“The unambiguous mandate by the people in the recent election has set the ball rolling for the New India,” stated India’s first-ever woman Finance Minister while presenting her maiden budget and assuring that a $5 Tn economy size quite doable in next few years. The FM’s first budget was a much-awaited one given that it came in the backdrop of falling employment, farm distress, slow economic growth, and amidst hopes that after PM Modi’s party’s decisive election victory, it will deliver a strong growth mandate. How did it fare on all these counts? Did it build confidence that the government is serious about tackling the unemployment challenge and is on track to turn India into a $5 Tn economy by 2025? Let’s take a look.
Here are the key highlights for the Budget 2019-
Income and Taxation
Thanking the honest taxpayers who are responsible citizens, the FM stated the government aims to simplify tax administration and ensure greater transparency. The tax collection has increased to 11.37 lakh crore to 2018-19 from 6.37 lakh crore from 2013-14 with Direct tax revenue having grown 78% from 2014 to 2019. Currently, only 25% tax rate is applicable to companies with an annual turnover of Rs 250 Cr. The corporate tax of 25% has been extended to all companies with an annual turnover of Rs 400 Cr. Only 0.7% of companies will remain outside of this 25% rate.
To boost electric vehicles, Interest subvention for up to Rs 2.5 lakh on buying electric vehicle will be provided. The government also provided an additional Rs 1.5 lakh deduction in income tax on home loans.
The FM also proposed a series of measures to leverage technology and make compliance easier for taxpayers such as interchangeability of PAN and Aadhar. Now, one can file I-T returns with Aadhar, with PAN and Aadhar interchange to be allowed.
In order to boost digital transactions, TDS of 2% for withdrawals of Rs 1 crore in a year from bank accounts for business payment will be levied. Business establishments with an annual turnover of Rs 50 Cr will have to use these 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 government has also waived MDR changes on cashless payments.
Though no change was announced in income tax rates, revenue mobilization measure was announced in the form of enhancing surcharge on individuals with taxable income of Rs 2-5 crore effective tax rate will increase by 3% and 7% each.
Rural India and Agriculture
The FM stated that ‘Gaon, Garib and Kisan are at the centre of all our efforts.’ The government plans that by 2022, power and LPG will be provided to all households. Farmers to become power generators through entrepreneurship support from the government. In order to double farmers’ incomes, the government will go back to basics on zero-budget farming and will aim to replicate this model across the nation. The government also hopes to form 10,000 new farmer organizations.
Also, 80 livelihood business incubators and 20 technology business incubators to be set up in 2019-20 under ASPIRE to develop 75,000 skilled entrepreneurs in agro-rural industries. 100 new clusters to be set up in 2019-20 under SFURTI, which will enable 50,000 artisans to join the economic value chain.
Pension benefits will be offered to 3 crore shop owners with an annual turnover of less than Rs 1.5 crore under a new scheme called Pradhan Mantri Man Dhan Scheme. This would only require an Aadhaar card.
The government will streamline multiple labour laws into a set of four labour codes. It aims to bring about labour reforms, to cut down on litigations.
In order to make India more FDI attractive, the government will examine suggestions for more foreign direct investment in aviation and media. It will allow for 100% foreign direct investment in insurance intermediaries. Local sourcing norms will also be relaxed for FDI
The government will bring in a new educational policy to transform India’s higher education to global standards. A National Research Foundation will be set up to fund and coordinate research in India. An amount of Rs 400 Cr has been provided under the head world-class institution for this year. A program ‘Study In India’ proposed to bring foreign students to India. Draft legislation Higher Education Commission of India (HECI) to be tabled.
The government will try to improve the skills of the youth in areas such as Artifical Intelligence, Big Data, Robotics, etc.
The government also plans to launch an exclusive TV channel for startups under DD bouquet channels to disseminate information in the industry. She added that the ‘Stand Up India' Scheme will continue till 2025. Angel tax relief to startups which provide documents was also announced by the FM. The 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.
While the government clearly did not announce any concrete job creation measures, only time will tell if the measures announced can lead to the growth of entrepreneurship in the country and make a difference to the mounting problem of unemployment.
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