Headline Verdana Bold - Glimpses of Budget 2019 Key highlights of the Budget Speech - Tax Changes | Deloitte India

 
Headline Verdana Bold - Glimpses of Budget 2019 Key highlights of the Budget Speech - Tax Changes | Deloitte India
Headline Verdana Bold
Glimpses of Budget 2019
Key highlights of the Budget Speech
July 2019
Headline Verdana Bold - Glimpses of Budget 2019 Key highlights of the Budget Speech - Tax Changes | Deloitte India
Direct Tax

©2019 Deloitte Touche Tohmatsu India LLP.           Glimpses of Budget 2019
                                            Key highlights of the Budget Speech
Personal taxation

Additional surcharge on income exceeding INR 2 crs
• Surcharge to increase effective tax rate by about 3 percent for individuals with taxable income of INR 2 upto 5 crs
• Surcharge to increase effective tax rate by about 7 percent for individuals with taxable income of INR 5 crs and above

Deduction for interest paid on loans for purchasing electronic vehicles
• Additional income tax deduction of INR 1.5 lakh on the interest paid on loans taken to purchase electric vehicles; amounting to a benefit of
  about INR 2.5 lakh over the loan period to tax payers who take loans to purchase electric vehicles

Capital gains exemption for investments in start-ups
• Extension of the period of exemption of capital gains arising from the sale of residential house for investment in start-ups up to 31 March
  2021 and relaxation of certain conditions related to this exemption

Interest deduction for affordable housing
• An additional deduction of up to INR 1,50,000 for interest paid on loans borrowed up to 31 March 2020 for purchasing an affordable house
  valued up to INR 45 lakh.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                        Glimpses of Budget 2019       3
                                                                                                                         Key highlights of the Budget Speech
Personal taxation

Contribution to National Pension System (NPS)
• Additional benefits for NPS subscribers

Widening of Black Money Act
• The definition of the term “Assessee” under the Black Money Act being widened to cover non-residents and not-ordinarily residents, who were
  residents in the year in which the undisclosed income /asset was earned/acquired.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                    Glimpses of Budget 2019       4
                                                                                                                     Key highlights of the Budget Speech
Corporate tax

Increased turnover threshold for claiming 25 percent tax rate
• The current lower tax rate of 25 percent is applicable only to companies whose annual turnover is up to INR 250 crs. This annual turnover
  threshold is proposed to be increased to INR 400 crs.
• 99.30 percent of the companies would now be entitled to claim the reduced tax rate of 25 percent.

Parity between banks and NBFCs
• Interest on certain bad and doubtful debts to be taxable in the hands of deposit taking and systematically important non-deposit taking
  NBFCs, only in the year in which such interest is received.

Preventing tax abuse
• Listed companies shall also be liable to pay additional tax at 20 percent in case of buyback of share, as is the case currently for unlisted
  companies.
• Registration of trusts or institutions availing benefit of section 12AA proposed to be cancelled in certain situations for violating provisions of
  laws.

Gifts to non-residents
• It is proposed that gift of any sum of money or property situated in India, by a person resident in India to a person outside India (not being a
  gift otherwise exempt), on or after 5 July 2019, shall be deemed to accrue or arise in India.

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                                                                                                                             Key highlights of the Budget Speech
Corporate tax
Certain beneficial provisions

Benefit of section 35AD for mega investments in the sunrise and advanced technology areas
• Section 35AD allows deduction for whole of the capital expenditure incurred wholly and exclusively for specified businesses. To boost economic
  growth and the Make in India initiative, a scheme will be launched to invite global companies to set up mega manufacturing plants in the
  sunrise and advanced technology areas. Benefit of section 35AD will be extended to these companies.
• This benefit will be given for manufacturing in areas such as semi-conductor, fabrication (FAB), solar photovoltaic cells, lithium storage
  batteries, solar electric charging infrastructure, computer servers, and laptops. The Finance Bill has however not proposed any change in
  section 35AD.

International Financial Services Center (IFSC) in GIFT City
• Direct tax incentives to an IFSC:
    ‒ 100 percent profit-linked deduction under section 80-LA in any 10-year block within a 15-year period
    ‒ Exemption from dividend distribution tax from current and accumulated income to companies and mutual funds
    ‒ Exemptions on capital gain to category III AIF
    ‒ Interest payment on loan taken by IFSC from non-residents to be exempt from tax
    ‒ Capital gains exemption to be granted to certain securities if traded on a recognised stock exchange by specified persons

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                                                                                                                        Key highlights of the Budget Speech
Corporate tax
Certain beneficial provisions

Benefit to start-ups
• Start-ups and their investors who file requisite declarations and provide information in their returns will not be subject to any kind of scrutiny
  in respect of valuations of share premiums.
• With e-verification for establishing identity of investors and source of funds, funds raised by start-ups will not require any kind of scrutiny
  from the Income Tax Department.
• No inquiry or verification will be done in the pending assessments by assessing officers without obtaining supervisory approval.
• Fair market value of shares of a start-up issued to Category II AIFs will not need to be justified. At present, this benefit is available only to
  Category I AIFs.
• Some of the conditions related to carry forward and set off of losses in case of start-ups proposed will be relaxed.

Relief in levy of STT
• Levy of securities transaction tax (STT) will be restricted only to the difference between settlement and strike price in case of exercise of
  options.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                            Glimpses of Budget 2019       7
                                                                                                                             Key highlights of the Budget Speech
Corporate tax
Certain beneficial provisions

Concessional rate on short-term capital gains to FoF
• It is proposed to provide that concessional rate of short-term capital gains tax shall also apply to fund of funds set up for disinvestment of
  central public sector enterprises (CPSEs), to which concessional rate of long-term capital gains tax has already been extended.

Pass through of losses to categories I and II AIFs
• It is proposed to allow pass through of losses in cases of categories I and II AIF similar to pass through of income, which is allowed at
  present.

Demerger
• It is proposed to relax the definition of ‘demerger’ to allow the resulting company to record the value of the property and liabilities at a value
  different from the book value in compliance with the Indian Accounting Standards.

Affordable housing
• Definition of affordable housing (section 80-IBA) proposed to be relaxed to align it with the GST Act.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                          Glimpses of Budget 2019       8
                                                                                                                           Key highlights of the Budget Speech
Corporate tax
Certain beneficial provisions

Benefit u/s 9A to offshore funds
• Conditions relating to the remuneration of fund manager and the time limit to build up a corpus for availing benefit of section 9A are proposed
  to be rationalised.

Category II AIF
• Category II AIFs will be exempted from the provisions of section 56(2)(viib).

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                       Glimpses of Budget 2019       9
                                                                                                                        Key highlights of the Budget Speech
Corporate tax
Certain beneficial provisions

Incentive for resolution of distressed companies
• The conditions of continuity of shareholding for carry forward and set off of losses not to be complied by companies whose board of directors
  has been suspended by NCLT and new directors have been appointed on recommendation of the Central Government.
• For the purpose of computation of MAT liability of such companies, the aggregate of brought forward losses and unabsorbed depreciation to
  be allowed as a deduction.

Incentive in respect of rupee denominated bonds (RDB)
• Exemption granted through a press release to interest income of non-resident from RDB issued by a company or a business trust, outside
  India, during the period 17 September 2018 to 31 March 2019 to be regularised.

Payments by other electronic modes
• The current provisions permit certain transactions only through account payee cheques, drafts, or electronic clearing systems. It is proposed
  to allow payment or receipts through other prescribed electronic modes as well.

Measures to reduce genuine hardship
• Increase in the threshold for launching prosecution for non-filing return
• Certain class of persons to be exempted from anti-abuse provisions of section 50CA

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                      Glimpses of Budget 2019       10
                                                                                                                       Key highlights of the Budget Speech
TDS related amendments

TDS on taxable pay out of life insurance companies
• It is proposed to provide that tax shall be withheld on taxable pay out of life insurance companies on a net basis at 5 percent, instead of 1
  percent on gross (as at present).

Online filing for deduction u/s 195
• It is proposed to provide for online filing of application by a person making a payment to a non-resident seeking determination of tax to be
  deducted at source.

Failure to deduct tax u/s 195
• If the non-resident has filed its tax return, paid taxes on such income, and furnished a prescribed certificate from an accountant, the person
  failing to comply with section 195 shall not be treated as assessee in default. The amounts so paid without TDS should also not be disallowed.

TDS from consideration for immovable property
• Section 194-IA requires deduction tax 1 percent from consideration for acquisition of immovable property. It is now provided that
  consideration shall include other charges in the nature of club membership fee, car parking fee, electricity and water facility fee, maintenance
  fee, advance fee, or any other charges of similar nature that are incidental to the purchase of immovable property.

Payments by individuals or HUFs
• Individual or HUF to deduct tax at source at 5 percent from payments made to resident contractors and professionals.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                        Glimpses of Budget 2019       11
                                                                                                                         Key highlights of the Budget Speech
Simplification and procedural

Interchangeability of PAN and Aadhaar
• Those who do not have PAN will be allowed to file income tax returns on the basis of Aadhaar number.
• Aadhaar can be quoted wherever PAN is required.

Pre-filled income-tax returns
• Pre-filled tax returns will be made available to tax payers that will contain details of salary income, capital gains from securities, bank
  interests, dividends, etc., and tax deductions.
• Information regarding these incomes will be collected from the concerned sources such as banks, stock exchanges, mutual funds, EPFO, and
  state registration departments.

Faceless e-assessment
• A scheme of faceless assessment in electronic mode involving no human interface to be operationalised in a phased manner.

Digital payments
• TDS of 2 percent on cash withdrawal exceeding INR 1 crore in a year from a bank account to be levied.
• The business establishments with an annual turnover of more than INR 50 crore shall offer low-cost digital modes of payment (BHIM, UPI,
  UPI-QR Code, etc.) to their customers.
• No charges or merchant discount rate shall be imposed on customers and merchants. Costs shall be absorbed by banks and RBI.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                           Glimpses of Budget 2019       12
                                                                                                                            Key highlights of the Budget Speech
Transfer pricing

• It is proposed to clarify that once an advance pricing agreement (APA) has been signed and modified return is filed by the assessee, the
  assessing officer needs to only modify the total income in accordance with the APA.
• It is proposed to simplify the provisions of secondary adjustment (in case of transfer pricing) by providing that instead of interest payment
  every year, the assessee shall have an option to make one-time payment of tax of specified amount.
• It is proposed to clarify that master file needs to be filed even when there is no international transaction and that the assessing officer and
  commissioner (appeals) do not have power to call for master file from the assessee.
• It is proposed to provide for rationalisation of the definition of “accounting year” for alternate reporting entity, which needs to file a country-
  by-country report.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                            Glimpses of Budget 2019       13
                                                                                                                             Key highlights of the Budget Speech
Indirect Taxes

©2019 Deloitte Touche Tohmatsu India LLP.           Glimpses of Budget 2019
                                            Key highlights of the Budget Speech
Excise

•    Nominal Basic Excise Duty (BED) imposed on the following products to resolve the dispute pertaining to levy National Calamity Contingency
     Duty (NCCD):
     − Petroleum crude
     − Various tobacco products
•    Special Additional Excise Duty, and Road and Infrastructure Cess increased by INR 1 per litre each on petrol and diesel. The existing and
     revised effective duty rates are mentioned below:

       Commodity                            Existing Rate (per litre)   Revised Rate (per litre)

       Unbranded Petrol                     17.98                       19.98

       Branded Petrol                       19.16                       21.16

       Unbranded Diesel                     13.83                       15.83

       Branded Diesel                       16.19                       18.19

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                         Glimpses of Budget 2019       15
                                                                                                                          Key highlights of the Budget Speech
Customs

•    Enhanced penalty and stringent prosecution provisions introduced under the Customs Act for specified offences, such as fraudulent availment
     of undue concessions and export incentives
•    Provisions introduced for the verification of identity or compliance through Aadhar to prevent smuggling and protect interests of revenue
•    Basic customs duty (BCD) rates revised for the following products to give a push to the Make in India initiative or provide a level playing field
     to domestic manufacturing:

       BCD rates reduced/exempted for                                       BCD rates increased for
       • Inputs and raw materials in the nature of select chemicals,        • Various chemical, plastic and rubber products, optical
         textile, steel, other base metals, etc.                              fibre cables, electronic goods, automobile parts,
                                                                              completely built units of vehicles, and steel products
       • Capital goods used in manufacturing electronic items, such as
         populated PCBA, parts of mobile phones, and set top boxes          • Precious metals
       • Select parts of electric vehicles                                  • Capital goods used in manufacturing electronic goods,
                                                                              such as cathode tray tubes, CD/DVD, CRT monitors, and
       • Select military equipment and their parts imported by the
                                                                              plasma display panels.
         Ministry of Defence or armed forces
                                                                            • Specified electronic goods, such as switches, sockets,
       • Raw material, parts and accessories used in manufacturing
                                                                              plugs, connecters, and relays
         artificial kidneys
                                                                            • Petroleum crude

•    Increase in Road and Infrastructure Cess on petrol and diesel

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                            Glimpses of Budget 2019       16
                                                                                                                             Key highlights of the Budget Speech
Service tax

Retrospective exemption granted to the following services for the respective periods:
•    Taxable services provided by the state government for grant of liquor licence during the period 1 April 2016 to 30 June 2017
•    Services provided by state government industrial development corporations or undertakings or entities with 50 percent or more ownership by
     Government (either directly or indirectly) by way of granting developers a long-term lease of 30 years or more for plots for developing
     infrastructure for financial business during the period 1 October 2013 to 30 June 2017 (only to the extent of upfront amount received)
•    Services provided by Indian Institutes of Management to their students for specified educational programmes (except executive development
     programme) during the period 1 July 2003 to 31 March 2016
The application for refund (for taxes collected/paid in the past) in the above-mentioned cases will need to be submitted within six months from
the date of enactment of the Finance Bill (No 2.) 2019.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                        Glimpses of Budget 2019       17
                                                                                                                         Key highlights of the Budget Speech
Goods and services tax (GST)

•    An option to pay GST under the composition scheme extended to suppliers of services or suppliers of both goods and services with an annual
     turnover of up to INR 5 million in the previous FY
•    Enabling provisions introduced to allow the Government to prescribe a higher threshold limit of up to INR 4 million (existing threshold is INR
     2 million) at the request of any state or the recommendation of GST Council
•    Aadhaar authentication made mandatory for all taxpayers except specified states or class of tax payers
•    The Government may prescribe a class of registered persons who shall be mandatorily required to give an option to their recipients to make
     payments through specified electronic modes
•    Composition taxpayers to be allowed to furnish return on an annual basis along with quarterly payment of taxes
•    The commissioner has been empowered to extend the due date for furnishing annual return (FORM GSTR-9/9A) and reconciliation statement
     (FORM GSTR-9C) by tax payers, and monthly and annual statements by e-commerce operators
•    A facility has been introduced to allow the registered person to transfer any amount of tax, interest, penalty, fee, from one head to another
     head in the electronic cash ledger

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                          Glimpses of Budget 2019       18
                                                                                                                           Key highlights of the Budget Speech
Goods and services tax (GST)

•    Interest shall be levied only on the net tax liability (i.e., net of input tax credit) in respect of supplies declared in the return where such
     return is filed after the due date. Such relaxation shall not apply where returns are filed subsequent to initiation of any proceedings.
•    The central government has been empowered to disburse the refund amount in respect of state taxes as well.
•    National Appellate Authority for Advance Ruling will be constituted for hearing appeals against conflicting advance rulings pronounced on the
     same question by the Appellate Authorities of two or more states in respect of matters pertaining to distinct persons. Such advance ruling
     shall be binding on the applicants, all registered persons with the same PAN, the concerned officers or the jurisdictional officers of applicants,
     and other registered persons with the same PAN
•    National Anti-profiteering Authority has been empowered to impose penalty equivalent to 10% of the profiteered amount.

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                               Glimpses of Budget 2019       19
                                                                                                                                Key highlights of the Budget Speech
Others

A dispute resolution cum amnesty scheme, “Sabka Vishwas Legacy Dispute Resolution Scheme, 2019”, has been introduced for resolution
and settlement of legacy cases of central excise, service tax, and certain other central levies/duties/taxes/cesses. The proposed scheme
provides relief in the following ways:
•    Relief from 40−70 percent of tax dues, and waiver of interest and penalty for cases other than voluntary disclosure ones
•    Waiver of interest and penalty on payment of full tax dues disclosed for voluntary disclosure cases
•    No prosecution for the person discharged under the scheme

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                                                                                                                         Key highlights of the Budget Speech
Regulatory

©2019 Deloitte Touche Tohmatsu India LLP.           Glimpses of Budget 2019
                                            Key highlights of the Budget Speech
Regulatory

Securities law
•    SEBI to consider increasing minimum public shareholding in listed companies from the current threshold of 25 percent to 35 percent
•    Know Your Customer (KYC) norms for FPIs to be rationalised and streamlined
•    Social stock exchange to be set-up under the regulatory ambit of SEBI for listing social enterprises and voluntary organizations

FDI
•    FDI in aviation, media (animation, AVGC), and insurance sectors may be further relaxed
•    100 percent FDI to be permitted in insurance intermediaries
•    Local sourcing norms to be eased for FDI in Single Brand Retail Trading (SBRT)

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                         Glimpses of Budget 2019       22
                                                                                                                          Key highlights of the Budget Speech
Regulatory

Banking and Financial Services
•    Regulatory authority over the housing finance sector to be shifted from NHB to RBI
•    Proposals mentioned in the Finance Bill for strengthening the regulatory oversight of RBI over NBFCs such as empowering RBI to:-
      − Remove directors of NBFCs in public interest
      − Remove or debar auditor from acting as auditor of any RBI regulated entities for a maximum period of three years
      − Frame schemes for the functioning of the financial system which may involve amalgamation or reconstruction or splitting of NBFC
•    To allow NBFCs to raise funds in public issues, the requirement of creating a DRR will be done away with
•    To facilitate on-shoring of international insurance transactions and enable opening of branches by foreign reinsurers in the International
     Financial Services Centre, it is proposed to reduce Net Owned Fund requirement from INR 5,000 crore to INR 1,000 crore

Others
•    Model Tenancy Law to be finalised and circulated to the States for adoption
•    Measures to be taken by the Government to eliminate delay in payments to MSME sector
•    To consider issuing Aadhaar Card for NRIs with Indian Passports after their arrival in India without waiting for 180 days

©2019 Deloitte Touche Tohmatsu India LLP.                                                                                          Glimpses of Budget 2019       23
                                                                                                                           Key highlights of the Budget Speech
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