INDIAN INTERIM BUDGET
The Indian Interim Budget 2019 - Foreword INDIAN INTERIM BUDGET 2019 The Finance Minister in his Interim Budget for Fiscal Year 2019-2020 ahead of the national elections in May 2019, elaborated on the achievements of NDA Government. The Interim Budget 2019 proposes new expenditures, pressuring fiscal consolidation efforts. As expected from an Interim budget, no new policies to increase revenues were announced but a number of expenditure measures have been proposed that will increase outlays making it a challenge to meet fiscal deficit targets going forward. India s high debt burden remains its biggest credit challenge. The present Government seeks to meet with its efforts to reduce dependence on imported fossil fuels, encouraging renewable sources of energy, Make in India, Ease of Doing business, Ease of Living in India initiatives, thereby reducing India s dependency on import of oil thereby reducing the deficit in the balance of payments. Policies aimed at promoting expenditure efficiency through rationalization of government schemes and bettertargeted delivery, including through direct income transfer schemes, are credit positive when implemented effectively. However, their effects will take time to bear fruit. Increased fiscal outlays as a result of the introduction of a new direct income support scheme for farmers and subsidized agriculture loans are likely to boost the rural economy through consumption in the near-term, but will have a fiscal cost. The Government has given its 10 Dimensional Vision for the India of 2030 in the fields of 1) Physical & Social Infrastructure, 2) Digital India, 3) Clean and Green India, 4) Rural Industrialisation, 5) Clean Rivers, 6) Oceans and Coastline, 7) Space, 8) Self-sufficiency in Food Production, 9) Health and 10) Minimum government and max governance. If the any Government given its constraints and uncertainty of what the future shall bring can achieve this vision it would be a momentous occasion for every Indian in India and overseas. We at SRD as usual have tried to decode the fine print and my team has prepared a summary of the proposals contained in the Finance Bill for your consideration. 1
Budget Highlights 2
Changes in the Tax laws affecting Individuals () No change in Slabs or rates for taxation on Income The slabs for personal taxation remain same along with the rate of taxes. The present levy of Health and Education Cess @ 4% remains same for FY 2019-20. Individual having taxable income upto Rs. 5 lakhs exempted from tax The NDA Government to woo the middle class taxpayer has proposed that individual assessee having net taxable income upto Rs. 5 lakhs will be out of the tax net from FY 2019-20. This move is expected to provide tax benefit of approximately Rs.18,500 Crores to an estimated 3 Crores middle class taxpayers. This tax benefit has however been proposed by way of tax rebate u/s 87A (by increasing the tax rebate from Rs.2,500 to Rs.12,500) which is applicable to individuals having net taxable income upto Rs. 5lakhs. Therefore, sadly individual having total income exceeding this Rs.5 lakhs threshold would not be entitled for this tax rebate. Standard deduction on salary income increased It is proposed to increase the standard deduction u/s 16 from `40,000/- to `50,000/- or the amount of salary income, whichever is less. Exemption from Notional Rent extended to 2 self occupied house properties For Individuals having more than one house property in self occupation, the second self occupied house property was subjected to taxation under the deeming fiction created under section 23 of the Act. The amendment proposes to exempt the 2 nd self occupied house property from taxation by bringing it out of the ambit of the deeming fiction. The benefit of deduction for Interest on borrowing has been limited to Rs. 2 lakhs in aggregate on both self occupied house properties. 3
Changes in the Tax laws affecting assessees tax rate remains unchanged for MSMEs to 25% In order to respond to the global trend of reducing the corporate tax rate and to make India competitive, the Govt. had reduced the tax rate to 25% for medium and small domestic companies (upto turnover of Rs.250 crores) in its Budget 2018 which remains unchanged in this interim budget. No change in tax rate & Surcharge for other than MSMEs No change in tax rates (30%) and surcharge for remaining companies in India. 4
Changes in the Tax laws affecting all Assessees Tax Rate for co-operative societies, local authorities, firms & LLPs remains the same. Health & Education Cess of 4% remains unchanged. TDS amendments Increasing thresholds It is proposed to amend section 194A so as to raise the threshold for deduction of TDS on interest income from Rs. 10,000/- to Rs. 40,000/-. Meaning thereby that interest income paid by banks, cooperative banks and post office would be free of tax deduction at source upto Rs.40,000 in a financial year. It is proposed to amend section 194-I so as to raise the threshold for deduction of TDS on rental income from Rs. 180,000/- to Rs. 240,000/-. Implying thereby that rental income upto Rs. 20,000 per month (on yearly average basis) would be free of tax deduction at source. Exemption period from Notional Rent on property lying as stock in Trade extended It is proposed to amend section 23(5) of the Act so as to extend the period of exemption on land & building held as stock in trade from the notional rent liable to taxation under the deeming fiction created by law. The exemption period has been extended from one year to two years from the end of year in which completion certificate has been obtained. 5
Changes in the Tax laws affecting all Assessees Benefit of rollover of Capital Gains u/s 54 extended to purchase/construction of two house properties It is proposed to amend section 54 of the Act so as to extend the benefit of exemption on the profits/gains on sale of residential house property on purchase/construction of one house property to two house properties. This is subject to the maximum of Rs. 2 crores of Capital gain and availment of this option once in the lifetime of the assessee. Deduction in respect of Profits and Gains from approved Housing projects u/s 80-IBA of the Act extended from 31 st March 2019 to 31 st March 2020. 6
Changes in the Tax laws affecting Transactions & Transfer Adoption of BEPS Action Plan India is committed to implement BEPS standards in so far as they are beneficial to India. In order to align the concepts to the international consensus / Multilateral Instrument (MLI), amendments have been proposed vide circulars/notifications issued by the CBDT from time to time including CbCR. Digital PE Rules pending to be prescribed No rules have been prescribed for defining significant economic presence under section 9 of the Act which was amended in the Last budget of 2018. 7
Changes in the Tax laws for Goods & Service Tax Act No announcements with respect to Goods & Services Tax (GST) as recommendations on GST Rates and changes will come from GST Council including reduction in GST rates for Home Buyers Customs Custom Duty abolished on 36 Capital Goods. 8
Conclusion In line with the growth in previous years, India after improving its world rankings of Ease of Doing Business is now moving to Ease of Living and has put down a 10 tier agenda for making India a 10 Trillion dollar Economy by 2030. Sources Speech of Hon ble Finance Minister Shri Piyush Goyal Finance Bill, 2019 S.R. Dinodia & Co. LLP Your Intelligent Connect For more information on how S.R. Dinodia & Co. LLP can provide business solutions that work for you Contact us at srdinodia@srdinodia.com or visit us at www.srdinodia.com This information contained herein is in summary form and is therefore intended for general guidance only. This publication is not intended to address the circumstances of any particular individual or entity. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. This publication is not a substitute for detailed research and opinion. Before acting on any matters contained herein, reference should be made to subject matter experts and professional judgment needs to be exercised. S.R. Dinodia & CO. LLP cannot accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. 9
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