Union Budget 2019: However, the urban rich of India will have to contribute more towards tax collection as surcharge has been increased for those earning Rs 2-5 crores to 3 per cent and for those earnings above Rs 5 crores to 7 per cent.
By Ritika Loganey Gupta
In the Modi-led NDA 2.0 Government, the first woman Finance Minister Nirmala Sitharaman presented her maiden budget with a clear focus on continuing the winning formula of maximum welfarism and incrementalism. At the same time, FM seems to be keeping an eye on the PM’s dream of taking India to a $5 trillion economy by 2025. Needs to be seen how the fiscal math works out for the debutant FM!
Emphasis has been put on reforms to support the Government’s mission of “ease of living” by incentivising affordable housing, focusing on start-ups, promoting digital economy and bringing greater transparency in tax administration. With a view to accommodate one of the foremost asks of the Corporate India, FM has put companies with annual turnover of up to Rs 400 crore instead of Rs 250 crore in the lower 25% income tax bracket. While this is good news for the existing 99.3% companies; however, this is not in line with the promise made by the government of rationalizing the rates in a 3-5 years time frame.
The budget indeed proved sanguine to the tribulations faced by the NBFC sector. The government has proposed incentives for the public banks to encourage them to purchase specified assets of NBFCs. Steps in this direction would help improve liquidity for NBFCs and capital flow in the economy.
Converging the media and start-ups in India, FM has proposed a dedicated media platform to catalyse the match-making of the venture capitalists and start-ups. A mechanism has been put in place for e-verification of the share premium valuation to ensure that the start-ups do not feel the heatwave of angel tax. Looks like the measures are indeed being taken towards ease of doing business to release the entrepreneurial spirit of the Indian youth!
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It has been proposed to make PAN and Aadhar interchangeable, individuals who do not have PAN will now be able to file income tax return just by quoting the Aadhar number. This move is in complete harmony with Government’s motive of bringing ease and convenience for the taxpayers and will also bring additional freedom for individuals to enter into various financial transactions such as making investment, purchase of foreign currency, etc.
Carrying the baton forward for the Government’s mission of bringing greater transparency, efficiency, and accountability in the government’s functionary, FM has introduced faceless assessment income tax proceedings. Notices will be issued electronically through a central cell which would ensure anonymity. This helps in laying to rest the face to face interaction between taxpayer and authorities; thereby, curbing the taxpayer harassment.
Impetus has also been put on Modi’s dream of ‘Cashless Bharat’ through multiple means of incentivizing digital transactions as well as penalizing use of cash beyond a limit. To boost digital transactions, businesses exceeding annual turnover of Rs 50 crores will need to provide for prescribed low-cost electronic modes. Also to cast down the practice of making business payments in cash, withholding tax of 2% is proposed to be levied on cash withdrawal exceeding Rs 1 crore in a year from a bank account.
At the top of the wishlist of the common man was lower taxes resulting in increased disposable income. While the tax slab has been left untouched, the FM has given additional options for savings for individuals in the form of additional benefit on interest on loans for affordable housing and electric vehicles. However, the urban rich of India will have to contribute more towards tax collection as surcharge has been increased for those earning Rs 2-5 crores to 3 per cent and for those earnings above Rs 5 crores to 7 per cent.
The Government continues to emphasize on the policy reforms to fuel the economic growth. While the reforms proposed in the budget deliver a lot of promise, it will be intriguing to see if the welfare reforms and double-digit growth are indeed “imminently achievable”.
(The author is Partner – Tax & Regulatory Services, EY India. With inputs from Sahil Babbar, Manager. Views expressed are personal.)