Key Highlights of the Union Budget 2019-2020

The Finance Minister of India presented the Union Budget for India for the financial year 2019-2020 on 5 July 2019 (Budget), which aims to bolster several sectors such as infrastructure, roads, railways, agriculture, education, rural development, banking and finance thereby increasing jobs and bringing rural and urban India closer together to make India a USD 5 Trillion economy by 2024, as it moves towards becoming a USD 3 Trillion economy this year with the focus being on promoting ease of living for its citizens and ease of doing business in India and with India maintaining a 7% GDP growth in 2019-2020 as per the Economic Survey presented by the Government prior to the Budget.

Some of the key proposals in the Budget are:

  • Liberalising foreign direct investment (FDI) limits in Aviation, Media, Insurance and Single Brand Retail and permitting 100% FDI in insurance intermediaries.
  • A push for greater use of digital payments with a compulsory 2% tax deduction at source for cash withdrawals exceeding INR 10,000,000 (approx. USD 146,000) annually from a single account and low cost digital payments for customers in business establishments with annual turnover more than INR 500,000,000 (approx. USD 7 million) with no charges on the customer and the merchant.
  • No angel tax scrutiny on start-ups so as to incentivise young businesses and prevent them from any tax harassment.
  • Providing tax concessions for the manufacture and adoption of electric vehicles, including no custom duty on the import of certain components of electric vehicles.
  • Introducing faceless e-assessment of income tax returns to reduce the requirement of physical meetings between the tax payer and the income tax department and check undesirable practices of income tax officials.
  • To ease filing of tax returns and safeguard accuracy in reporting, pre-filled tax returns to be made available to taxpayers containing details of salary income, capital gains from securities, interest earned, dividends and so on collected from sources such as banks, stock exchanges, mutual funds, State registration departments and so on.
  • Scheme to invite global companies through transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as semi-conductor fabrication, solar photo voltaic cells, lithium storage batteries, solar electric charging infrastructure, laptops, servers and so on and provide investment linked income tax exemptions and other indirect tax benefits.
  • Listed companies to pay income tax on the buy-back of shares at the rate of 20%.
  • Establishment of “Legacy Dispute Resolution Scheme, 2019” for resolution and settlement of legacy cases of Central Excise and Service Tax, with proposed tax relief on dues ranging from 40% to 70%.
  • Increased Government investments in Railways infrastructure which needs USD 72 billion until 2030.
  • 125,000 km of roads to be upgraded at an estimated cost of USD 11.5 billion.
  • India to enter into aircraft financing and leasing space.
  • An annual global investors’ meet to be organized in India.
  • Corporate tax rate reduced to 25% from the current 30% for companies with an annual turnover up to INR 4,000,000,000 (approx. USD 58 million).
  • Securities and Exchange Board of India to consider increasing minimum public shareholding in listed companies from 25% to 35%.
  • Liberalising investments by Foreign Portfolio Investors (FPI) investment in a company from 24% to the sectoral level permitted under the FDI Policy with an option to the concerned corporates to limit this to a lower threshold.
  • FPIs to be permitted to subscribe to listed debt securities in Infrastructure Investment Trusts and Real Estate Investment Trusts and debt securities issued by Infrastructure Debt Fund – Non-Bank Finance Companies to be transferred/sold to any domestic investor within the specified lock-in period.
  • Non Resident Indian (NRI) portfolio route to be merged with FPI for seamless investment in stock markets.
  • Rationalisation and streamlining of KYC norms for FPIs to make the process investor-friendly.
  • Credit Guarantee Enhancement Corp to be set up in 2019-20 and action plan to deepen markets for long-term bonds with specific focus on infrastructure sector to be put in place.
  • Recapitalisation up to INR 700,000,000,000 (approx. USD 10 billion) of public sector banks to boost credit and introduce reforms to strengthen governance of public sector banks.
  • Non-Banking Financial Companies which undertake public placement of debt to maintain a debenture redemption reserve in addition to a special reserve as required by the Reserve Bank of India.
  • Disinvestment target by the Government set at INR 1,050,000,000,000 (approx. USD 15 billion) for the financial year 2019-2020 and to achieve this the Government is considering divesting its shareholding below 51% in certain public sector undertakings.
  • Multiple labour laws to be streamlined into four labour codes to ensure standardisation of registration and filing of returns.
  • A model tenancy law to be prepared and circulated to all States to promote rental housing.

The full Budget can be accessed through the following link:

https://www.indiabudget.gov.in/bh.php