India: India Interim Budget 2019-20 - Analysis

On February 01, 2019, the Indian Finance Minister presented an interim Budget for financial year ("FY") 2019-20 ("Budget"). The backdrop of the Budget was the national elections which are slated to take place in the next few months. While a full budget will be announced by the newly elected government later this year, the present interim Budget will help the government machinery to run before the elections. While the Government expects to keep the fiscal deficit to 3.4% of GDP and current account deficit to 2.5% for FY 2019-20, the Budget does not make major tax policy changes. As anticipated, it centered its attention on the domestic rural and agrarian economy, the unorganized sector and low- income salaried citizens.

The Budget mainly focuses on the Government's vision to drive India to higher economic growth and become a five trillion-dollar economy in the next five years. The Budget lists down the Government's macro-economic plans for boosting sustained economic growth. These include expending capital towards building next generation physical infrastructure, building a strong health system, focusing on rural industrialization, farm production, a safe and clean environment, outer space programmes and the creation of a Digital India, amongst others.

Reforms have been proposed with the aim of generating higher income for farmers and the Indian middle class. A financial support scheme has been introduced which proposes to provide minimum guaranteed income to small and vulnerable farmers. This, along with the impetus given to interest subvention schemes for improving the availability of farmers' loans, is expected to increase disposable income in the hands of farmers and boost rural consumption. Similarly, budgetary allocation has been made towards social security benefits in the form of pension schemes for workers in the unorganized sector. Reforms are also made to safeguard the interests of micro, medium and small enterprises.

For providing relief to small taxpayers, the Budget offers a full tax rebate for individuals whose total income is below INR 5,00,000 (approx. USD 7000). No changes are however proposed in the income tax slab rates for individuals or corporates, and persons earning income over INR 5,00,000 remain to be taxed in the same manner. Certain other measures have also been introduced for promoting the interests of the middle class and salaried citizens of the country.

The Budget also provides a thrust to investment in the real estate sector. Proposals include a) tax exemption on notional rent earned by a person on two self-occupied houses; b) non-taxability of notional rental income on unsold inventories for two years; and c) benefits of rollover of capital gains up to INR 20 million (approx. USD 280,000) from investment in two residential houses. To boost affordable housing, tax exemptions for development of housing projects are extended by a year which are further likely to accelerate construction and provide a boost to the real estate sector.

An impetus is also given to technological development, creation of digital infrastructure and digitalization of governance. To this end, the Budget proposes to create a more taxpayer friendly, technology-driven, tax assessment platform, where scrutiny is proposed to be done anonymously and in a speedier manner. It is expected that tax returns will be processed digitally within 24 hours under this project. It would be interesting to see how this is implemented and whether this can minimize challenges around unreasonable and high-pitched assessments by the tax authorities.

The Budget also proposes to introduce much needed reform to India's stamp duty legislation. One of the key reforms proposed clarifies that where several instruments are executed in furtherance of a transaction relating to issue or transfer of securities, only the principal instrument will be chargeable with stamp duty. Other key reforms include proposals to (a) impose an obligation on stock exchanges and depositories to collect stamp duty on transfers (delivery based or otherwise) of listed securities, on behalf of State Governments (b) replace broker turnover stamp duty with stamp duty on the clearance list used for transactions through stock exchanges, and (c) withdraw the stamp duty waivers on transfer of securities and mutual fund units in dematerialized form. The reforms are expected to provide operations efficiency, increase government revenue and even streamline the process of paying stamp duty.

Thus, while the interim Budget does not make significant tax reforms, it indicates the direction and pace for India's economic policy. It is interesting that the Government has estimated a fiscal deficit of 3.4% of the total GDP and current account deficit of 2.5% of the GDP for FY 2019-20. While this is a prudent target, in light of the reforms and sops proposed, further reforms may be required to maintain these ratios. The expected nominal GDP growth rate of 11.5% in FY 2019-20, coupled with expectations of higher tax collections, specifically of goods and services tax, may have an impact on achieving set goals. The prospects of the Indian economy will also need to be assessed in light of emerging global trade tensions. All-in-all, the Finance Minister presented a populist Budget keeping the elections in mind while trying to not deviate from fiscal prudence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions