Union Budget 2020 comes at such a vulnerable time that if you risk nothing, you risk everything.
The choices for Finance Minister Nirmala Sitharaman were frankly limited - spend beyond means, cut taxes and risk a higher fiscal deficit, or reduce expenditure and raise taxes and further cripple the economy.
But the treasury's top mandarin wore the britches and opted for a middle path, offering significant income tax reliefs to the salaried class, yet managing to raise expenditure, albeit modestly, on the usual but essential heads like agriculture, education, defence and healthcare. Allaying anxiety over the safety of bank deposits amid the PMC Bank crisis, she raised deposit insurance to a steep Rs 5 lakh per depositor from the current Rs 1 lakh.
Given tax collections have limited scope for growth, the Finance Minister also decided to binge on non-tax revenue.
In a historic move, insurance behemoth LIC will be listed to bump up the centre's kitty, though Sitharaman hasn't gotten around to fixing a timeline. Also, for the first time, debt ETFs including government securities will be issued and a stake sale in public-sector enterprises including banks like IDBI will collectively fetch a princely sum of Rs 2.1 lakh crore in FY21.
As for personal income taxes, the Finance Minister's proposed new tax regime raises the number of income tax slabs to six - 0, 10, 15, 20, 25, and 30.
Taxpayers now have two options.
One, to stay in the old regime and claim taxes with exemptions and deductions. Two, opt for new rates minus deductions, and simplify the tax-filing process. The highest slab excluding exemptions will be 43 per cent.
According to Sitharaman, the new rates will be significantly lower for those who forego reliefs, exemptions. A similar option was also given to corporates last September and it appears that the FM is keen on first simplifying the tax structure before rationalising rates.
Under Saturday's budget proposals, those with an annual income of Rs 5 lakh to Rs 7.5 lakh will have to pay a reduced rate of 10 per cent, those earning between Rs 7.5 lakh and Rs 10 lakh 15 per cent; between Rs 10 lakh and 12.5 lakh 20 per cent; between Rs 12.5 lakh and 15 lakh 25 per cent; and above Rs 15 lakh 30 per cent.
A person earning Rs 15 lakh per annum would be able to save Rs 78000 in taxes by opting for the new tax regime, Sitharaman explained.
The revised rates, according to the Finance Minister, will force the government to forego Rs 40000 crore in tax revenue per annum. The upshot is, over 100 tax exemptions and deductions in the current tax regime are being pared down to 30, making direct taxes the 'lowest, simplest and smoothest'.
To further instil confidence among taxpayers including businesses about unwarranted tax harassment, she proposed a taxpayers' charter in the Income Tax Act to ensure fairness to all assessees and to make sure that officials in their quest to collect taxes do not end up harassing citizens.
Another change was the abolition of Dividend Distribution Tax for companies, but that burden now shifts to consumers.
When it comes to the nominal GDP, for FY21, it is pegged at a seemingly realistic 10 per cent. In other words, real GDP will grow at 6-6.5 per cent as the Economic Survey noted on Friday.
In all, Sitharaman presented an expansive expenditure budget of Rs 30.42 lakh crore, about 12 per cent increase over last year with receipts pegged at Rs 22.46 lakh crore and net market borrowings at Rs 5.36 lakh crore.
As suspected, FY20 fiscal deficit target has been breached and will settle at 3.8 per cent of GDP for FY20, but will return to 3.5 per cent in FY21.
Given the bleak revenue collections this fiscal, the government will resort to expenditure compression and so FY20 spending has been revised downwards to Rs 26.99 lakh crore, and receipts to Rs 19.32 lakh crore.
For FY20, the gross tax revenue is significantly revised down to Rs 21.6 lakh crore from the Rs 24.6 lakh crore budgeted originally.
The reduction is largely due to lower corporate tax revenue, which is now estimated at Rs 6.1 lakh crore, down from Rs 7.6 lakh crore. For FY21, the tax revenue is pegged at Rs 24.2 lakh crore.
According to Sitharaman, tax buoyancy will take time and the recent cut in corporate tax will likely cause substantial revenue loss in the short run, but the economy will reap huge returns in due course.
In line with tradition, the budget also delivered another dollop for agriculture setting the credit target at Rs 15 lakh crore for FY21. There was Rs 99,300 crore for education, Rs 69,000 crore for healthcare and over Rs 3 lakh crore for defence. For the first time, Rs 8,000 crore is allotted for developing quantum computing linked technologies under the National Mission on Quantum Technologies and Applications.
Sitharaman announced that to address liquidity constraints of NBFCs and housing finance corporations, a partial credit guarantee scheme will be launched by the government and amendments will be made to enable NBFCs to extend invoice financing to MSMEs.
To sum up, those expecting Sitharaman to rekindle animal spirits found Saturday's budget a downbeat statement. But the FM resorted to rudimentary principles and tried to live within means, at least until the economic crisis is behind us.