The Modi government presented the Union Budget 2019. It majorly focuses on simplifying and modernizing the tax structure. There aren’t any changes in personal income tax rates. However, the Govt. has levied an additional surcharge on the rich.
Key Takeaways from the Union Budget 2019
Under the direct tax regime, the revenue has increased by over 78% to ₹11.37 lakh crore. The minimum limit for the taxpayers will be ₹ 5 lakh. There would be an additional deduction on loans to March 31, 2020, for buying affordable houses by giving ₹ 7 lakh benefit to home buyers.
In addition, below is a list of changes in the tax structure.
- Lower rate of 25% so far only applicable to companies with a turnover of ₹250 crore. This is proposed to be increased to ₹400 crore, covering 99.3% of companies.
- GST rate on electric vehicles already proposed to be lowered to 5%. Additional income tax deduction of ₹1.5 lakh on interest on loans taken to purchase electric vehicles.
- To resolve the angel tax issue, startups will not be subject to any scrutiny with respect to valuation. Funds raised by startups will not require any scrutiny by the Income Tax department.
- Period of exemption for capital gains arising from the sale of the house for investment in startups to be extended to March 31, 2021.
- Additional deduction of ₹1.5 lakh for interest paid on loans for affordable housing borrowed up to March 31, 2020. This will come up to enhanced interest reduction of up to ₹3.5 lakh on loans for affordable homes.
- PAN and Aadhaar to be interchangeable, and to allow those without PAN to file income tax by using Aadhaar number. Faceless and anonymous assessment system for income tax being rolled out this year in phases.
2. Banking & Finance Sector
Financial gains from cleaning up of the banking sector are clearly visible. NPAs of commercial banks have come down by ₹1 lakh crore. The number of public sector banks has been reduced by 8, through consolidation.
- ₹70,000 crore recapitalization for public sector banks.
- NBFCs that are fundamentally sound should continue to get funding from banks and mutual funds. Govt will provide one-time 6-months partial credit guarantee for public sector banks, for the purchase of pooled assets of financially sound NBFCs.
- The National Housing Bank is also the regulator of the housing finance sector. The finance minister has proposed the regulation to be returned to the RBI. ₹100 lakh crore investment in infrastructure would be undertaken over the next five years.
- Pension Fund Regulatory Authority to be separated from the National Pension Scheme Trust.
- With a view to improving capital inflows, Govt would realign its holdings in CPFCs. In addition, Strategic disinvestment of select CPFCs will continue to remain a priority.
- Air India disinvestment to be reinitiated. Govt sets an enhanced target of ₹1.05 lakh crore from disinvestment.
3. Investments & Markets
- Investment by FIIs and FDIs in debt securities in infrastructure debt funds to be allowed. Minimum public shareholding in listed companies can be increased from 25% to 35%.
- A social stock exchange is proposed, for social and voluntary organizations, to raise capital, equity, and debt.
- Global FDI fell to $1.3 billion from $1.5 trillion, but inflows in India remained strong at $54.37 billion, a growth of 6%.
- 100% FDI for insurance intermediaries. Local sourcing norms to be eased for FDI in single-brand retail.
- Global Investors Meet to happen in India. Limit on FPI in a company increased to 24%. NRI investment in Indian capital markets is comparatively less. NRI investment would be merged with FPIs.
4. Digital Payments
TDS will be charged @ 2% on cash withdrawals exceeding ₹1 crore from bank accounts to discourage business payments in cash. There would be no charges or merchant discount rates on customers or the merchants as RBI and banks will absorb these costs.
The Minister proposes a modern tenancy law. Loans of up to ₹1 crore to be given to MSMEs for ease of access. The government will create a payment platform for MSMEs to enable them to pay bills, and save time. It will extend pension benefits to 3 crore retail traders and shopkeepers who have a revenue of less than ₹1.5 crore – PM Karam Yogi Maan Dhan scheme.
Union Budget 2019 is going to make India’s tax structure quite simple. This is definitely a source of relief for the taxpayers across the country. We all had longed for simplification and modernization of the tax system along with an increase in tax benefits. And, Budget 2019 has finally made that happen!” – CA Kapil RANA, Founder & Chairman, HostBooks.