Budget 2019-20:

Today, the 5^th of July 2019, Mrs. Nirmala Sitharaman, presented the maiden Union Budget of the Modi Government after it was re-elected. Nirmala Sitharaman is only the 2^nd woman Finance Minister after Mrs. Indira Gandhi to present the budget in the House of Parliament. Not only was the presentation of the budget clear, precise and very well presented, the Finance Minister also ditched the colonial briefcase, and carried a red traditional ledger known as ‘bahi-khata’.

The Finance Minister’s chief economic advisor, Krishnamurthy Subramaniam said that it ‘depicted a departure from the slavery of western thought. ‘

Over all, this budget prioritised start-ups, infrastructure, research and development, making women the front runners and investment especially via FDI.

It is important to note that the Finance Minister stated that the Fiscal Deficit has been brought down to 3.3% from 3.4%. Though, the opposition has questioned the accuracy of these numbers, Congress communication in-charge, Mr. Randeep Singh Sujrewal claimed that the real fiscal deficit is 4.7%, and not 3.3%, and asked if this is a skulduggery of figures.

Given below are some of the highlights of the Union Budget 2019-2020:

Tax:

Nirmala Sitharaman thanked the tax payers, who as responsible citizens have performed their duty by paying tax, due to which the Government is able to work towards collective dream of inclusive and all round development of India.

Direct Tax:

• the direct tax revenue has increased by 78%, from 6.38 lakh crore to 11.37 lakh crores.
• The IT slab has been increased, and those who earn below Rs. 5 lakhs annually are exempted from paying Income Tax.
• Government to levy surcharge of 3% and 7% on individuals having annual income of Rs. 2 crores to Rs. 5 crores and Rs. 5 crores and above respectively.
• Extension in the period of exemption of capital gains arising from sale of residential house for investment in start-ups.
• Income tax exemptions under Section 35AD of the Income Tax Act, 1961, and certain indirect tax benefits to be given to global companies that set up mega manufacturing plants in sunrise and certain other solar based technology.
• In order to make India a global hub of manufacturing electric vehicles, the government proposed an additional income tax deduction of Rs. 1.5 lakhs on interest on loan taken for purchase of electric vehicles.
• Government to bring about paradigm shift in IT department by implementing faceless assessment in electronic mode.

Indirect Tax:

• The current lower rate of 25% corporate tax that is applicable to all companies having a turnover of up to Rs. 250 crores annually has been expanded and is now applicable to all companies having a turnover of up to Rs. 400 crores. The Minister said that this covers 99.3 % of the companies, leaving only 0.7% of the companies outside its ambit.
• Interest on certain bad or doubtful debts made by scheduled banks or other financial institutions is allowed to be offered to tax in the year in which the interest is received. The Government has proposed to extend this facility to deposit taking and systematically important non-deposit taking NBFCs.
• Government to provide relief in levy of securities transaction tax.
• Government is further simplifying GST. It is introducing electronic invoice system to simplify the process due to which there will be no need for e-way bill. A fully automated GST refund module shall be implemented.
• Custom Duty on import of defence equipment is exempted. Custom duty on gold and precious metals increased from 10% to 12.5%.
• Increase on special additional excise and road and infrastructure cess each by 1 rupee per lire of petrol and diesel.
• Customs Act is being implemented to include provisions to enhance penalty and prosecution for offences such as resorting to unfair practices to avail undue concessions and export incentives.

Infrastructure:

• Major push given to Pradhan Mantri Gram Sadak Yojna, industrial corridors, Jal Marg Vikas, and UDAN scheme, covering all modes including road, air and water.
• UDAN Scheme is providing air connectivity to smaller cities.
• Steps being taken to make India hub for aircraft financing and leasing activities.
• Under new metro rail projects, metro lines of 300 kms was approved in 2018, and metro line of 210 kilometres have been operationalised in 2019.
• Phase II of FAME scheme with an outlay of 10,000 crores for the next 3 years has been approved to encourage faster adoption of electric vehicles.
• Comprehensive restructuring of National Highway Programme to encourage National Highway Grid.
• Development of multi modal terminals under Jal Marg Vikas project.
• Railway infrastructure may need an investment of Rs. 50 lakh crores between 2018 and 2030.
• Government to upgrade 1,25,000 kilometres of road length in the next 5 years.
• Under Pradhan Mantri Awaz Yojna, 81 lakhs urban homes have been sanctioned, of which construction of 47 lakhs houses have been started and around 24 lakh houses have been delivered to the beneficiaries.
• Government to invest Rs. 100 lakh crores on infrastructure over the next 5 years.

MSMEs and Start-ups:

• In order to provide ease of access to credit, Government to provide loan of upto Rs. 1 crore within 59 minutes using an online portal.
• 350 crores has been allocated for 2% interest grant for all MSMEs that are GST registered on fresh or incremental loans.
• Government has proposed to streamline labour laws into four labour codes, which would make the process of registration and filing of returns standardized.
• Government to start a TV channel exclusively for start-ups.
• In order to resolve the ‘angel tax’ issue for start-ups, Government to exempt start ups and investors that file their returns and declarations from scrutiny with respect to valuation of share premiums.
• For assessments of start-ups and redressal of grievances, Central Board of Direct Tax shall make special administrative arrangement.
• Relaxation on conditions to carry forwards and set off of losses for start ups.
• Livelihood business incubators and technology business incubators to be set up to develop 75,000 entrepreneurs in agro-rural industry.
• Entrepreneurship that add value to farmer’s produce from the field and allied activities shall be supported by the Government.

Banks and Financial Sector:

• The Finance Minister stated that the non-performing assets of the corporate banks have been reduced by Rs. 1 lakh crores, and that there has been a record recovery of over Rs. 4 lakh crores due to Insolvency and Bankruptcy Code and other measures that have been effected over the last four years.
• Public Sector Banks to be given Rs. 70,000 crores capital to boost credit.
• Proposal to strengthen the regulatory authority of RBI over NBFC’s being placed in the Finance Bill.
• Disinvestment in public sector undertakings is done by maintaining Government’s 51% stake, and not going below that. Now, there is a modification from retaining 51% Government stake to retaining 51% stake inclusive of Government controlled institutions.
• The Government has prioritised strategic disinvestment in select Central Public Sector Enterprises (CPSEs), and intends to reinstate strategic disinvestment of Air India.
• The Government has set an enhanced target of Rs. 1,05,000 crores of disinvestment.
• Regulation of Housing Finance Sector to be returned from National Housing Bank to RBI.
• Government to take steps to empower account holders of public sector banks by addressing the issue of account holders not having control over deposit of cash in their accounts by others.

Affordable Housing:

Interest paid on housing loans is allowed as a deduction of up to Rs. 2 lakhs in respect of self occupied property. The Government has now proposed an additional deduction of Rs. 1,50,000 for interest paid on loans borrowed up to 31st March 2020 for affordable homes costing up to 45 lakhs.

Youth:

• New National Education Policy to be implemented.
• Proposal to establish National Research Foundation to fund, co-ordinate and promote research in the country.
• A draft legislation to set up Higher Education Commission of India (HECI) to be introduced.
• Awareness of sports brought about by Khelo India Scheme introduced in October, 2017.

Women:

Quoting Swami Vivekananda, the Minister said that there is no chance of welfare of the world unless the condition of women is improved. The Government has therefore supported women entrepreneurship through Mudra Scheme, Stand up India and Self Help Groups. Government announced Women SHG interest subvention programme to be extended to all districts and a loan of Rs. 1 lakh to be made available to one woman in each SHG under the Mudra Scheme.

FDI:

Government to further open up FDI in aviation, media and insurance sectors. 100% FDI permitted for insurance intermediaries. Local sourcing norms to be eased in FDI in Single Brand Retail sector.

The statutory limit of Foreign Portfolio Investment (FPI) in companies has been enhanced from 24% to sectoral foreign investment limit with option to individual corporates to limit it to lower threshold. FPIs are also allowed to subscribe to listed debt securities issued by Real Estate Investment Funds (ReITs) and Investment Trusts (InvTs).

Other important announcements: 

• Government has proposed to provide Aadhaar cards to NRI having Indian passports after their arrival to India without having to wait for 180 days.
• Government announced interchangeability of PAN and Aadhaar, so that people who don’t have PAN can produce their Aadhaar.
• In order to discourage large amount of cash withdrawals, Government to provide for tax deduction at source at 2% for cash withdrawals of more than Rs. 1 crore in a year.
• Government to develop 17 iconic tourist sites into world class tourist destinations to increase domestic and international tourists.
• Government to co-ordinate with state governments so that farmer can benefit from e-NAM. Farmers to be trained zero budget farming so that they get fair price for their produce.
• Around 35,000 crore bulbs have been distributed under the UJALA Yojna. Government to follow mission LED bulb method to promote solar stoves and battery chargers in India.
• The Government states that the Indian economy was at approximate US $1.85 trillion in 2014 and has increased to US $ 2.7 trillion in 5 years. Hence, the Government aims to reach US $ 5 trillion dollars in the next few years.

Conclusion:

Given above are some of the main highlights of the Union Budget 2019. The budget shows clear prioritisation to start-ups, FDI, affordable housing and empowerment of women through schemes like Mudra Scheme. However, it brought no changes to the personal tax slabs, due to which middle class salaried persons will continue to suffer and pay higher rates of tax, while professional/businessmen who earn far more than the salaried employees will reap the benefit.

There is no mention of the health sector in the budget. Also, not much was said about ways in which Government would ensure job creation. While the budget had big number in terms of infrastructure development, there was no clear roadmap as to where the money for development of infrastructure would come from.

The budget is future oriented and it remains to be seen if the Government is able to meet the target and figures mentioned in the Union Budget, 2019, including the targets set under Vision for the Decade.

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