BUDGET 2019-20

CORPORATE TAXATION :

1. Domestic Companies (Turnover/Gross receipts for PY 2017-18 <400 Cr) will be taxed @ 25% instead of 30%. Surcharge and HE Cess remain the same. Earlier the limit was 250 Cr.
2. Surcharge : 7% for income from 1 Cr to 10 Cr / 12% for income > 10 Cr HE Cess : 4% for all
3. Aggregate of cash withdrawn from a Bank/Co-operative Bank/PO during the FY 2019-20 > 1 Cr will be subjected to TDS @ 2%, this is applicable from 01.09.2019.
4. Buy back of shares by listed companies from a shareholder will be charged to tax on the companies @ 20% on the difference between consideration paid by the company and the amount received by the company for the issue of shares. Earlier this was applicable for unlisted companies. This is applicable from 05.07.2019.

PERSONAL TAXATION :

1. Slab rates kept as it is, nothing to be happy about this !!!! Net income upto Rs. 5 Lacs will be entitled to tax rebate of Rs.12,500/- as earlier.
2. Biggest shocker for HNI's : Surcharge increased : Individuals having income between Rs. 2 Cr to 5 Cr - 25% / above Rs. 5 Cr - 37%
3. Income Tax return can be filed using Aadhaar Card if person doesnt have PAN. This is applicable from 01.09.2019
4. Gifts of money or other property by a resident to a person outside India subject to certain exceptions will be deemed to be the income for the person resident outside India in India. This is applicable from 05.07.2019
5. ITR mandatory if a person has deposited Rs. 1 Cr or more in current account OR Incurred foreign travel expenditure of > Rs. 2 Lacs OR incurred electricity expenditure > Rs. 1 Lacs
6. Earlier Individuals were not required to deduct TDS from payments made to contractors or professionals unless subjected to Tax Audit. Now TDS @ 5% is to be made for payment to the aforesaid if it exceeds Rs. 50 Lacs.
7. Interest on Housing Loan for acquisition of a residential house property upto stamp duty value of Rs. 45 Lacs and loan sanctioned by any FI between 01.04.2019 and 31.03.2020 and assessee doesnt own any residential property on the date of sanction of loan will be allowed an additional Rs. 1.5 Lacs.
8. Interest on Loan on purchase of electric car will be allowed Rs. 1.5 Lacs if loan sanctioned between 01.04.2019 to 31.03.2023 by a FI and individual doesnt own any electric vehicle on the date of sanction of loan.
9. Withdrawal upto 60% from NPS tax free.
10. TDS to be deducted by Buyer of immovable property @ 1% on the consideration exceeding Rs. 50 Lacs. This is applicable from 01.09.2019

11. Incentives for Start-Ups:

In line with the Government's philosophy of encouraging "Start-ups" in India in order to boost employment generation opportunities, and to encourage the philosophy of self- empowerment, in the amendment proposals, a major and bigger thrust has been given on incentivizing eligible Start-Ups.

In order 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.

In addition, 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.

At present, start-ups are not required to justify fair market value of their shares issued to certain investors including Category-I Alternative Investment Funds (AIF). The said benefit has been extended to Category-II Alternative Investment Funds also. Therefore, valuation of shares issued to these funds shall be beyond the scope of income tax scrutiny.

Relaxation of conditions for carry forward and set off of losses by Start-ups: In order to facilitate ease of doing business in the case of an eligible start-up, it is proposed to amend section 79 so as to provide that loss incurred in any year prior to the previous year, in the case of closely held eligible start-up, shall be allowed to be carried forward and set off against the income of the previous year on satisfaction of either of the two conditions stipulated currently at clause (a) or clause (b) of section 79.

In order to incentivise investment in eligible start-ups, it is proposed to amend the said section so as to-

 (i) extend the sun set date of transfer of residential property for investment in eligible start-ups from 31st March 2019 to 31st March 2021;

 (ii) relax the condition of minimum shareholding of fifty per cent of share capital or voting rights to twenty five per cent.

(iii) relax the condition restricting transfer of new asset being computer or computer software from the current five years to three years.

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

INDIRECT TAXATION : -

1. Make in India

Customs duties have been increased on precious metals, specified automobile parts (mirrors, intake filters, horns, lighting equipment, etc.), electronic equipment (digital video recorder, CCTV camera, optical fibres, indoor-outdoor unit of split AC etc.), iron and steel items, imported books, flooring materials etc. Moreover, the exemption given to specific electronic components (such as charger/power adapter for camera, plugs, sockets etc.), which are now being manufactured in India, is withdrawn, which indicate the government's intention to withdraw exemptions and promote Make in India by disincentivising imports.

2. Focus on defence

By giving exemption to specified defence equipment and their parts imported by the Ministry of Defense or Armed Forces, Sitharaman has given a message that the defence sector is an integral and important part of the nation.

3. Thrust to electric vehicles sector

In order to incentivise and give thrust to electric vehicles sector, customs duty on specified parts required for the manufacture of EVs has been brought down to nil. In addition, there is already a proposal before the GST Council to reduce the GST on e-vehicles from present 12 per cent to 5 per cent.

4. Rates rationalisation

Reduction in customs duties has also been made on a few items, which were considered necessary such as medical supplies, nuclear fuels and nuclear energy, wood fibre, capital goods for manufacture of specified electronic items etc.

5. Legacy Dispute Resolution Scheme

Recognising the huge pending litigation in excise and service tax, the government has heeded to demands of the industry by introducing the Legacy Dispute Resolution Scheme. While details and mechanics of the scheme would need to be analysed in detail, as of now it looks like that the government - by offering relief to the extent of more than 50 per cent of the disputed taxes in addition to waiver of interest and penalty - has clearly indicated that it also wants to end open legacy matters and unnecessary litigation clogging the system.

6. Hike in duties on petrol, diesel and tobacco

There has been an increase in duties on petrol & diesel by Rs 2 per litre, which will definitely attract negative response from the public at large since it will go in increasing the price of petrol and diesel. This would lead to an increase in transportation costs resulting in spiralling inflation.