5 Jul 2019, 16:52 — 5 min read
Background: The re-elected government presented its first budget today. In his previous article financial expert Anirudh Gupta had shared 7 tips for the new financial year. In this article he analyses the budget from the point of view of various stakeholders and lists out the interesting aspects of the budget.
The budget is essentially a vision document. At an aggregate level I would rate today's budget 7 out of 10. The government has missed an opportunity to make it a 'Dream Budget'. Let us examine the plus, minus, neutral and interesting elements of this budget.
Here are the highlights of the budget from the point of view of various stakeholders.
1. Salaried taxpayer: There is a benefit under buying houses under the affordable housing category of additional INR 1.5 lakhs. Value of houses purchased up to INR 45 lakhs is included in the same.
Additionally, any interest serviced on electronic vehicles is available up to an amount of INR 1.5 lakhs. This is likely to encourage a lot of e-vehicle manufacturing activity from a medium term point of view.
The tax authorities are looking at an e-resolution for scrutiny and queries raised on taxation. This is likely to reduce harassment of regular taxpayers.
Aadhaar card and PAN inter-operatability potentially can widen the tax base.
2. HUF: Earlier TDS was not to be deducted at source while making a payment from a HUF. However currently TDS will need to be deducted.
3. Senior citizens: Mediclaim amount deduction has gone up from 30,000 to 50,000 per annum.
4. Investors: Thankfully ITCG rates have not been increased and DDT maintained at old levels. It stays the same at 10%.
5. NRI: Non-residents with an Indian passport can obtain an Aadhaar card on their visit to India immediately as opposed to 180 days earlier
1. Startups: Startups have been facing the issue of valuation questions from tax authorities, and hence have been exempted from scrutiny on valuation premium. This is good from a point of view of facilitating increase in angel investments.
2. Corporates: Corporate with up to 400 crores of turnover have the benefit of paying lesser tax rates. They constitute 99.3 % of the number of taxpayers. This potentially may increase jobs over a period of time.
3. Non Banking Financial Companies (NBFCs): NBFCs are likely to receive a line of funding from the regulator. This has been a discussion since the last 1 year. This is likely to stabilise the situation.
4. Public Sector Undertakings (PSUs): Recapitalisation of 70,000 crores for PSU Banks would act as growth capital and can potentially increase the capital base of the banks and thus the credit flows over the medium term. This would be good for SME borrowers.
5. Small and Medium Enterprises (SMEs): There is not much from an SME point of view apart from the pension scheme for smaller traders with a turnover of up to 1.5 crore.
Government is looking at the possibility of raising money overseas on account of a stable rupee and controlled fiscal deficit. It needs to be looked at carefully and evaluated in the larger scheme of global risks and potential risk-reward as an economy.
If a corporate does a buyback an additional tax of 20% is levied.
This is a negative sentiment on the jewellery industry. Duty rates have gone up from 10% to 12.5%. This could potentially be positive for certain industries where imports may reduce.
Overall a slight increase in fiscal deficit maybe up to 3.5% of the GDP and an increase in capex would have potentially enthused the animal spirits. The government has stuck to the fiscal path probably to borrow at better terms overseas if needed.
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