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New Delhi, Feb. 1 (PTI): Finance Minister Nirmala Sitharaman on Saturday announced cuts in personal income tax, extended tax benefits for affordable housing and gave relief to companies on payment of dividend in the Union Budget for 2020-21 as the government looked to boost consumption to bring the economy out of the worst slowdown in 11 years.
The minister proposed raising customs duty on a variety of products ranging from tableware and kitchenware, electrical appliances to footwear, furniture, stationery and toys to give a level playing field to domestic companies and boost 'Make in India'.
Offering an optional lower rate of income tax to individuals, Sitharaman in her Union Budget for 2020-21 proposed new tax slabs of 15 per cent and 25 per cent in addition to the existing 10 per cent, 20 per cent and 30 per cent. The new I-T slabs would be for individuals not availing certain specified deductions or exemptions.
Under the proposed I-T slab, annual income up to INR 2.5 lakh is exempt from tax. Those individuals earning between INR 2.5 lakh and INR 5 lakh will pay 5 per cent tax. Income between INR 5 and 7.5 lakh will be taxed at 10 per cent, while those between INR 7.5 and 10 lakh at 15 per cent.
Those earning between INR 10 and 12.5 lakh will pay tax at the rate of 20 per cent, while those between INR 12.5 and INR 15 lakh will pay at the rate of 25 per cent. Income above INR 15 lakh will be taxed at 30 per cent.
Individuals opting for taxation under new rates will not be entitled to exemption/deductions including under Section 80C and 80D, LTC, housing rent allowance, the deduction for entertainment allowance, professional tax, and interest on self-occupied/vacant property.
Currently, annual income up to INR 2.5 lakh is exempt from I-T. While a 5 per cent tax is charged for income between INR 2.5 and 5 lakh, 20 per cent for income between INR 5 lakh and INR 10 lakh and 30 per cent for those earning above INR 10 lakh.
"The new tax regime shall be optional for taxpayers," she said.
"The proposed tax structure will provide significant relief to taxpayers and more so to those in the middle class," Sitharaman added.
To boost growth, Sitharaman announced higher spendings on infrastructure, rural development and Agri sector.
The Finance Minister said the government is proposing a 16-point action plan to boost agriculture and farmers' welfare.
Agricultural services need copious investments, she said, adding the government has insured 6.11 crore farmers under the Pradhan Mantri Fasal Bima Yojna.
With her post 2019-20 Budget corporate tax cut drilling an INR 1.45 lakh crore hole in government revenues, the minister hiked the fiscal deficit target for current fiscal to 3.8 per cent of GDP, from 3.3 per cent.
For 2020-21, she pegged the fiscal deficit at 3.5 per cent.
After slashing income tax rates for individuals on condition that they give up exemptions and deductions, Finance Minister Nirmala Sitharaman on Saturday said the government intends to remove all I-T exemptions in the long run.
Speaking at a press conference after presenting her second budget in the Lok Sabha, she said income tax cuts follow a reduction in corporate tax rates in September last year.
The minister said additional capital will be provided to public sector banks as and when required.
Her budget speech did not provide for any specific number for additional capital.
The finance minister said the improvement in revenue generation gives hopes of lowering the fiscal deficit to 3.5 per cent of GDP in the next fiscal from 3.8 per cent in the current.
Disinvestment Secretary T K Pandey said big-ticket stake sale will happen in the next few months and that he was confident of achieving the INR 2.10 lakh crore target set for the next financial year.
He said an expression of interest (EoI) for sale of government stake in Bharat Petroleum Corp Ltd (BPCL) will be issued shortly.
The Cabinet had approved the sale of government stake in BPCL in November last year.