Key Highlights of the Interim Budget 2019-20 : Direct & Indirect Tax related

Income Taxes

Non Corporate Taxes

No changes proposed in the Income Tax rates and slabs, the
Government has made certain key proposals to provide relief to small taxpayers,
especially to middle class and salaried earners in the form of:

• Rebate on tax for total income of up to INR 5,00,000 for individuals

• Increase in standard deduction from INR 40,000 to INR 50,000 for salaried

• Relief for owners of more than one house; second self-occupied house not to
be subject to tax on deeming/notional basis; aggregate deduction of interest on
home loan for self-occupied properties retained at INR 2,00,000

• Prescribed monetary threshold for deduction of tax on interest from bank or
Post Office deposits increased from INR 10,000 to INR 40,000

• Proportionate exemption on long-term capital gains arising from proceeds of
sale of residential house extended to purchase of two residential houses from
one house, subject to:

– Amount of capital gain not exceeding INR 2 crore [no monetary threshold
continues for investment in one residential house]
– One-time opportunity to claim such exemption

Corporate Taxes

Domestic companies with a turnover not exceeding INR 250 crore during FY 2016-
17 continue to enjoy a reduced tax rate of 25% (increased by applicable surcharge
and cess). The base year for this reduced tax rate is proposed to be extended to
domestic companies with turnover not exceeding INR 250 crore for FY 2017-18.
The provisions relating to TDS on rental payments provide for a monetary threshold
of INR 1.8 lakh. This threshold has been enhanced to INR 2.4 lakh.

Certain key amendments have been proposed in the Interim Budget to provide relief
and give an impetus to the Real Estate sector, including the affordable housing market:

• The provisions were introduced vide Finance Act 2017 to tax notional income on
rentals from property held as stock-in-trade for a period beyond one year from
the end of the financial year in which the certificate of completion of property
was obtained. This period of holding is proposed to be increased to two years.

• Under the present provisions, deduction on profits is available to developers
who are engaged in developing and building affordable housing projects. One
of the conditions, i.e. the time taken to seek approval for a project from the
competent authority, is proposed to be extended to 31 March 2020.

• The Government envisages a push towards technology-intensive tax
assessments and return processing within the next two years. This is directed
towards eliminating personal interface and bringing transparency.

Indirect Taxes

The Government has estimated the CGST collection for FY 2019-20 at
INR 6.10 lakh crore. This assumes a growth of around 20% over the revised estimate
FY 2018-19 at INR 5.04 lakh crore.

GST is proposed to be levied @ 5% on Electric Cars instead of 12%.

GST on Gold, Silver & Other Precious Stones are likely to increase as proposed.

Given that overall growth in GST collection in the current year over last year is
only 8% (INR 97,100 crore vs INR 89,700 crore on a month-on-month basis), it will
be interesting to see how this ambitious target is achieved by the Government.
It will need substantial expansion in the tax base and stringent control over
revenue leakages.

Stamp Duty

The proposed amendments in stamp duty provisions are largely aimed at rationalising
the various stamp duty provisions as well as streamlining the stamp duty collection
mechanism. It is intended to designate stock exchanges and depositories to collect
stamp duty on sale or transfer of securities. Such collection will be transferred to
the respective state government within the prescribed time. The amendments also
propose changes to the rates of duties. It also appears that exemption of stamp duty
on transfer of dematerialised shares is proposed to be done away with.

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