Indian Government Finance Updates

The Finance Minister Nirmala Sitharaman presented the Union Budget for the year 2019-20 in the Parliament on July 5, 2019. As mentioned in the budget statement, India’s Ease of Doing Business ranking under the category of ‘paying taxes’ showed a significant jump from 172 in 2017 to 121 in the 2019, India had also improved its overall ranking in doing business from 100 to 77.
 
The key highlights of budget are as follows:
 
For Individuals
  • There will be no change in personal income tax rates. The Personal Income Tax rates for Financial Year April 01, 2019 to March 31, 2020 will be as follows:
Annual Taxable Income (in INR) Tax rate
0 to 250,000 0%
250,001 to 500,000 * 5%
500,001 to 1,000,000 20%
1,000,001 and above 30%
 
* Individual taxpayers having taxable income up to INR 500,000 will get full tax rebate and will not be required to pay income tax. Please note that taxable income exceeding INR 500,000 will not get any benefit from such tax rebate and hence will have to pay income tax on full taxable income. (Introduced in the Interim Budget of February 2019)
  • The standard deduction limit for salaried persons has been raised from INR 40,000 to INR 50,000 per annum. (Introduced in the Interim Budget of February 2019)
  • It is proposed to enhance surcharge on individual having taxable income between INR 20 million to INR 50 million and individuals earning more than INR 50 million a year. The effective tax rates for these two categories will increase more than 3 % and 7 % respectively (10% and 22% increase in the surcharge).
  • Interest paid on housing loans is allowed as a deduction to the extent of INR 200,000 in respect of self-occupied property. An additional deduction of up to INR 150,000 is proposed for interest paid on loans borrowed up to March 31, 2020 for purchase of an affordable house valued up to INR 4.5 million.
  • Pre-filled tax returns will be made available to the individual taxpayers.

For Companies
  • The Government is proposing to streamline multiple labor laws into a set of four labor codes. This will ensure standardized and streamlined process of registration and filing of returns. The details are awaited.
  • Currently lower corporate tax rate (CIT) of 25% is applicable to companies having annual turnover up to INR 2.50 billion. It is proposed to increase annual turnover limit for 25% Corporate tax rate from INR 2.50 billion to INR 4.00 billion.
  • Levy of Tax Deducted at Source (TDS) of 2% on cash withdrawals exceeding INR 10 million in a year from bank accounts for business payments.
  • Relaxing some of the conditions for carry forward and set off of losses in the case of start-ups.
  • Currently, there is high level of personal interaction between the taxpayer and the department for scrutiny assessments in the Income-tax Department. This leads to heavy corruption from the tax officials. To eliminate such instances a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner.


Goods and Services Tax (GST)
  • A simplified single monthly return is being rolled out.
  • Taxpayer having annual turnover of less than INR 50 million will have to file only a quarterly return.
  • From January 2020, an electronic invoice system will be implemented wherein invoice details will be captured in a central system at the time of issuance.
  • GST rate on electric vehicles (EV) reduced from 12% to 5%. Government will provide additional income tax deduction of INR 150,000 on the interest paid on loans taken to purchase electric vehicles.
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