Direct Taxes and related reforms

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Source: Press Information Bureau (Budget 2019)

Following are the areas under which changes related direct taxes mentioned in the budget;

• Tax rate reduced to 25% for companies with annual turnover up to Rs. 400 crore
• Surcharge increased on individuals having taxable income from Rs. 2 crore to Rs. 5 crore and Rs. 5 crore and above.  
• India’s Ease of Doing Business ranking under the category of ‘paying taxes’ jumped from 172 in 2017 to 121 in the 2019.
• Direct tax revenue increased by over 78% in past 5 years to Rs. 11.37 lakh crore

Tax Simplification and Ease of living – making compliance easier by leveraging technology:

• Interchangeability of PAN and Aadhaar
  • Those who don’t have PAN can file tax returns using Aadhaar.
  • Aadhaar can be used wherever PAN is required.
• Pre-filing of Income-tax Returns for faster, more accurate tax returns
  • Pre-filled tax returns with details of several incomes and deductions to be made available.
  • Information to be collected from Banks, Stock exchanges, mutual funds etc.
• Faceless e-assessment
  • Faceless e-assessment with no human interface to be launched.
  • To be carried out initially in cases requiring verification of certain specified transactions or discrepancies.

Affordable housing

• Additional deduction up to Rs. 1.5 lakhs for interest paid on loans borrowed up to 31st March, 2020 for purchase of house valued up to Rs. 45 lakh.
  • Overall benefit of around Rs. 7 lakh over loan period of 15 years.

Boost to Electric Vehicles

• Additional income tax deduction of Rs. 1.5 lakh on interest paid on electric vehicle loans.
• Customs duty exempted on certain parts of electric vehicles.

Other Direct Tax measures

• Simplification of tax laws to reduce genuine hardships of taxpayers:

• • The higher tax threshold for launching prosecution for non-filing of returns
  • Appropriate class of persons exempted from the anti-abuse provisions of Section 50CA and Section 56 of the Income Tax Act.

Relief for Start-ups

• • Capital gains exemptions from sale of residential house for investment in start-ups extended till FY21.
  • ‘Angel tax’ issue resolved- start-ups and investors filing requisite declarations and providing information in their returns not to be subjected to any kind of scrutiny in respect of valuations of share premiums.
• Funds raised by start-ups to not require scrutiny from Income Tax Department

• • E-verification mechanism for establishing the identity of the investor and source of funds.
• Special administrative arrangements for pending assessments and grievance redressal
  • No inquiry in such cases by the Assessing Officer without obtaining approval of the supervisory officer.
• No scrutiny of valuation of shares issued to Category-II Alternative Investment Funds.
• Relaxation of conditions for carry forward and set off of losses.

NBFCs

• Interest on certain bad or doubtful debts by deposit-taking as well as systemically important non-deposit taking NBFCs to be taxed in the year in which interest is actually received.

International Financial Services Centre (IFSC)

• Direct tax incentives proposed for an IFSC:

• • 100 % profit-linked deduction in any ten-year block within a fifteen-year period.
  • Exemption from dividend distribution tax from current and accumulated income to companies and mutual funds.
  • Exemptions on capital gain to Category-III Alternative Investment Funds (AIFs).
  • Exemption to interest payment on loan is taken from non-residents.

Securities Transaction Tax (STT)

STT restricted only to the difference between settlement and strike price in case of exercise of options

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