ANALYSIS OF UNION BUDGET, 2019

ICAI CHAPTER, DUBAI

CA. T.N. Manoharan

Chairman,

Canara Bank

STATE OF THE ECONOMY in FY19

Fiscal deficit declined from 3.5% of GDP in FY 2017-18 to 3.4% in FY 2018-19. Target is 3.3%

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Growth of GDP moderated to 6.8% in FY 2018-19 from 7.2% in FY 2017-18.

Inflation (CPI) contained at 3.4%.

Expected to cross 3 trillion GDP by end of this year

Global FDIs in India remained strong at $ 64.37 billion, a growth of 6%.

Current account deficit at 2.1% of GDP.

GDP & Fiscal Deficit

Fiscal Deficit (%)

-4.8

-5.91

-4.93-4.48

-4.1 -3.89-3.52

-3.53

-3.42 -3.3

-7

-6

-5

-4

-3

-2

-1

0

SOVEREIGN DEBT TO GDP & INFLATION

106%

50%

238%

60% 70%

97% 87%

130%

88%

17%

0%

50%

100%

150%

200%

250%

300%

2018 % of GDP

5.80%

4.90%4.50%

3.60%3.48%3.88%

0%

1%

2%

3%

4%

5%

6%

7%

2014 2015 2016 2017 2018 2019

Inflation %

Approval for 11

PBs and 10 SFBs in 2015

Data Analytics and SaaS

P2Plending Regulati

on

RupayDebit Card –28.4 Cr

92.05% tele-density

35.99 crore Jan Dhan accounts

opened

99% Population Coverage through Aadhaar

Jam Trinity

JAM

GDP CONTRIBUTION SECTOR-WISEAgriculture

Sector16% Mining &

quarrying3%

Manufacturing17%

Electricity, gas, water supply &

other utility services

3%

Construction7%

Trade, hotels, transport,

communication and services related to

broadcasting…

Financial, real estate & prof

servs21%

Public Administration, defence and other

services15%

BUDGET 2019 PROPOSALS

21p

Borrowings and Other Liabilities

3p

4p

Customs

8p

9p

Union Excise Duties

16pIncome

Tax

19p

Non-Tax Revenue

20p

Non-Debt Capital Receipts

RUPEE COMES FROM RUPEE GOES TO

GST & Other Taxes

Corporate Tax

23p

Defence

5p

Pensions

7p

Finance Commission

& Other Transfers

8p

8p

Subsidies

9p

Other Exp

9p

States’ Share of Taxes &

Duties

13p

Interest Payments

Centrally Sponsored Schemes

Central Sectoral Schemes

2019 BUDGET

Capital Gain exemption

claimed cases must file

returns if before allowing

such exemption income

exceeds limit .

Faceless e-assessment

with no human interface

to be launched.

DIRECT TAXRs 1.5 lakh on interest paid

on loans taken up to

31.03.2020 for purchase of

house up to Rs 45 lakhs.

Aadhaar and PAN

interchangeable for

filing Income Tax Returns

and other purposes.

Deduction of Rs. 1.5

lakh on interest paid on

electric vehicle loans.

Return filing mandatory if

high value transaction is

entered into even if there is

no taxable income

10

Surcharge increased by 3% for

individuals etc., having taxable

income between Rs 2 crore and

Rs 5 crore and by 7% where

income exceeds Rs. 5 crore.

A slew of tax benefits for

IFSC’s:

❖ Capital Gains benefit on

transfer of units is

extended to Category III

AIF

❖ Interest on loans received

by NR from units located

in IFSC to be exempt

❖ Dividends declared from

accumulated income also

to be exempt from DDT.

❖ DDT Exemption to be

extended to MF’s in IFSC in

addition to companies.

❖ Profit Linked deduction

can now be claimed for 10

consecutive years out of

the first 15 years.

DIRECT TAX

Domestic companies to be

taxed at 25% and not at 30% if

the turnover/gross receipt is

upto INR 4 bn ( INR 2.5 bn)

Tax rate of 20% to be

applied on buyback of

shares by listed companies

post 5 July 2019.

ENHANCED SURCHARGE RATES

Income Tax

Slab

Existing

Surcharge

Proposed

Surcharge

Maximum

Marginal

Tax Rate

50 Lakh – 1 crore 10% 10% 34.20%

1 crore – 2 crore 15% 15% 35.88%

2 crore – 5 crore 15% 25% 39.00%

More than 5 crore 15% 37% 42.74%

TDS of 2% on cash withdrawal exceeding Rs.1

Crore a year from ‘a’ bank account-

Sec.194N

TDS on any amount received under a life

insurance policy which is not exempt shall be at 5%

of the taxable amount (Net) and not at 1% on the gross –Sec.194DA

TDS at 5% by Individuals and HUF on Contract

payments & Professional fees if amount exceeds

Rs.50 lakhs in a year-194M

TDS on interest to a NR/Foreign Co., in respect of Rupee

denominated bond U/S.194LC at 5% from

1.4.2019

TDS at the time of purchase of Immovable Property at

the 1% shall be on a consideration that shall include value of other

benefits-194-IA

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Tax Deduction at Source

NRI Proposals

Gifts received by NRs from Resident is taxable

Local Sourcing norms will be eased for FDI in single

brand retail sector

FPI permitted to subscribe to listed debt securities of ReiTs and InvITs

Black money and Impositionof Tax Act, 2015 now includesNRI with retrospective effect.

FDI in aviation, media,Insurance and animation sectors

Merger of the NRI portfolioinvestment scheme routewith FPI route.

NRI with Indian passports to get Adhaar card on arrival immediately (erstwhile after 180 days).

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INVESTMENTS AND MARKETS

Investment by FIIs and FDIs in debt securities in

infrastructure debt funds to be allowed.

A social stock exchange is proposed, for social and voluntary organizations, to raise capital, equity and debt.

Further recapitalization of PSBs: USD 10 bn.

SEBI to consider raising the minimum Public Shareholding threshold of 25% to 35% in listing Companies

Statutory limit for FPI in a company to be increased from 24%

to sectoral foreign investment limit.

Reduction in net owned fund requirement from INR 50 bn to INR 10 bn for units of foreign reinsurance company in IFSC.

INDIRECT TAX

< 5 Crores Quarterly

returns

5% BCD on imported

books

BCD of 7.5% on oil and gas,

from 5%.

Electronic invoice system

instead of e-way

bill 01

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0807

Withdrawal of Exemptions on

electronic items

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Exemption on import of

Defense equipment

SAD & road &

infrastructure

cess by INR

2 per Liter on

petrol

& diesel

Custom Duty from 10% to

12.5% on Gold & other

precious metals

10% Penalty on Profiteered amount

Interest on net tax liability, payable in cash

Amnesty scheme “Sabka Vishwas(Legacy Dispute Resolution)

Scheme”

CG to act as a single disbursement authority to grant refund

Balance in electronic cash ledger from one head to another head

Creation of National Appellate Authority for GST Advance Ruling

INDIRECT TAX

GST COLLECTIONS

103,45994,016

113,865

100,289

0

20,000

40,000

60,000

80,000

100,000

120,000

April May

GST COLLECTION (IN CRS)

2018 2019

Govt projects 18% growth rate in total tax revenues in FY20.

Last yr FY19, gross tax revenue fell short by 8.4% of budget estimates.

Reason – Centre GST collections which was 22% lower than budgeted.

The April-June average for GST mop uphas been Rs. 1.05 trillion, below the Rs.1.12 trillion average estimated to berequired to meet this year’s target.

STARTUPS

19,773 Startups registered as on Date

Loans of up to INR 1 crore to be given to MSMEs for ease of access- 59 minute approval

No scrutiny in respect of share valuation of share premiums

A television channel proposed exclusively for and by start-ups

Capital gains exempt on sale of residential house for Investment in start-ups till FY 2021

25%holding/Voting(50%) and 3 Yrs lock in (5 Yrs)

184

137 126156

137

186158

3652

24

80

121 108

163137

22

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50

100

150

200

Ease of doing Business Report

2014 2019 Change

WAY FORWARD - EODB

India ranks 77th as against 142nd during 2014.

Countries Rank

New Zealand 1

Singapore 2

Denmark 3

Hong Kong, China

4

Korea 5

USA 8

UAE 12

India 77

THANK

YOU