Key Highlights of Direct and Indirect Tax Proposals
Budget 2019-20 on Direct Tax
- 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 with no human interface to be launched.
- To be carried out initially in cases requiring verification of certain specified transactions or discrepancies.
- 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.
- 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.
- Electronic invoice system will be introduced to prefill the taxpayers return. Roll out from January 2020
- There will be no need for separate for e-way bill.
- A simplified single monthly return.
- Taxpayers with less than 5 crores annual turnover will file only quarterly return.
- A fully automated GST refund module will be implemented.
- Multiple tax ledgers for GST payers will be replaced by just one.
- GST reduced on EV from 12% to 5%.
- Defence imports not manufactured in India to be exempted from Custome Duty.
- Increased Custom Duty on gold & other precious metals from 10% to 12.5%.
- Non-calamity & contingent duty imposed on tobacco products.
Download the New Finance Bill 2019 here
Download the Memorandum Finance Bill here