Union Budget 2019-20 Current Affairs - 2020
Performance: India’s Ease of Doing Business (EDB) ranking under ‘Paying Taxes’ category jumped from 172 in 2017 to 121 in 2019. In past 5 years, Direct tax revenue increased by over 78% to Rs. 11.37 lakh crore
For companies with annual turnover of up to Rs.400 crore, Tax rate reduced to 25%
For individuals having taxable income from Rs.2 crore to Rs.5 crore and Rs. 5 crore and above, Surcharge to be increased
Tax Simplification and Ease of Living: Leveraging technology to make compliance easier:
- Interchangeability of PAN and Aadhaar– Those who don’t have PAN (Permanent Account Number is a ten-digit alphanumeric number) can file tax returns using Aadhaar. Moreover wherever PAN is required, Aadhaar can be used.
- Pre-filling of Income-tax Returns (ITR) for faster, more accurate tax returns- Pre-filled ITR with details of several incomes and deductions to be made available and regarding this information to be collected from Stock exchanges, Banks, mutual funds etc.
- Faceless e-assessment– with no human interface to be launched soon. Initially it is to be carried out in cases which require verification of certain specified transactions or discrepancies.
Other Direct Tax measures: includes Simplification of tax laws to reduce genuine hardships of taxpayers such as-
- Appropriate class of persons exempted from anti-abuse provisions of Section 50CA of Income Tax (IT) Act and Section 56 of IT Act
- Higher tax threshold for launching prosecution for non-filing of returns
Relief for Start-ups:
- Scrutiny: Funds raised by start-ups to not require scrutiny from IT Department.
- ‘Angel tax’ issue resolved- start-ups and investors filing requisite declarations and also providing information in their returns are not to be subjected to any kind of scrutiny in respect of valuations of share premiums
- Capital gains (a profit from sale of capital asset like property/investment/stocks) exemptions from sale of residential house for investment in start-ups extended till FY 2021
- Relaxation of conditions for carry forward and set off of losses
- e-verification mechanism so as to establish identity of investor and source of funds
- Special administrative arrangements for grievance redressal and pending assessments. In such cases no inquiry by Assessing Officer (AO) would be done without obtaining approval of Supervisory Officer.
- No scrutiny of valuation of shares issued to Category-II Alternative Investment Funds (AIF). Category II AIF are funds which are allowed to invest anywhere in any combination but cannot take debts, except for day-to-day operation purposes
Affordable housing: For purchase of house which is valued up to Rs.45 lakh an additional deduction of up to Rs.1.5 lakhs proposed for interest paid on loans borrowed up to 31st March 2020. Overall benefit would be around Rs.7 lakh over loan period of 15 years.
Boost to Electric Vehicles: Additional IT deduction of Rs.1.5 lakh on interest paid on electric vehicle loans as well as customs duty exempted on certain parts of electric vehicles.
Non-bank financial institution (NBFCs): Interest on certain doubtful or bad debts by deposit taking and systemically important non-deposit taking NBFCs to be taxed in year in which interest is actually received
Securities Transaction Tax (STT): is restricted only to difference between settlement and strike price in case of exercise of options. STT (a direct tax) is levied on every sale and purchase of securities that are listed on recognized stock exchanges in India.
International Financial Services Centre (IFSC): Direct tax incentives proposed for IFSC are as follows-
- Exempting interest payment on loan taken from non-residents
- 100 % profit-linked deduction in any 10 year block within a 15-year period
- Exemptions on capital gain to Category-III AIFs (are funds that make short-term investments and then sell like hedge funds Category III).
- Exemption from dividend distribution tax from current and accumulated income to companies and Mutual Funds
Make In India: Custom Duty-
- Imposed– Basic Customs Duty (a duty/tax imposed under Customs Act 1962) increased on optical fibre cable, CCTV camera, auto parts, cashew kernels, PVC, tiles, marble slabs, etc.; 5% Basic Custom Duty imposed on imported books.
- Withdrawn– End use based exemptions on fatty oils, palm stearin withdrawn; Custom Duty Exemptions on certain electronic items now manufactured in India withdrawn; Exemptions to various kinds of papers withdrawn
- Reduced– on certain raw materials such as: Capital goods required for manufacture of specified electronic goods; Fuels for nuclear power plants and Inputs for artificial kidney and disposable sterilised dialyser etc.
- Exempted: Defence equipment not manufactured in India exempted from basic customs duty
- Increased: on gold as well as other precious metals.
Other Indirect Tax provisions
Increase in Special Additional Excise Duty and Road and Infrastructure Cess each by Rs.1 per litre on both petrol and diesel
Export Duty rationalised on raw and Semi-Finished Leather
Legacy Dispute Resolution Scheme (LDSR) for quick closure of pending litigations in Central Excise and Service tax from pre-GST (Goods & Service Tax) regime
Tags: Category-II Alternative Investment Funds • Custom Duty • Direct Tax • Indirect Tax • international financial services centre
Smt. Nirmala Sitharaman Union Minister for Finance and Corporate Affairs recently presented Union Budget 2019-20 before Parliament. Key Highlights of which are-
10-point Vision for the decade
- Jan Bhagidari: Minimum Government Maximum Governance for Building Team India.
- Space: Launching Gaganyan, Chandrayan, other Space and Satellite programmes
- Environment: Achieving green Mother Earth and Blue Skies through a pollution-free India
- Self-sufficiency and export of food-grains, pulses, oilseeds, fruits and vegetables.
- Digital India: Making Digital India reach every sector of the economy.
- Building physical and social infrastructure.
- Water: Water, water management, clean rivers
- Blue Economy
- Health: Achieving a healthy society via Ayushman Bharat, well-nourished women & children, safety of citizens
- Emphasis on Start-ups, MSMEs (Micro, Small and Medium Enterprises), defence manufacturing, electronics, automobiles, fabs and batteries, and medical devices under Make in India
Towards a 5 Trillion Dollar Economy
India Inc. are India’s job-creators and nation’s wealth-creators”- Finance Minister.
Indian economy to become a $3 Trillion economy in current year (2019-2020)
Government aims to make India a $5 trillion economy.
Need for investment in: Infrastructure, Digital economy and Job creation in small and medium firms
Initiatives to be proposed for kick-starting the virtuous cycle of investments and
Common man’s life changed through MUDRA (Micro Units Development and Refinance Agency Bank) loans for ease of doing business (EDB).
Measures related to MSMEs:
Pradhan Mantri Karam Yogi Maandhan Scheme (PMKYMS):
- Pension Benefits: to about 3 crore retail traders & small shopkeepers with annual turnover of less than Rs.1.5 crore
- Scheme Enrolment to be kept simple, requiring only Aadhaar, bank account and a self-declaration-
- 350 crore allocated for Financial Year 2019-2020 for 2% interest subvention (on fresh/incremental loans) to all GST-registered MSMEs, under Interest Subvention Scheme (ISE) for MSMEs.
- Payment platform for MSMEs to be created to enable filing of bills and payment thereof, to eliminate delays in government payments.
National Common Mobility Card: India’s first indigenously developed payment ecosystem for transport, based on National Common Mobility Card (NCMC) standards, launched in March 2019.
Ease of Travelling: Inter-operable transport card runs on RuPay card and would allow the holders to pay for bus travel, toll taxes, parking charges, retail shopping.
Massive push given to all forms of Physical Connectivity via: Bhartamala (road and highways project) and Sagarmala projects (national water port development connectivity scheme), Pradhan Mantri Gram Sadak Yojana (PMGSY), Jal Marg Vikas and UDAN Schemes, Industrial Corridors and Dedicated Freight Corridors.
State road networks to be developed in 2nd phase of Bharatmala project.
Jal Marg Vikas Project: Under it Navigational capacity of Ganga to be enhanced through multi modal terminals at Sahibganj and Haldia and a navigational lock at Farakka by 2019-20.
Ganga Waterways: 4 times increase in next 4 years estimated in cargo volume on Ganga, leading to cheaper freight and passenger movement and reducing import bill.
For Railway Infrastructure during 2018-2030, Rs.50 lakh crore investments is needed
Public-Private-Partnership (PPP) proposed for development and completion of tracks, delivery of passenger freight services and rolling stock manufacturing.
657 kilometers of Metro Rail network has become operational across India.
Policy interventions to be made for development of Maintenance, Repair and Overhaul (MRO), to achieve self- reliance in aviation segment
Government will be laying a Regulatory roadmap for making India a hub for aircraft financing and leasing activities from Indian shores
Outlay of Rs. 10,000 crore for 3 years approved for Phase-II of FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) Scheme
Upfront incentive proposed on purchase and charging infrastructure, to encourage faster adoption of Electric Vehicles (EV).
Under FAME Scheme only advanced-battery-operated and registered e-vehicles to be incentivized
Highways: National Highway Programme (NHP) to be restructured to ensure a National Highway Grid, using a financeable model
Power: to be provided to states at affordable rates ensured under ‘One Nation, One Grid’ and package of power sector tariff and structural reforms to be soon announced.
Undesirable duties on captive generation or open access sales for industrial as well as other bulk power consumers to be removed under Ujjwal DISCOM Assurance Yojana (UDAY).
Blueprints to be made available for water grids, gas grids, i-ways, and regional airports
Implementing HLEC (High Level Empowered Committee) Recommendations which is- Addressing low utilization of gas plant capacity due to paucity of Natural Gas; Retirement of old & inefficient plants.
Model Tenancy Law to be finalized and circulated to all states in country
To promote rental housing appropriate reform measures are to be taken up
For public infrastructure and affordable housing on land parcels held by Central Government and Central Public Sector Enterprises (CPSEs), a joint development and concession mechanisms to be used.
Measures for enhancing sources of capital for Infrastructure Financing:
Credit Guarantee Enhancement Corporation to be set up in FY 2019-2020
To deepen the market for long term bonds Action Plan to be put in place with focus on infrastructure
Proposed transfer/sale of investments by FIIs (Foreign Institutional Investor)/FPIs (Foreign portfolio investment) (in debt securities issued by IDF-NBFCs) to any domestic investor within specified lock-in period
Measures to deepen bond markets:
To enable securities exchange (or stock exchange) to allow AA rated bonds as collaterals
Review the User-friendliness of trading platforms for corporate bonds
Social stock exchange:
Electronic fund raising platform under regulatory ambit of SEBI (Securities and Exchange Board of India)
Listing social enterprises and voluntary organizations
To raise capital as debt, equity or units like a mutual fund
SEBI to consider raising threshold for minimum public shareholding in listed companies from 25% to 35%
Government to supplement efforts by RBI to get retail investors to invest in government treasury bills and securities (G-Sec), with further institutional development using stock exchanges
Measures for making India a more attractive FDI destination:
Know Your Customer (KYC) norms for FPIs to be made more investor friendly
Foreign Direct Investment in sectors like media (animation, AVGC), insurance sectors and aviation can be opened further after multi-stakeholder examination.
Insurance Intermediaries to get 100% FDI
Easing local sourcing norms for FDI in Single Brand Retail sector.
Annual Global Investors Meet to be organized by Government in India, using National Infrastructure Investment Fund (NIIF) as an anchor to get all three sets of global players (pension, insurance and sovereign wealth funds).
The statutory limit for FPI investment in a company is suggested to be increased from 24% to sectoral foreign investment limit. Also, option to be given to the concerned corporate to limit it to a lower threshold
FPIs to be permitted to subscribe to listed debt securities issued by Real estate investment trusts (REITs) and Infrastructure investment trusts (InvITs).
NRI-Portfolio Investment Scheme Route is proposed to be merged with FPI Route.
Cumulative resources garnered through new financial instruments such as InvITs, REITs as well as models like Toll-Operate-Transfer (ToT) exceed Rs. 24,000 crore.
INDIA and SPACE:
New Space India Limited (NSIL), a Public Sector Enterpises (PSE), incorporated as a new commercial arm of Department of Space (DoS)
To tap benefits of Research & Development carried out by ISRO (Indian Space Research Organisation) such as commercialization of products like launch vehicles, transfer to technologies and marketing of space products