversified portfolio today

Open Demat Account at IIFL