Union Budget 2019-20 has been presented on July 5th, 2019, washing away all the uncertainties and assumptions. This first maiden budget of Finance Minister Nirmala Sitharaman comes out to be an ambitious one, aiming to fulfill the dreams of Modi 2.0 Government to take India’s economy to USD 5 billion by 2024.
The budget 2019 offers incentives for startups and MSMEs, strengthens NBFCs, eases the tax compliance norms, prioritises empowerment
of rural India and women and focuses on infrastructural development including roads, railways, waterways and airways.
India to become more attractive FDI destination. Government will examine suggestion of opening FDI in aviation, insurance, construction. India expected to become a USD 3 trillion economy this year.
Termed as “Green Budget” by PM Modi, the annual budget announces no change in Income Tax slabs and announces increase in custom duty on Gold and other precious metals from 10 percent to 12.5 percent. It eases tax compliance and offers taxation relief for individuals buying affordable houses and electric-vehicles. The Budget prioritises transformation of ‘Gaon’, ‘Garib’ and ‘Kisan’ (village, poor and farmer). Let’s discuss major reforms laid in the budget.
Breather for Start-ups
Start-ups in India are taking firm roots and their continued growth needs to be encouraged. To resolve the so-called ‘angel tax’ issue, the start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums. The issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department.
It is proposed to relax some of the conditions for carry forward and set off of losses in the case of start-ups. It is further proposed to extend the period of exemption of capital gains arising from sale of residential house for investment in start-ups up to 31.3.2021 and relax certain conditions of this exemption.
Moreover, pension benefit extended to retail traders with annual turnover less than ₹ 1.5 crore
Under a phased reduction plan for corporate taxes, the budget proposed to bring under 25% tax ambit companies with an annual turnover of up to ₹ 400 crore, in place of the earlier cap of ₹ 250 crore.
Nirmala Sitharaman’s maiden budget proposed to make Pan Card and Aadhaar card interchangeable to file tax returns. In addition to that, those who do not have PAN can simply quote their Aadhaar number wherever PAN is mandatory to quote.
Surcharge on individuals having taxable income from ₹ 2 crore to ₹ 5 crore; and ₹5 crore and above will be enhanced. The effective tax rate will increase by around 3% and 7% respectively.
EVs on a faster road
Sitharaman announced that upfront incentive will be offered on purchase of electric vehicles, adding that the government has already moved GST Council to cut rate for EVs to 5% from 12%.
Other big announcement on EVs pertained to (a) tax deduction of ₹ 1.50 lakh on EV loan interest, and (b) No custom duty on certain parts of EVs.
Ease of Living
- NRIs to get Aadhar on arrival
The budget proposes to consider issuing Aadhaar Card for NRIs with Indian passports after their arrival in India. As of now, they have to wait for a period of 180 days.
- ₹ 3,000 pension per month for informal sector workers
Around 30 lakh workers are now covered under the Pradhan Mantri Shram Yogi Maandhan Yojana, the scheme that provides a monthly pension of ₹ 3,000 to informal sectors workers after they turn 60.
Encouraging digital payments
- TDS of 2% on cash withdrawals exceeding ₹1 crore in a year from bank accounts, to discourage business payments in cash.
- Further, businesses with annual turnover of over ₹ 50 crore will offer low-cost digital payments. No charges will be levied on customers and merchants. RBI will bear these expenses.
Local sourcing norms to be eased for single brand retail
The budget announced that local sourcing norms for FDI in single-brand retail will be eased. The proposal is expected to solve a long-standing problem in the sector.
- Local sourcing norms will be relaxed for the single-brand retail sector.
- Govt to open FDI in aviation, insurance, animation AVGC and media.
Merging NRI portfolio with FPI route
With an aim to give NRIs better and easier access to Indian equities, it is proposed to merge the NRI-Portfolio Investment Scheme Route with the Foreign Portfolio Investment Route.
Shareholding norm for listed companies
It is proposed to raise minimum public shareholding in the listed firms to 35% from 25% at present. Investment by FIIs and FDIs in debt securities in infrastructure debt funds would be allowed.
Legacy Dispute Resolution Scheme for quick closure of pending litigations in Central Excise and Service tax from pre-GST regime.
- To boost affordable housing, additional deduction upto ₹ 1.5 lakh will be provided for interest paid on loans borrowed up to 31st March, 2020 for purchase of house valued up to ₹ 45 lakh.
- Faceless Income Tax Assessment in electronic mode to be launched in 2019 in a phased manner involving no human interface, to reduce taxpayer trouble.
- Increase in Special Additional Excise Duty and Road and Infrastructure Cess each by Re 1 per litre on petrol and diesel
- Custom duty on gold and other precious metals increased
- Stress on zero-budget farming, which is a form of gardening as a self-sustainable practice, with minimum external intervention.
Government lays out 10-point vision for the New India. Further, Govt. aimed at boosting investment at a time when the economy is showing signs of slowdown. Taking a pragmatic approach, Finance Minister announced no changes in personal income tax rates but levied additional surcharge on the super rich.
India will become $3 trillion economy this year. We need to continue to take many structural reforms to achieve $5 trillion economic goal. Connectivity is the lifeline of the economy.