Union Budget 2019

17-July-2019 by Virtue Ventures

Finance Minister Nirmala Sitharaman on Friday presented Union Budget. This Budget, since it was also the first one of the Narendra Modi-led central government in its second term, was watched very keenly to gauge the direction that Centre’s policy will take over the next few years. For this reason, there had been a lot of anticipation among the various sectors of the economy.

Financial Services

NPA taxation benefit

§  Receipt-based taxation of interest on specified bad or doubtful debts have been extended to NBFCs.
Capital infusion
§  Capital to the tune of Rs 70,000 crore will be infused in public-sector banks to boost their credit.
Cashless economy
§  TDS (Tax deducted at source) at 2% has been levied on cash withdrawal of more than Rs 1 crore from a bank account in a year.
§  Specified businesses have been mandated to provide the facility to accept payments through electronic modes without imposing any charges.
Thin capitalization rules
§  The condition to create debenture redemption reserve for NBFCs seeking public placement of debt has been removed.
MAT (Minimum alternate tax) exemption
§  100% foreign direct investment (FDI) has been permitted in insurance intermediaries.
TDS rules for insurance cancellation
§  Additional tax incentives have been announced for international financial service centers (IFSCs), such as enhanced profit linked deduction, exemption from dividend distribution tax and capital gains, etc.
Withholding tax
§  Exclusion of interest payments to NBFC from withholding tax levy under Section 194A
Depreciation rules
§  Higher depreciation be permitted on plant and machinery leased out by NBFCs.
Deduction under 80C
§  Deduction of life insurance premium be enhanced under Section 80C of the Act.
Aadhaar-PAN interchangeability
§  To make Pan Card and Aadhaar card interchangeable to file tax returns.
§  Those who do not have PAN can simply quote their Aadhaar number wherever PAN is mandatory to quote. 
§  Banks with Rs 70,000 crore of capital to boost credit.
§  There has been a record recovery of over 4 lakh crores of bad loans through IBC in the last 4 years. 
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. 

Real estate
Income Tax deduction
§  Additional annual deduction of up to Rs 150,000 has been allowed for interest on loans taken for affordable housing (stamp duty value of up to Rs 4.5 million)
TDS under Section 194-IA
§  Scope of consideration for immovable property has been broadened for the purpose of TDS under Section 194-IA.
REITs (Real Estate investment trust)
§  Foreign portfolio investors (FPIs) have been permitted to subscribe to listed debt instruments of REITs and infrastructure investment trusts (InvIT)
Carry-forward of losses
§  Model tenancy law will be finalized to promote rental housing.
Duty relief
§  Basic customs duty on raw materials like marble slabs and tiles has been increased.
Benefits for first-time home buyers
§  Additional tax incentives be provided for first-time home buyers.
Reform of rental housing
§  Rental laws will be reformed, Sitharaman announced. Modern tenancy law will be shared with states to promote house renting. 

Automotive sector
Tax sops for R & D
§  Promotion of specified manufacturing activities through schemes for attracting global investment and investment-linked tax incentives.
Electric vehicles
§  Phase-II of Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has been introduced to encourage a faster adoption of electric vehicles
§  Annual deduction of interest up to Rs 150,000 has been provided for on purchase of e-vehicles (for loans taken until March 31, 2023)
Addition deduction for capex
§  Basic Customs duty for certain parts used exclusively for electric vehicles reduced to Nil.
Local manufacturing
§  Basic Customs duty has been increased on import of motor vehicles used for specified purposes, chassis (fitted with engine), body of motor vehicle and specified goods used for motor vehicles.
IT & Start-ups 
Angle tax
§  Eligible start-ups will not be scrutinized for angel tax, subject to conditions
Investment in start-ups
§  Conditions governing the eligibility to claim long-term capital gains (LTCG) exemption on sale of residential property for investment in start-ups has been relaxed. Launch of an exclusive TV Channel to promote start-ups
Skill development
§  Creation of a skilled manpower pool through increased focus on areas such as artificial intelligence, internet of things, big data, virtual reality.
Carry-forward of tax losses
§  The condition for carry-forward and set off of losses for eligible start-ups has been relaxed.
Section 94B
§  The Central Board of Direct Taxes (CBDT) will make special administrative arrangements for pending assessment of start-ups and redress of grievances
MAT applicability 
§  Exemption from the applicability of Section 56(2) (viib) has been extended to Category-II alternative investment funds
Duty relief
§  Basic Customs duty exemption on specified capital goods used for manufacturing of certain specified IT goods. But that on products like router, CCTV camera, optical fiber, bundles and cables.

Oil and Gas
Infrastructure status
§  Committee recommendation on retirement of old and inefficient plants and addressing low utilization of gas plant capacity due to paucity of natural gas to be taken up for implementation.
Investment-linked deduction
§  A blue print will be made available for developing gas grids.
MAT rate
§  Road & infrastructure cess and special additional excise duty has been increased by Re 1 per litre each. It will be levied on petrol and high-speed diesel oil.
§  The levy of basic Customs duty on import of petroleum crude has been imposed at Re 1 a tonne. Basic Customs duty rate on import of certain oil products like methyloxirane, ethylene dichloride and naphtha has been reduced.
Private participation
§  Public-private partnership be encouraged in the natural gas sector.
Zero-Budget farming
§  It considered zero budget because costs of raising the main crop are offset by the income that farmers earn from intercrops, chemical fertilizers and pesticides make way for locally available cow dung and cow urine, jaggery and pulse flour. 
§  There will soon be a new education policy, and that higher education in the country will be reformed comprehensively. Efforts will be made to bring in foreign students under a Study in India plan. the government will make renewed efforts to promote research in the country. 
Corporate tax
§  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 Rs 400 crore, in place of the earlier cap of Rs 250crore. 
§  The budget turned out to be big damp squib for the armed forces. At a time when India's security risks are at an all-time high, no specific mention of the forces came as a major dampener for both the forces and the country at large. 
§  At the season of serious job woes for the country, budget disappointed one and all as no move was announced to ease one of India's biggest pain points.
Fuel bill 

  • In a blow to owners of cars and bikes, Sitharaman proposed to increase Special Additional Excise duty and Road and Infrastructure Cess each by one rupee a litre on petrol and diesel. 
Raiding the RBI
  • The government expects higher dividend payout from the Reserve Bank of India, bringing a contentious issue back into focus.