The Indian economy, sixth largest in the world, is all set to become a 3 trillion dollar economy in the current year. In terms of Purchasing Power Parity, India is the 3rd largest economy already, next only to China and Unites States.
Finance Minister Nirmala Sitharaman presented her first Union Budget in Parliament.
Key Budget 2019 highlights:
Taxation: Faceless e-assessment, Direct tax reforms paying off, Enhancing ease of tax payers
Housing for All: In the second phase of PMAY-G, during 2019-20 to 2021-22, 1.95 crore houses are proposed to be provided to the eligible beneficiaries
Education: To bring in a New National Education Policy to transform India’s higher education system and introduce Study in India initiative for attracting foreign students
Start-ups: Addressing angel tax issues for start-up investors, provision for alternative investment funds. To start a television programme within the DD bouquet of channels exclusively for start-ups
Ease of living: Pradhan Mantri Shram Yogi Maandhan scheme aims at providing 3,000 per month as pension on attaining the age of 60 to crores of workers in unorganized and informal sectors
Nari tu Narayani / Women Empowerment: Expansion of the Women SHG interest subvention programme to all districts. For every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed
Banking and Financial Sector: Public Sector Banks to be further provided 70,000 crore capital to boost credit.
Interchangeability of PAN and Aadhaar
Less cash transactions: To levy TDS of 2% on cash withdrawal exceeding 1 crore in a year from a bank account
A scheme of faceless electronic assessment involving no human interface to be launched this year
DIRECT TAX REFORMS PAYING OFF
Increase in tax collection by 78% from ₹6.4 lakh crore in 2013-14 to ₹11.4 lakh crore in 2018-19
ENHANCING EASE OF TAX PAYERS
Threshold for applicability of lower corporate tax rate of 25% increased from ₹250 crore to ₹400 crore.
Enhanced interest deduction up to ₹3.5 lakh for purchase of an affordable house. Deposit taking and systemically important non-deposit taking NBFCs can now pay tax in the year they receive interest for certain bad or doubtful debts.
TDS of 2% on cash withdrawal exceeding ₹1 crore in a year from a bank account to promote less cash economy.
Effective tax rate for individuals having taxable income above ₹2 crore has been increased.
No charges or MDR on specified digital mode of payments. These modes are to be compulsorily provided by large businesses.
Sabka Vishwas Legacy Dispute Resolution Scheme proposed for quick closure of service tax and excise related litigations.
Housing for All by 2022
Pradhan Mantri Awas Yojana – Gramin (PMAY-G)
A total of 1.54 crore rural homes have been completed in the last five years. In the second phase of PMAY-G, during 2019-20 to 2021-22, 1.95 crore houses are proposed to be provided to the eligible beneficiaries. These houses are also being provided with amenities like toilets, electricity and LPG connections.
With the use of technology, the DBT platform and technology inputs, the average number of days for completion of houses has reduced from 314 days in 2015-16 to 114 days in 2017-18.
The Government will bring in a New National Education Policy to transform India’s higher education system to one of the global best education systems. The new Policy proposes major changes in both school and higher education among others, better Governance systems and brings greater focus on research and innovation.
With the aim to make India a hub for higher education, the finance minister proposed to start a programme ‘Study in India’ that will focus on bringing foreign students to study in our higher educational institutions.
To prepare our youth to also take up jobs overseas, we will increase focus on skill sets needed abroad including language training. We will also lay focus on new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics, which are valued highly both within and outside the country, and offer much higher remuneration.
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.
Alternative Investment Funds
Start-ups are not required to justify fair market value of their shares issued to certain investors including Category-I Alternative Investment Funds (AIF). I propose to extend this benefit to Category-II Alternative Investment Funds also. Therefore, valuation of shares issued to these funds shall be beyond the scope of income tax scrutiny.
Startups on DD
The Finance Minister proposed to start a television programme within the DD bouquet of channels exclusively for start-ups. This shall serve as a platform for promoting start-ups, discussing issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning. This channel shall be designed and executed by start-ups themselves. Later in this speech, I shall deal with taxation matters of the start-ups.
Ease of Living
Pradhan Mantri Shram Yogi Maandhan was launched on 5th March, 2019 by Hon’ble PM at Ahmedabad. The Scheme aims at providing 3,000 per month as pension on attaining the age of 60 to crores of workers in unorganized and informal sectors. About 30 lakh workers have joined the Scheme.
Nari to Narayani / Women Empowerment
Government has supported and encouraged women entrepreneurship through various schemes such as MUDRA, Stand UP India and the Self Help Group (SHG) movement. In order to further encourage women enterprise, I propose to expand the Women SHG interest subvention programme to all districts. Furthermore, for every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to 1 lakh under the MUDRA Scheme.
Banking and Financial Sector
Financial gains from cleaning of the banking system are now amply visible. NPAs of commercial banks have reduced by over 1 lakh crore over the last year, record recovery of over 4 lakh crore due to IBC and other measures has been effected over the last four years, provision coverage ratio is now at its highest in seven years, and domestic credit growth has risen to 13.8%.
Public Sector Banks are now proposed to be further provided 70,000 crore capital to boost credit for a strong impetus to the economy.
For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rupees one lakh crore during the current financial year, Government will provide one time six months’ partial credit guarantee to Public Sector Banks for first loss of up to 10%.
NBFCs which do public placement of debt have to maintain a Debenture Redemption Reserve (DRR) and in addition, a special reserve as required by RBI, has also to be maintained. To allow NBFCs to raise funds in public issues, the requirement of creating a DRR, which is currently applicable for only public issues as private placements are exempt, will be done away with.
The Finance Minister proposed to return the regulation authority over the housing finance sector from NHB to RBI. Necessary proposals have been placed in the Finance Bill.
Government is setting an enhanced target of 1,05,000 crore of disinvestment receipts for the financial year 2019-20. The Government will undertake strategic sale of PSUs. The Government will also continue to do consolidation of PSUs in the non-financial space as well.
Due to slew of efforts taken by our Government, the direct tax revenue has significantly increased over the past couple of years. It has increased by over 78% from 6.38 lakh crore in Financial Year 2013-14 to around 11.37 lakh crore in Financial Year 2018-19. It is now growing at double digit rate every year.
Interchangeability of PAN and Aadhaar
More than 120 Crore Indians now have Aadhaar. For ease and convenience of tax payers, PAN and Aadhaar are now made interchangeable and allow those who do not have PAN to file Income Tax returns by simply quoting their Aadhaar number and also use it wherever they are required to quote PAN.
Less Cash transaction
To discourage the practice of making business payments in cash, the FM has proposed to levy TDS of 2% on cash withdrawal exceeding 1 crore in a year from a bank account.