Budget - 2019 My Views By YVST Sai Commissioner of

slide1. Budget - 2019 My Views
By
YVST Sai
Commissioner of Income Tax (Judicial) & (DR)
Hyderabad
saiyvst@gmail.com<br>
slide2. What does the Economic Survey indicate? Ambitious agenda for behavioural change by applying the principles of behavioural economics to several issues including gender equality, a healthy and beautiful India, savings, tax compliance and credit quality
Impact created by Government's flagship initiatives such as Swacch Bharat Mission, Jan Dhan Yojana and the Beti Bachao Beti Padhao provide testimony to the potential for behavioural change in India
Given our rich cultural and spiritual heritage, social norms play a very important role in shaping the behaviour of each one of us
Countless opportunities in creating data as a public good "of the people, for the people and by the people“
Vision of India becoming a $5 trillion economy by 2025
“Blue sky thinking“ - idea of complementary inter-linkages between macroeconomic variables using the pictorial description of several inter-linked gears<br>
slide3. What does the Economic Survey indicate? Private Investment as the Key Driver of Growth, Jobs, Exports and Demand - capital investment fosters job creation as the production of capital goods, research & development and supply chains generate jobs
Job creation, demand, exports and economic growth are not separate problems
Focus on policies that nourish MSMEs to create more jobs and become more productive, reduce the cost of capital, and rationalize the risk-return trade-off for investments – MSMEs provide jobs – unshackle them – Dwarfs are less productive than infant small firms – Incentivize infant firms – Age based policy
Focus on high employment elastic sectors – focus on service sector with spillovers like Tourism
Data of the people, by the people, for the people
Ramp up capacity in lower judiciary
Swach Bharath to Sundar Bharat via Swasth Bharath
Affordable, reliable and sustainable energy
National level minimum wage system for inclusive growth
Labour laws need to be revisited
Derides Anglo – Saxon view of economy but heavily relies on Anglo – Saxon theories and also does not present any viable alternative<br>
slide4. The past five years India became the sixth largest economy by sustaining growth rates higher than China
Average inflation was less than half the inflation level of the preceding five years, matching the lowest levels attained in the country’s post post-independence history.
The current account deficit (CAD) remained within manageable levels
Foreign exchange reserves rose to all-time highs
Beneficiary focus and targeted delivery – Aadhar as universal identifier for delivery of benefits through Act in 2016 – JAM (Jan Dhan Yojana, Aadhar, Mobile) for DBT in schemes like MNREGA, NSAP, PMAY-G, PMUY – LPG, Ayushman Bharat Yojana (ABY)
Infrastructure – Electricity to all villages, NHAI roads, UDAAN
Fiscal Federalism - Increase in share of States in central pool, GST, IBC
Labour Force Participation Rate (LFPR) in India has declined to 36.9 per cent in 2017-18 from 39.5 per cent in 2011-12 (NSSO) as per usual status. In rural areas, it has declined by 3.6 percentage points while it has declined by 0.1 percentage points in urban areas – Data from Periodic Labour Force Survey, 2017<br>
slide5. Behavioral Change Beti Bachao – Beti Padhao improved the child sex ratio
Swach Bharat Mission increased the percentage of ODF villages
IBC helped recovery of NPAs
Technology improved tax administration
Belief in Nudge?<br>
slide6. Budget Speech In the past five years:
Mudra loans helped common man to do business
Smokeless kitchens, Electricity to each house, Toilet in each house
Investment in Infrastructure – digital economy, MSME sector
Connectivity
Now: Kickstarting Investments – Govt to invest ` 100 lakh Cr in 5 years in infrastructure
Upfront incentives will be provided for purchase of electric cars.
Railways to use Public-Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services – Waterways to be given importance
'One Nation One Grid' to ensure power availability of electricity in India
Government will adopt suitable policy interventions to create a congenial atmosphere for the development of MRO in the country<br>
slide7. Budget Speech Pension will be provided to retail trader having turnover of less than Rs. 1.5 crore under 'Pradhan Mantri Man Dhan Scheme’ – enlarging existing scheme
2% leverage in rate of interest on fresh or incremental loan for GST registered MSMEs - loans upto 1 crore for MSMEs within 59 minutes through online portal
Threshold for public shareholding in listed Cos is proposed to be raised from current 25% to 35%
KYC Norms for Foreign Portfolio Investors (FPIs) would be streamlined to attract more investment
A new National Education Policy will be brought to transform India's education system to global standards – setting up NRF for convergence
To launch a television channel exclusively for Start-ups
To streamline the multiple laws dealing with labour welfare
NRIs having Indian Passport won't have to wait for mandatory 180 days after arriving in India to get Aadhar<br>
slide8. Budget Speech A Model Tenancy Law will also be finalized and circulated to the States
Large public infrastructure can be built on land parcels held by Central Ministries and Central Public Sector Enterprises through innovative instruments such as joint development and concession, public infrastructure and affordable housing will be taken up
Measures to develop corporate debt markets
To rationalize and streamline the existing Know Your Customer (KYC) norms for FPIs to make it more investor friendly without compromising the integrity of cross-border capital flows
Setting up of a social stock exchange – listing social enterprises and voluntary organizations
100% FDI in insurance intermediaries
Local outsourcing norms to be eased for FDI in single brand retails<br>
slide9. Budget Speech To increase the statutory limit for FPI (Foreign Portfolio Investors) from 24% to sectoral foreign investment limit - FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs
To merge the NRI-Portfolio Investment Scheme Route with the Foreign Portfolio Investment Route
New Space India Limited (NSIL) has been incorporated as a new commercial arm of Department of Space to tap the benefits of the R&D carried out by ISRO
Pradhan Mantri Matsya Sampada Yojana (PMMSY) – the Department of Fisheries will establish a robust fisheries management framework to help fishermen
PMGSY-III to upgrade 1,25,000kms of road length over the next five years, with an estimated cost of 80,250 crore
Support private entrepreneurships in driving value-addition to farmers’ produce from the field and for those from allied activities, like Bamboo and timber from the hedges and for generating renewable energy.
Annadata can also be Urjadata
New Jal Shakti Ministry to ensure piped water to all through Jal Jeevan Mission by 2024<br>
slide10. Taxation – Direct Taxes Basic Exemption limit raised to ` 5 lakhs – Surcharge of 3% on income from ` 2 – 5 Cr and 7% on income of ` 5 Cr and above
25% tax rate extended to companies with turnover upto ` 400 Cr from earlier ` 250 Cr – covers 99.3% of companies
GST on electric vehicles 5% (reduced from 12%)
Startups with angel investment would not be subject to scrutiny on the issue of valuation of share premium – e-verification of identify and source – Category AIF – II funds also need not justify FMV of their shares – this is already available to AIF – I
Relaxation of conditions for carry forward of loss for startups
Exemption of tax on capital gains on sale of residential house for investment in startup to be available till 31/03/2021
Deduction on housing loans taken upto 31/03/2020 to be ` 3.5 lakhs in case the value of the house is upto ` 45 lakh<br>
slide11. Taxation – Direct Taxes NBFCs to offer interest on bad and doubtful debts in the year of receipt like banks – wef AY 2020-21
In case of exercise of options STT would be only on difference between settlement price and strike price
Can quote AADHAR in place of PAN – AO will allot PAN in such cases
Pre filled tax returns
Faceless e-assessments – jurisdiction less assessments allotted by central cell
TDS of 2% on withdrawal of cash of ` 1 Crore and above in an year from bank or cooperative bank or post office except in case of exempt businesses which require large cash transactions like banking business, post office, banking correspondents and white label ATM operators – w.e.f from 01/09/2019
No charges on digital transactions for establishments with turnover of ` 50 Cr and above – Banks/RBI to absorb costs – penalty for failure by establishment – w.e.f 01/11/2019
Threshold limit of tax ` 10,000 for prosecution for non-filing of returns
Deeming FMV would not apply for prescribed transactions in case of deemed gift u/s 50CA and 56(2)(x)<br>
slide12. Taxation – Direct Taxes Individual or HUF to deduct TDS at 5% if annual payment made to a contractor or professional exceeds ` 50 lakh – new 194M – can pay on PAN – with effect from 01/09/2019
TDS on purchase of immovable property – consideration to include incidental charges like club fees, parking fee, water fees etc – w.e.f 01/09/2019
Income on gifts made to non-residents after 5/7/2019 would be deemed to accrue or arise in India u/s 9 – w.e.f from A.Y 2020-21
Compulsory filing of returns by –persons, who have deposited more than ` 1 crore in a current account in a year or spent more than ` 2 lakh on foreign travel or more than ` 1 lakh on electricity consumption in a year or enter into high value transactions or whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains u/s 54. 54F etc – w.e.f from AY 2020-21
PAN and AADHAR interchangeable from 01/09/2019 - PAN will be deactivated if not linked with Aaadhar after notice
Widening of scope of SFT w.e.f from 01/09/2019<br>
slide13. Taxation – Direct Taxes In certain cases of distressed companies before NCLT, carry forward of loss to be permitted even when there is change in shareholding – Also for computation of MAT, accumulated losses and UAD to be deducted from profit
Interest earned by non-resident from RDB issued between 17/09/2018 and 31/03/2019 is exempt
Deduction of ` 1.5 lakh on loan taken from Bank/NBFC to purchase electric vehicle upto 31/03/2023
NPS – exemption increased from 40% to 60% of withdrawals – employee contribution exempt upto14% of salary (earlier 10%) for central government employees – deduction u/s 80C for contribution to tier – II NPS
In case of buy back of shares 20% tax on gains extended to listed companies also
Registrations of trusts can be cancelled for violation of local laws, if the violation is not contested or the issue reached finality<br>
slide14. Taxation – Direct Taxes Definition of “demerger” to be relaxed to enable resulting entities to value the property and liabilities at a value different from book value in compliance with IAS
Relaxation of deduction of TDS available to residents u/s 40(a)(ia) and 201 extended to non-residents also
Concessional rate of STCG available to disinvestment funds set up by CPSEs – earlier they had for LTCG
Like pass through of income, pass through would be allowed for losses of AIF – I and AIF – II
TDS on payout by life insurance companies to be at 5% of net instead of 1% on gross
Deemed penalty provisions for under reporting of income incase of disclosure for first time u/s 148
To claim refund, return has to be filed<br>
slide15. Taxation – Direct Taxes Time period to auction property by TRO after finalization of proceedings extended to 7 years from 3. Board can extend for 3 more years
In case correction statement is filed, extra time would be available to pass order u/s 201 on TDS default
In case of Benami Property Prohibition Act, residential status of the assessee in the year in which income is earned or asset is acquired is the determinative factor<br>