HomeNewsBudget 2019 fails to meet high expectations

Budget 2019 fails to meet high expectations

This is the first budget for Modi 2.0 and also it is the first budget of our new Finance Minister, Nirmala Sitharaman. So expectations were high and people were hoping for some path breaking announcement to pull the economy out of the current phase of slow growth. However, the budget appeared to be a damp squib – it was more of a Thanks Giving Ceremony than a Budget presentation. At times it appeared that the Ruling Party is still in its election mode as Sitaraman’s speech often resembled an election speech.

The FM has touched upon some of the burning issues like NBFC crisis and farm distress. But it’s premature to judge the impact of steps taken to tackle those issues. Some of the major steps taken in the budget are:

  • Issuing of Aadhaar Card to NRIs has been made easy. The government has promised Aadhaar card to NRIs with Indian Passports will be issued on arrival and there is no need to wait for 180 days.
  • So far as corporate tax is concerned, the lower rate of 25 % is currently applicable to companies having annual turnover up to Rs 250 Crore. The Budget proposes to widen this to include all companies having annual turnover up to Rs 400 crore. This will cover 99.3% of the companies. Now only 0.7% of companies will remain outside this rate.
  • To resolve the ‘angel tax’ issue, the start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums. The issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department.
  • Special administrative arrangements shall be made by Central Board of Direct Taxes (CBDT) for pending assessments of start-ups and redressal of their grievances. It will be ensured that no inquiry or verification in such cases can be carried out by the Assessing Officer without obtaining approval of his supervisory officer.
  • For realisation of the goal of ‘Housing for All’ and affordable housing, a tax holiday has already been provided on the profits earned by developers of affordable housing. Also, interest paid on housing loans is allowed as a deduction to the extent of Rs 2 lakh in respect of selfoccupied property. In order to provide a further impetus, the latest budget allows an additional deduction of up to Rs 1,50,000 for interest paid on loans borrowed up to 31st March, 2020 for purchase of an affordable house valued up to Rs 45 lakh. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 lakh. This will translate into a benefit of around Rs 7 lakh to the middle class home-buyers over their loan period of 15 years.
  • The Finance Minister has proposed to make PAN and Aadhaar interchangeable and allow those who do not have PAN to file Income Tax returns by simply quoting their Aadhaar number and also use it wherever they are required to quote PAN.
  • Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends etc. and tax deductions. Information regarding these incomes will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments etc. This will not only significantly reduce the time taken to file a tax return, but will also ensure accuracy of reporting of income and taxes.
  • To discourage the practice of making business payments in cash, the FM has proposed to levy TDS of 2% on cash withdrawal exceeding Rs 1 crore in a year from a bank account.
  • It is proposed to provide that for the purpose of tax deduction at source from payment made for acquisition of immovable property, consideration shall include other charges in the nature of club membership fee, car parking fee, electricity and water facility fee, maintenance fee, advance fee or any other charges of similar nature which are incidental to the purchase of immovable property.
  • It is proposed to make return filing compulsory for persons, who have deposited more than Rs. 1 crore in a current account in a year, or who have expended more than Rs. 2 lakh on foreign travel or more than Rs. 1 lakh on electricity consumption in a year or who fulfils the prescribed conditions, in order to ensure that persons who enter into high value transactions also furnish return of income.

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