The Finance Minister, Nirmala Sitharaman, presented the Union Budget for the year 2019-20 in Parliament today. The focal points of the Budget were as follows:

  • In a major boost to the start-up environment and the in a an effort to simply the the issue of angel tax, it was announced during the budget that start-ups and their investors will not be subjected to any kind of income tax scrutiny on their valuation if they are verified by the government.Angel tax is applicable to unlisted companies that have raised capital through sale of shares at a value above their fair market value. This excess capital is treated as income and taxed accordingly. The tax was first introduced in 2012 to curb money-laundering through the sale of shares of private unlisted companies at bloated prices. It has now been proposed that a mechanism will be set up for this verification of investors and companies. CBDT will set up mechanism to alleviate issues with pending cases regarding angel tax," said Ms. Sitharaman.

    In addition, the period of exemption for capital gains arising from sale of house for investment in startups was also extended to March 31, 2021.

  • The Finance Minister has also declared that thethe Government will be setting up platforms to encourage the businesses of MSME and further ease filing of the bills and payment .. The government has announced a pension scheme for 30 million small traders having a Goods and Service Tax turnover of less than 1.5 Crore.

  • To attract more global investment, the government will consider further opening up of foreign direct investment (FDI) in aviation, media, animation, and the insurance sector in consultation with stakeholders .The minister has also proposed 100% FDI in insurance intermediaries. Apart from this, the government has also allowed 100% FDI in single-brand retail and proposed removing the 30% local sourcing norms.

  • Creation of a social stock exchange has been proposed for listing social enterprises and voluntary organizations working for the realization of a social welfare objective. SEBI has been urged to consider increasing the minimum public shareholding in listed firms to 35% from 25%. This has been proposed with a view to increase liquidity in the stock markets.
  • 7% increase in tax surcharge for those earning an income above 5 crore and 3% surcharge for those earning an income between 2 to 5 crore has been proposed.A cut in corporate tax for companies with annual turnover of up to Rs 400 crore to 25 per cent from 30 per cent has also been announced.
  • Public Sector Banks shall be provided Rs 70,000 crore capital to boost credit. Further, Government will provide one time six months' partial credit guarantee to Public Sector Banks for first loss of up to 10%. Appropriate proposals for strengthening the regulatory authority of the Reserve Bank of India over Non-Banking Financial Companies shall be put in place.
  • Companies with a business turnover of more than 50 crores will be mandated to have digital payments for promoting RTGS, IMPS and BHIM UPI. The Budget proposes to levy TDS of 2 percent on cash withdrawal exceeding Rs. 1 crore in a year from a bank account which will in turn encourage digital payments.
  • A labor code consolidating the existing 4 labor laws has been proposed.The finance minister has also proposed that reforms would be undertaken to amend rental laws as the existing laws appear to be archaic and do not address lessor-lessee relationships fairly.