Budget 2019 expectations: What P2P industry expects from Union Budget

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Updated: January 24, 2019 3:01:45 PM

It is going to be the final budget presentation by the Modi government prior to the 2019 Lok Sabha elections, and the government must not lose this opportunity to win back the trust of their core vote banks

Budget 2019, Interim Budget 2019-20, Budget 2019 expectations, Micro and small enterprises, salaried middle class,start-upsIn the last four budgets, barring a few initiatives, nothing substantial have been done for micro & small enterprises, salaried middle class and start-ups.

The Interim Budget 2019-20 is the last opportunity for NDA government to win back trust of micro & small enterprises, salaried middle class and start-ups. All these three segments have been traditional vote bank of the BJP and their expectations with the government were very high.

However, in the last four budgets, barring a few initiatives, nothing substantial have been done for three segments. Micro and small enterprises have been affected most by demonetization and GST implementation. They have been traditional vote bank of the BJP and yet they suffered a lot. This interim budget is the last opportunity for government to win back the trust of their core vote banks.

The government has realized its mistakes and have been taking various steps to ease out their pains, but it is still proving to be insignificant. As we are heading closer to 2019 Lok Sabha elections, all these 3 segments are looking at the government to bring some hope.

MSEs make up about 65% of the enterprises of India and contribute around 20% of the overall GDP. MSEs are a major source of employing workforce. Getting access to institutional credit has been one of the major problems of the MSEs. Though the government has been allocating a lot of budget through Mudra Yojna to solve this problem, but like any other government initiative, implementation on the ground has not been that effective.

It is high time that the government looks at alternative financing options like Peer to Peer Lending platforms to solve this problem. P2P lending platforms have huge potential as they can channelize idle wealth of the Indian middle class to this sector.

To encourage retail investors to participate more in lending activities at P2P lending platforms, the interim Budget 2019 should waive off tax on the interest earned by an individual investor through P2P lending.

Income tax slabs for individuals have gone through very little changes in the four years of the NDA government. Salaried middle class is hoping that the government will simplify income tax rules and reduce tax rates. In this budget, the government must give tax benefits to the middle class. Recent upper caste reservation rule classifies families earning less than Rs 8 lakh as poor. It is high time that the government exempts people earning less than Rs 8 lakh from income tax. Also, 30% tax rate should apply only to those earning Rs 25 lakh plus annually.

Startups have had lots of hope from the Modi government after the Start-Up India initiative. But this initiative also turned out to be just like any other government initiate which needs you to fill lots of forms and meet a lot of conditions to get any kind of benefit. Being part of start-up community, I know for sure that very few serious startups got registered with this initiative. Genuine start-ups just need government to provide some relaxation in terms of ROC compliance and traditional documentation and income tax on funding rounds.

Instead of focusing their energy on making their products better and reaching out to more customers, startups have to deal with old age processes and systems meant for traditional companies. Last year many startups received notices under Section 56(2) (vii b) of the Income Tax Act from the I-T department to pay taxes on angel funds raised by them. The government on January 16 has given some relief and eased the procedure for seeking income tax exemption by startups on investments from angel funds and prescribed a 45-day deadline for a decision. The startup community is hopeful that the government will decisively address all the concerns revolving around this issue in the interim Budget.

The recent judgment on Aadhaar by the Supreme Court has put sudden break on various digital initiatives taken up by Fintech startups. Many Fintech firms who created their business model around Aadhaar are now close to shut down. The government must find a way to allow genuine Fintech startups to use Aadhaar to bring out new innovations, be it for KYC or for fraud prevention or for digital payments.

It is going to be the final budget presentation by the Modi government prior to the 2019 Lok Sabha elections, and the government must not lose this opportunity to win back the trust of their core vote banks.

(By Raghavendra Singh, Co-Founder of i2ifunding)

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