Key Highlights of Direct and Indirect Tax Proposals in Budget 2019

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

• 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.

Affordable housing

• 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.

NBFCs

• 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.

Indirect Tax

1. Electronic invoice system will be introduced to prefill the taxpayers return.  Roll out from January 2020  
2. There will be no need for separate for e-way bill.
3. A simplified single monthly return.
4. Taxpayers with less than 5 crores annual turnover will file only quarterly return.
5. A fully automated GST refund module will be implemented.
6. Multiple tax ledgers for GST payers will be replaced by just one.
7. GST reduced on EV from 12% to 5%.
8. Defence imports not manufactured in India to be exempted from Custome Duty.
9. Increased Custom Duty on gold & other precious metals from 10% to 12.5%.
10. Non-calamity & contingent duty imposed on tobacco products.

Download the New Finance Bill 2019 here 
Download the Memorandum Finance Bill here