In a 2:10 hour budget speech, the Union Finance Minister Nirmala Seetharaman has made some significant proposals for tax matters. Some of the key proposals are the below.
- Tax rate reduced to 25% for companies with annual turnover up to Rs. 400 crore
- Surcharge increased on individuals having taxable income from Rs. 2 crore to Rs. 5 crore and Rs. 5 crore and above.
- India’s Ease of Doing Business ranking under the category of ‘paying taxes’ jumped from 172 in 2017 to 121 in the 2019.
- Direct tax revenue increased by over 78% in past 5 years to Rs. 11.37 lakh crore
Tax Simplification and Ease of living – making compliance easier by leveraging technology:
- Interchangeability of PAN and Aadhaar
- Those who don’t have PAN can file tax returns using Aadhaar.
- Aadhaar can be used wherever PAN is required.
- Pre-filling of Income-tax Returns for faster, more accurate tax returns
- Pre-filled tax returns with details of several incomes and deductions to be made available.
- Information to be collected from Banks, Stock exchanges, mutual funds etc.
- Faceless e-assessment
- Faceless e-assessment with no human interface to be launched.
- To be carried out initially in cases requiring verification of certain specified transactions or discrepancies.
Affordable housing
- Additional deduction up to Rs. 1.5 lakhs for interest paid on loans borrowed up to 31st March, 2020 for purchase of house valued up to Rs. 45 lakh.
- Overall benefit of around Rs. 7 lakh over loan period of 15 years.
Boost to Electric Vehicles
- Additional income tax deduction of Rs. 1.5 lakh on interest paid on electric vehicle loans.
- Customs duty exempted on certain parts of electric vehicles.
Other Direct Tax measures
- Simplification of tax laws to reduce genuine hardships of taxpayers:
- Higher tax threshold for launching prosecution for non-filing of returns
- Appropriate class of persons exempted from the anti-abuse provisions of Section 50CA and Section 56 of the Income Tax Act.
Relief for Start-ups
- Capital gains exemptions from sale of residential house for investment in start-ups extended till FY21.
- ‘Angel tax’ issue resolved- start-ups and investors filing requisite declarations and providing information in their returns not to be subjected to any kind of scrutiny in respect of valuations of share premiums.
- Funds raised by start-ups to not require scrutiny from Income Tax Department
- E-verification mechanism for establishing identity of the investor and source of funds.
- Special administrative arrangements for pending assessments and grievance redressal
- No inquiry in such cases by the Assessing Officer without obtaining approval of the supervisory officer.
- No scrutiny of valuation of shares issued to Category-II Alternative Investment Funds.
- Relaxation of conditions for carry forward and set off of losses.
NBFCs
- Interest on certain bad or doubtful debts by deposit taking as well as systemically important non-deposit taking NBFCs to be taxed in the year in which interest is actually received.
International Financial Services Centre (IFSC)
- Direct tax incentives proposed for an IFSC:
- 100 % profit-linked deduction in any ten-year block within a fifteen-year period.
- Exemption from dividend distribution tax from current and accumulated income to companies and mutual funds.
- Exemptions on capital gain to Category-III Alternative Investment Funds (AIFs).
- Exemption to interest payment on loan taken from non-residents.
Securities Transaction Tax (STT)
- STT restricted only to the difference between settlement and strike price in case of exercise of options.
Indirect Taxes
Make In India
- Basic Customs Duty increased on cashew kernels, PVC, tiles, auto parts, marble slabs, optical fibre cable, CCTV camera etc.
- Exemptions from Custom Duty on certain electronic items now manufactured in India withdrawn.
- End use based exemptions on palm stearin, fatty oils withdrawn.
- Exemptions to various kinds of papers withdrawn.
- 5% Basic Custom Duty imposed on imported books.
- Customs duty reduced on certain raw materials such as:
- Inputs for artificial kidney and disposable sterilised dialyser and fuels for nuclear power plants etc.
- Capital goods required for manufacture of specified electronic goods.
Defence
- Defence equipment not manufactured in India exempted from basic customs duty
Other Indirect Tax provisions
- Export duty rationalised on raw and semi-finished leather
- Increase in Special Additional Excise Duty and Road and Infrastructure Cess each by Rs. 1 per litre on petrol and diesel
- Custom duty on gold and other precious metals increased
- Legacy Dispute Resolution Scheme for quick closure of pending litigations in Central Excise and Service tax from pre-GST regime
