India’s new budget for 2019-20 on Friday hiked excise duty on petrol and diesel, raised import duty on gold, levied more tax on the super-rich and sought to spur growth with a cut in corporate tax and sops to housing sector, start-ups and electric vehicles. Presenting the first full budget for 2019-20 after Prime Minister Narendra Modi returned to power following a resounding victory in recent parliamentary poll, Finance Minister Nirmala Sitharaman, the first full-time woman Finance Minister, proposed measures to ease liquidity crisis facing Non-Banking Financial Services providing Rs 70,000 crore capital to public sector banks while seeking to raise additional resources through privatisation of some state-owned undertakings.
In relief to tax payers, she provided for an additional deduction of Rs 1.5 lakh on interest paid on loans borrowed up to March 31, 2020 on purchase of a houses up to Rs 45 lakh. Sitharaman did not announce any change in personal income tax rates for the middle class in her budget speech recalling that tweaks made during the interim budget in February and earlier had alleviated the tax burden on small and medium income-earners. “Those having annual income up to Rs 5 lakh are not required to pay any income-tax,” she said.
She said people in the highest income brackets need to contribute more to the nation’s development in view of rising income levels and proposed that people who earn over Rs 2 should be required to pay higher taxes. Under the budget, corporate tax on companies with turnover of up to Rs 400 crore has been cut to 25 per cent from existing 30 per cent. At present, the lower tax rate is applicable on companies having a turnover of up to Rs 250 crore. Sitharaman said the reduced tax rate would cover 99.3 per cent of India’s corporate.
To boost use of electric vehicles, an additional income tax deduction of Rs 1.5 lakh on interest paid on loans taken to purchase EVs has been proposed in the budget. She raised special additional excise duty and road cess on petrol and diesel by Re 1 per litre each. Customs duty on gold and precious metals was raised from 10 per cent to 12.5 per cent.
Basic customs duty was raised on an array of products including tiles, cashew kernels, vinyl flooring, auto parts, some synthetic rubber, digital and video recorder and CCTV camera. Excise duty of Rs 5 per 1000 has been imposed on cigarettes of length exceeding 65 mm, while 0.5 per cent duty has been levied on chewing tobacco, zarda and tobacco extracts and essence.
Sitharaman also announced a surcharge on individuals having taxable income of Rs 2 crore to Rs 5 crore and for those above Rs 5 crore which will hike their effective tax rate by 3 per cent and 7 per cent respectively. To boost FDI inflow into the country, the government will examine further liberalisation of sectoral investment caps in aviation, media, animation and insurance and also proposed 100 per cent FDI in insurance intermediaries and easing of local sourcing norms for single brand retail.
To boost cash-less economy, she said business establishments with annual turnover of Rs 50 crore will have to use digital modes of payments. Prime Minister Narendra Modi lauded the budget as one building a “New India.” In a statement, Modi said the budget will strengthen the poor and will create a better future for the youth of the country, accelerate the pace of development in the country and greatly benefit the middle class.
He said the budget will strengthen the enterprises as well as the entrepreneurs and will further increase the participation of women in the development of the country. The budget has a roadmap to transform the agriculture sector of India, the PM added.