Finance Minister Nirmala Sitharaman on Friday, July 5, 2019, hiked tax on petrol and diesel, raised import duty on gold, levied additional surcharge on super rich and brought a tax on high value cash withdrawals as she sought to spur growth with reduction in corporate tax and sops to housing sector, startups and electric vehicles.
Presenting the maiden budget of Modi 2.0 government in Lok Sabha, Ms. Sitharaman, the first full-time woman Finance Minister, proposed measures to ease liquidity crisis facing shadow banking sector (NBFCs) and providing ₹70,000 crore capital to public sector banks while seeking to raise additional resources through privatisation of some PSUs.
In relief to tax payers, she provided for an additional deduction of ₹1.5 lakh on interest paid on loans borrowed up to March 31, 2020 on purchase of a house up to ₹45 lakh.
Corporate tax
Corporate tax on companies with turnover of up to ₹400 crore has been slashed to 25 per cent from current 30 per cent. Presently, the lower tax rate is applicable on companies having a turnover of up to ₹250 crore.
Ms. Sitharaman said the reduced tax rate would cover 99.3 per cent of corporates in the country.
A fillip to EVs
To boost use of electric vehicles, an additional income tax deduction of ₹1.5 lakh on interest paid on loans taken to purchase EVs has been proposed.
Also the government has asked the GST Council to reduce tax rate on EVs from 12 per cent to 5 per cent. Customs duty on certain parts of EVs has been reduced.
Addressing the angel tax issue faced by startups, she said startups and investors who file requisite declarations will not be subjected to any kind of scrutiny in respect of valuation of share premium.
A mechanism of e-verification will be put in place and with this, the funds raised by startups will not require any tax scrutiny.
She raised special additional excise duty and road cess on petrol and diesel by ₹1 per litre each, saying lower crude oil prices provide her with an opportunity to review taxes on the sector.
Also, customs duty on gold and precious metals was raised from 10 per cent to 12.5 per cent to mobilise resources.
Basic customs duty was raised on an array of products including tiles, cashew kernels, vinyl flooring, auto parts, some synthetic rubber, digital and video recorder and CCTV camera.
Excise duty of ₹ 5 per 1000 has been imposed on cigarettes of length exceeding 65 mm, while 0.5 per cent duty has been levied on chewing tobacco, zarda and tobacco extracts and essence.
“I propose to levy TDS of 2 per cent on cash withdrawal exceeding ₹1 crore in a year from a bank account,” she said.
Tax on super-rich
She also announced a surcharge on individuals having taxable income of ₹2 crore to ₹5 crore and for those above ₹5 crore which will hike their effective tax rate by 3 per cent and 7 per cent respectively.
Ms. Sitharaman also proposed to made Aadhaar and PAN interchangeable for the purpose of filing Income Tax returns.
To boost FDI inflow into the country, the government will examine further liberalisation of sectoral investment caps in aviation, media, animation and insurance.
The Budget also proposed 100 per cent FDI in insurance intermediaries and easing of local sourcing norms for single brand retail.
She said measures are being worked out to ease filing returns and tax compliance. Taxpayers with an annual turnover of less than ₹5 crore will have to file only quarterly returns, she said
To boost cash-less economy, she said business establishments with annual turnover of₹50 crore will have to use BHIM, UPI, Aadhaar Pay, NEFT, RTGS modes of payments with no charges or merchant discount rates will be imposed on customers or merchants.
RBI and banks will absorb these costs, she said.
The Securities Transaction Tax or STT is proposed to be restricted to the difference between settlement and strike price of options, she said.
The Finance Minister also proposed an additional income tax deduction of ₹1.5 lakh on interest paid on loans taken to buy electric vehicles.
Ms. Sitharaman said the government will spend ₹100 lakh crores for infrastructure in next five years.
The disinvestment target for FY20 was raised to ₹1.05 lakh crore from ₹90,000 crore set in the interim budget and government will continue with disinvestment of PSUs in the non-financial space as well.
Regulation of housing finance companies has been moved to the Reserve Bank of India (RBI) from the NHB.
The government proposed to allocate ₹70,000 crore for PSU Bank recapitalisation.
