Budget 2019 provides the implementation road map for the governments vision of transitioning India to a INR 5 Trillion economy. The focus is on tapping different sources of capital to kick start investment, strengthening infrastructure, encouraging entrepreneurs and deepening digitization.
We have sent a strong signal that India is open for business with the easing of FDI norms for local sourcing for FDI in single brand retail, increase in FPI investment limit in a company from 24% to the sectoral foreign investment limit will help attract foreign investments.
The budget has proposed to widen the lower tax rate of 25% to companies having a turnover of up to Rs 400 crore from Rs 250 crore, this will cover 99.3% of all the companies.
The decision not to subject start ups to any kind of scrutiny in respect of share valuations of share premiums is welcome. In an another significant change, Budget 2020 has proposed to eliminate the high level of personal interaction between the taxpayer and tax department, which leads to certain undesirable practices on the part of tax officials. A scheme of faceless assessment in electronic mode involving no human interface has been launched.
According to this, the cases selected for scrutiny would be allocated to assessment units randomly and notices issued electronically by a Central Cell without disclosing the name, designation, or location of the assessing officer. The Central Cell will be the single point of contact between the tax departments and assesses.
In a relief for businesses, the FM proposed an amnesty scheme called “the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019” for pre-GST old disputes regarding Central Excise and Service Tax for faster closure of such disputes and litigations.
The proposed scheme covers past disputes of taxes, which have got subsumed in GST, namely central excise, service tax and cesses. All persons are eligible to avail the scheme, barring a few exclusions.
The relief under the scheme varies between 40 per cent and 70 per cent of the tax dues for cases other than voluntary disclosure cases, depending on the amount of tax dues involved. The scheme also provides relief from payment of interest and penalty. For voluntary disclosures, the relief is regarding waiver of interest and penalty on payment of full tax dues disclosed. The person discharged under the scheme shall also not be liable for prosecution.
To ease the process of filing tax returns, the Centre has introduced pre-filed returns. These will enable taxpayers to get pre-filed details when they download the pre-filed form from the I-T website. Accordingly, they need to verify the details and submit the form. The pre-filed information will be collected from banks, mutual fund houses, registrar, EFFO, stock exchanges and so on.
To make the pre-filing of returns viable, the Finance Bill proposed to widen the scope of furnishing statement of financial transaction (SFT) by mandating producing information other than prescribed persons (MFs, banks, post office). They also removed the current threshold criteria of Rs 50,000 to ensure that a small amount of transactions are also pre-filed.
To bring high-value transaction under the tax net, the Bill has mandated compulsory filing of return by those who have incurred certain expenditures, including deposit in current account exceeding Rs 1 crore, foreign travel for self or others exceeding Rs 2 lakh, electricity expenses more than Rs 1 lakh. Besides, for those claiming capital gains exemption, if the income before exemption is more than the minimum, exemption limit shall also be required to furnish a tax return.
To widen and deepen the tax base, the Finance Bill makes it obligatory for individual or Hindu undivided families to deduct Tax Deduction at Source (TDS) at the rate of 5 per cent on payments made to resident contractors or professionals when it is for personal use or the said entity is not subject to audit. This will be applicable if annual payment made to such a contractor exceeds Rs 50 lakh.
To further curb cash transactions, businesses will be required to pay TDS at 2 per cent for cash withdrawal of more than Rs 1 crore a year. The Finance Bill also mandates quoting and authentication of PAN or Aadhaar number by the person receiving the documents for high-value transaction and if he fails to do so, a penalty of Rs 10,000 will be levied for each default.
A 20% buy back tax has been levied on listed companies as several companies had preferred the buy back route over the dividend route to pay back investors. The outlook for the rupee is expected to be stronger given the government is looking to raise debt globally.