The finance minister has focused the Budget on the farmers, the youth, the rural population by announcing sops and schemes and on providing thrust to infrastructure and the digital economy.
Post demonetisation and the deferral of the Goods and Services Tax, a lot was expected from the finance minister as he tabled the Finance Bill 2017. The finance minister has focused the Budget on the farmers, the youth, the rural population by announcing sops and schemes and on providing thrust to infrastructure and the digital economy.
Last year the Budget provided a reduced tax rate of 25% for new manufacturing companies. This year, it is further extended to small and medium enterprises (companies with turnover of less than R50 crores). Relief is provided for the individuals by reducing the tax rate for income up to R5 lakhs to 5%. No changes have been brought about in the minimum alternate tax (MAT) rate. However, the MAT credit carry forward period is now extended to 15 years.
The government has made some changes in the capital gain tax regime. Period of holding for land and building for long term capital gain tax purpose has been reduced to two years from the current three years. Further for determining the indexed cost of capital assets, the base has been shifted from April 1, 1981 to April 1, 2001.
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Added impetus is provided on ease of doing business in India. It is now proposed to abolish the Foreign Investment Promotion Board, the regulatory authority granting approval for foreign investment in certain cases in the next fiscal. Further, it is proposed to liberalise the FDI scheme in the coming year.
On the taxation front, no change has been made on the period of holding of shares, which is welcomed by all investors. The concessional withholding tax rate of 5% on the external commercial borrowing (ECB) or bonds has been extended up to 30 June 2020.
Further, category I and category II foreign portfolio investors (FPIs) would be exempted from the indirect transfer provisions.
It is proposed that the revenue department would bring in maximum use of information technology to plug any tax avoidance and reduce face time between the tax payer and the tax department.
Completion period for scrutiny assessments is proposed to be reduced from 21 months to 18 months for FY 2018 and 12 months to FY 19. This should help in reducing the time and money spent on litigation significantly. Not many changes have been made to the excise regime or the service tax law as they are proposed to be replaced by GST soon.
The monetary policy stance in the US, the uncertainty of the crude oil prices and the need for people to focus on usage of captive goods and services from their countries would have an impact on the Indian economy in the coming months.
The finance minister has used the limited room by not complicating the tax and regulatory environment in the country and through the reliefs and clarifications in Budget 2017, have maintained the fiscal prudence have made investment into India simpler and progressive.
National head of Tax, KPMG in India
(Inputs from Pranav Dholakia, Director, KPMG in India)