Union Finance minister Nirmala Sitharaman presented her maiden Financial Budget in the Parliament charting a roadmap for Prime Minister Narendra Modi's vision to transform India into a $5 trillion economy. The stock markets were tepid with the Sensex at 39,964.12 points while the Nifty was at 11,951.80 when she began to present the budget.
Reiterating on Modi's vision, she presented a budget that stressed on investment led growth and reforms enhancing the ease of direct and indirect taxes. She iterated on the need to transform rural lives by strengthening connectivity infrastructure. This budget is a strong boost for the country's entrepreneurial ecosystem as the Finance Minister commended the role of entrepreneurs and said that they are India's job creators and wealth creators. Programmes to impart industry skills and streamlining of labour laws has been proposed, which will be great news for youth employment.
Taxpayers will have to pay zero taxes for income upto Rs. 5 lakh.
There will be an increase of surcharge by 3% for individuals with income between 2 to 5 crore and a 7% rise in surcharge for individuals earning more than 7 crore.
A system where in faceless and anonymous assessment of income tax will be made, is going to be rolled out in phases from this year.
A promising move in this year's money budget, is a proposal to levy TDS of 2% on cash withdrawal crossing 1 crore in a year, from a single bank account. This will discourage business payments in cash.
The lower tax rate of 25% applicable to companies with an annual turnover of 250 crore will be extended to all companies with turnover of 400 crore which will cover 99.3% of companies.
A proposal has been made to restrict Securities Transaction Tax (STT) to the difference between settlement and strike price of options.
Investments and Market
A suggestion has been made to SEBI for increasing the threshold of public shareholding in listed companies from 25% to 35%.
A proposal has been made for setting up a Social Stock Exchange for listing Social enterprises and voluntary organisations.
The exemption period of capital gains arising from sale of residential houses in order for investment into start-ups has been extended to 31-3-2021.
Business establishments with annual turnover of Rs 50 crore will need to offer low-cost digital mode of payments to their customers. No charges will be levied or merchant discount rates shall be imposed on customers as well as merchants.
As a welcome move to discourage the practice of making business payments in cash, a proposal has been made to levy TDS of 2% on cash withdrawal crossing 1 crore in a year from a single bank account.
350 crore rupees have been allocated at an interest rate of 2% subvention on fresh or incremental loans for all GST-registered MSMEs.
To enable easy filing of bills and payment of Government contracts, a payment platform will be created for MSMEs.
There will be an offering of pension benefits to 3 crore shop owners with an annual turnover of less than Rs 1.5 crore under new scheme called ‘Pradhan Mantri Man Dhan Scheme’.
Youth and Employment
What the experts say?
In the first innings of the Modi government, the RERA act (Real estate and regulation development act 2016) was passed, which brought in organization and transparency in the Real Estate Market. Hopes were pinned on a major infrastructure boost in this budget announcement.
The fraternity was looking forward for industry status, single window clearance for developers and financial incentives to find a resolution for growing piles of unsold properties. More tax cuts & incentives are also speculated. But the industry met with disappointment since nothing remarkable was declared in this government budget
The silver lining however is that the government will incentivize Public Sector Undertaking (PSU) banks to buy assets from Non-Banking Financial Companies (NBFC) under the pool purchase program, thereby addressing the NBFC crisis, which will increase the confidence in the sector.
The good news for the consumer is the interest deduction of up to Rs.3.5 lakh for affordable housing loans to purchase a house valued up to 45 lakhs. This measure will definitely boost sales and will empower the ability of the salaried class to invest in Real Estate.
For middle class home buyers, it brings a huge sigh of relief as they could save up to Rs.7 lakhs on a loan with a term period of 15 years.
We will need to wait and watch to know more about the amendments in the ‘Model Tenancy Law’ that will hopefully drive back the community to invest into the Real Estate market.
While many including the Prime Minister have lauded the budget as a People Friendly move, there has been large scale criticism with some citing the budget as doing nothing for Pharma and Healthcare sectors. The Real Estate budget wasn't entirely disappointing, since a growth in property sales is expected very soon due to reforms which have immensely empowered the home buyer.