The Finance Bill, 2019
This is the budget no. 1 of the Modi Govt. 2.0 by Smt. Nirmala Sitharaman creating history by presenting it as the first woman, after Smt. Indira Gandhi, Finance Minister of India. She has tried to lay down a road map to boost the Indian economy from the current 2.7 Trillion (US) Dollars to 3 Trillion Dollars by 2019 end and to 5 Trillion Dollars by 2025. It appears to be a pro-development budget with the modest to reform, perform and transform the key sectors, with special emphasis on housing sector, electric vehicles, infrastructure strengthening and relaxation of FDI in a few sectors. The budget has reflected its commitment to “Make in India” intention while following the “Carrot and stick” policy in the enforcement of tax laws. The fiscal deficit has been contained at 3.3% of the GDP.
On the direct tax front, the relief of charging the lower tax @ 25% only for domestic companies having annual turnover of earlier ₹ 250 crore, have been now extended to such companies with annual turnover up to ₹ 400 crore during F.Y. 2017-18.
Section 80EEB has been introduced to allow deduction up to ₹ 1.5 lakh for interest payment on loan taken for purchase of an electrical vehicle subject to certain conditions. The GST on purchase of such vehicles has been reduced from 12% to 5%. Under affordable housing scheme, section 80EEA has been introduced to allow deduction up to ₹ 1.5 lakh for interest payment on loan taken from financial institutions, for the purchase of a residential house provided the stamp duty value of the same is less than ₹ 45/- lakh. For filing the return of income, the mandatory provision to possess a PAN has been done away with and the same can be now filed by using Aadhaar number only.
Super rich have been compelled to fork out higher amounts of taxes since the surcharge rates have been revised upward for individuals, HUF, AOP and BOI to 25% on the tax for those having taxable income of above ₹ 2 crore to ₹ 5 crore, and 37% on the tax to those having income of more than ₹ 5 crore making the effective tax rates at 39% and 42.744% respectively. This move came as a surprise, since a lower tax rate encourages better tax compliance.
Filing of return has been made compulsory if a person (other than company/firm) has made a deposit of more than ₹ 1 crore in current account or has incurred expenditure of more than ₹ 2 lakh on foreign travels or more than ₹ 1/- lakh on electricity bills in aggregate in a year.
Start ups have been given favourable changes in the so called “Angel Tax” provisions as well as relaxation in carry forward and set off of losses since they will not be subjected to deep scrutiny relating to receipt of share premium, etc.
The government, in order to promote a cash less economy, has proposed to levy 2% TDS on cash withdrawals exceeding ₹ 1 crore in aggregate in a year. Further changes include to extend the scope of buy – back tax on shares of listed companies also.
Amendments in TDS provisions currently, tax at 1 per cent are deducted at source by the purchaser of an immovable property on the amount of consideration paid or credited on transfer of such property. However, the term ‘consideration for immovable property’ is currently not defined under the Act. It is proposed that consideration would include other types of payments besides the sales consideration such as club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property. At present, there is no liability on an individual to deduct TDS on any payment made to a resident contractor or professional when it is for personal use. It is now proposed to provide for levy of TDS at the rate of 5% on the sum paid on account of contractual work or professional fee by an individual, if such sum paid exceeds ₹ 50 lakh.
The FM mentioned in her speech that pre-filled tax returns will be made available to tax payers in the near future which will contain details of salary income, capital gains from securities, bank interests, dividends, etc. and tax deductions thereon. Information regarding this income will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments, etc. This will help ease the process and time taken for filing the tax return and also enhance the accuracy. The FM also mentioned about introduction of faceless assessments involving no human interface in the near future. Cases selected for assessment will be allocated to assessment units on an ad hoc basis and notices shall be issued electronically by a centralized unit without disclosing the name, designation of location of the assessing officer.
The budget focuses on increased digitization of transactions. We find liberalization of FDI in areas as aviation, insurance and media sectors by increasing the FDI caps from 49% to 100%.
There is enhanced customs duty and excise on items on import of plastic materials, electronic items, paper products, etc. to discourage the import and encourage the domestic manufacturing and “Make in India” programs. There is a provision for creation of a social stock exchange in social enterprises. The infusion of further capital of ₹ 70,000 crores in to public sector banks has come as a welcome move. For settling the long pending disputes of pre GST regime, a dispute resolution scheme has been announced by the FM under Sabka Vikas (legacy dispute resolution) Scheme, 2019 for quick closure of service tax and excise related litigations.
A major positive reform in tax administration has been proposed to reduce corruption and a hassle free face less assessment where the scrutiny assessments shall be taken up without any direct face to face interactions with the Assessing Officer and without identity of each other.
While imposing cess on tobacco products, electronics items, gold, etc. may be move considered wise by the Hon’ble FM, the move to impose cess on petroleum, diesel, imported books, etc. appears to be a retrograde step affecting the common man, which might have been avoided.
In brief, although many term it as a lackluster budget, we are of the opinion that it is a mixed budget with many positives but some concerns as well. However, the expectations would now be on the execution of all the announcements, along with some corrections required if any, in order to achieve the goal of a sustained growth of the Indian Economy.
H. N. Motiwalla