Key Highlights: First full Budget of Modi 2.0 government

Finance minister, Nirmala Sitharaman became only the Second Indian woman after the former Prime Minister Indira Gandhi, to present a Union Budget.

India’s first full-time woman Finance Minister presented the 29th Budget that focused on investment-led growth and reforms, including transforming rural lives, enhancing ease of direct and indirect taxation, harnessing India’s space abilities, strengthening connectivity infrastructure, and boosting the country’s entrepreneurial ecosystem.

Key Sector-wise highlights from the Finance Minister’s speech:

Direct Tax

• All companies having an annual turnover of 400 crores, will now be under the bracket of 25% corporate tax rate. This will cover 99.3% of all the companies.
• More than 120 crore Indians now have Aadhaar card, therefore for ease of taxpayers, It is proposed to make PAN card and Aadhaar card interchangeable and allow those who don’t have PAN to file returns by simply quoting Aadhaar number and use it wherever they require to use PAN.
• To provide further impetus to affordable housing, an additional deduction of 1.5 lakh rupees on interest paid on loans borrowed up to 31 Mar 2020 for purchase of house up to 45 lakh.
• Faceless income tax assessment in electronic mode involving no human interface to be launched this year in a phased manner, to reduce taxpayer harassment.
• Direct tax collection increased by 78%; Tax collection rose from Rs 6.38 lakh crore in 2013–14 to Rs 11.37 lakh crore in 2018.

Direct tax incentives proposed for an IFSC (International Financial Services Centre) :

• 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.

GST

• Rs 350 crore allocated for 2% interest subvention for all GST – registered MSMEs on fresh or incremental loans.
• A simplified single monthly return is being rolled out; taxpayers with annual turnover less than 5 crores need to file only quarterly returns.
• Fully automated GST Refund module shall be implemented; multiple tax ledgers to be replaced by one; invoice details to be captured in a central system.
• Electronic invoice system will be introduced to prefill the taxpayers return. Roll out from January 2020.
• There will be no need for separate e-way bills.
• A fully automated GST refund module will be implemented.

NRIs

• Aadhaar card for NRIs with Indian passports to be issued after their arrival in India, without waiting for the mandatory 180 days.
• To provide NRIs seamless access to Indian equities, NRI portfolio investment route to be merged with the foreign portfolio investment route

Customs duty

• 5% customs duty being imposed on imported books, to promote domestic publishing and printing industry.
• Imports of defence equipment not manufactured in India to be exempted from basic customs duty.
• Basic customs duty on certain items to be increased to promote the cherished goal of Make In India.

Digital payments

• To discourage business payments in cash, Tax Deduction at Source (TDS) of 2% to be levied on cash withdrawal exceeding Rs 1 crore in a year from a bank account.
• Business establishments with annual turnover more than 50 crore rupees may offer low-cost digital payments; no charges or merchant discount rates to be imposed on customers or merchants for these.

Dis-investment

• Strategic disinvestment of select Central Public Sector Enterprises will continue to be a priority; Strategic disinvestment of Air India will re-initiate; 1,05,000 crores is the disinvestment target for 2019–20.

Pension

• Pension benefit to be extended to around 3 crore retail traders and shopkeepers with annual turnover are less than Rs 1.5 crore under Pradhan Mantri Karam Yogi Man Dhan Scheme.

‘Naari tu Narayani’

• To further encourage women entrepreneurship, Women Self-help Groups (SHGs) Interest Subvention Programme to be expanded to all districts in India.
• An overdraft of Rs 5,000 will be allowed for every verified woman SHG member having a Jan Dhan account.
• One woman in every SHG shall be made eligible for a loan of 1 lakh rupees under MUDRA scheme.

Employment

• 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.
• Increase focus on skill sets required by the youth to apply for job opportunities abroad like language skills and artificial intelligence (AI).
• Proposal to start a television programme on DD National, exclusively for startups. This programme will be designed and executed by startup’s themselves.

Banks

• Public Sector Banks (PSBs) to be provided Rs 70,000 crore to boost capital and improve credit.
• Government considering to go below 51% to an appropriate level of an ownership stake in non-financial public sector undertakings on a case by case basis.
• PSBs will use technology, enabling customer of one PSB to access service across all PSBs as well.
• For purchase of high-rated pooled assets of financially sound Non-Banking Finance Companies (NBFCs) amounting to Rs 1 lakh crore during 2019–20, one-time six-month partial credit guarantee to be given to PSBs.
• Regulation authority over housing finance sector to be returned from National Housing Bank to RBI.
• Proposals for strengthening the regulatory authority of RBI over NBFCs have been made.

Railways

• Massive programme of railway station modernization to be launched in 2019.
• Railway infra would need an investment of 50 lakh crores between 2018 and 2030; PPP to be used to unleash faster development and delivery of passenger freight services.
• Railways to be encouraged to invest more in suburban railways through Special Purpose Vehicles (SPV) structures such as Rapid Regional Transport System (RRTS); more Public-Private Partner (PPP) initiatives to be encouraged in the rail sector.

Electric Vehicles (EVs)

• FAME II scheme aims to encourage faster adoption of electric vehicles by the right incentives and charging infrastructure.
• The government will provide Rs 1.5 lakh income tax deduction on interest payments on a loan taken for the purchase of electric vehicles.
• Government has already moved GST council to lower the GST rate on electric vehicles(EV) from 12% to 5%.
• Customs duty on certain parts of electric vehicles being exempted to promote e-mobility.

Connectivity

• A comprehensive restructuring of National Highways Programme to be done, to ensure the creation of National Highways Grid of desirable capacity. The government envisions using rivers for cargo transportation, which will also de-congest roads and railways.
• 657 km of the metro rail network has become operational in the country.
• The government has given a massive push to all forms of physical connectivity via PMGSY, Industrial corridors, Dedicated freight corridors, Bharatmala, Sagarmala, Jal Marg Vikas and UDAN schemes.

Swachh Bharat Mission

• Proposal to expand the Swachh Bharat mission to undertake solid waste management in every village.
• India to be open defecation free (ODF) by October 2 2019. To mark this occasion, Rashtriya Swachhata Kendra to be inaugurated at Raj Ghat, on the same day.

Gandhi-pedia

• ‘Gandhi-pedia’ too to be developed on the lines of Encyclopedia to help promote Gandhian school of thought.

Education and research

• New National Educational Policy to be brought in to transform the Indian educational system; major changes in higher as well as the school system to be introduced.
• Rs 400 crore under the head, World Class Institutions in 2019–20, more than three times the revised estimates of the previous year. ‘Study In India’ to be started to bring in foreign students into the Indian higher education system.
• Establish a National Research Foundation to fund, to coordinate and to promote research in the country.
• National Research Foundation to be set up to strengthen the overall research ecosystem in the country; funds available under all Ministries to be integrated with NRF.
• The Stand Up India Scheme which focuses on skill development has been extended to the year 2025. Multiple labour laws to be streamlined into a set of four Labour Codes. New-age skills like Artificial Intelligence, Big Data, Virtual Reality, robotics and internet of things to be promoted.

Rural

• By 2022, every single rural family except those who are unwilling to take the connection will have electricity and a clean cooking facility.
• In the second phase of PMAY-Gramin, 1.95 crore houses to be provided to eligible beneficiaries, during 2019–20 to 2021–22; they will have amenities such as LPG, electricity and toilets.
• 10,000 new Farmer Producer Organizations to be formed to ensure economies of scale for farmers over the next five years.
• SFURTI (Scheme of Fund for Regeneration of Traditional Industries) envisions 100 new clusters in 2019–20 to help 50,000 artisans economically.

Space

• To harness India’s space ability commercially, a public sector enterprise, New Space India Limited (NSIL) has been incorporated to tap the benefits of Isro.

Social stock exchange

• Electronic fundraising platform, a social stock exchange, to be set up to list social enterprises and voluntary organizations working for social welfare objectives.