Budget 2019 analysis: Here's what 5 key sectors expected and what they got

Finance Minister Nirmala Sitharaman with MoS Anurag Thakur and others leave the North Block to present the Budget for 2019-20 at the Parliament | Photo: PTI
Finance Minister Nirmala Sitharaman on Friday presented her maiden Union Budget. This Budget, since it was also the first one of the Narendra Modi-led central government in its second term, was watched very keenly to gauge the direction that Centre’s policy will take over the next few years. For this reason, besides others, there had been a lot of anticipation among the various sectors of the economy.

 

EY compares Budget wishlists of five key sectors — financial services, real estate, automobile, information technology (IT) & start-ups, and oil & gas — with actual delivery to estimate which of the five sectors have been the biggest winners and losers in Finance Minister Nirmala Sitharaman’s first Union Budget:

 

Financial services

 

* NPA taxation benefits

Expectation: Benefit of receipt-based taxation of interest on non-performing assets (NPAs) extended to non-banking financial companies

Delivery: Receipt-based taxation of interest on specified bad or doubtful debts have been extended to NBFCs

 

* Capital infusion

Expectation Recapitalisation of banks

Delivery: Capital to the tune of Rs 70,000 crore will be infused in public-sector banks to boost their credit

 

* Cashless economy

Expectation: Introduction of measures to promote cashless economy

Delivery: TDS at two per cent has been levied on cash withdrawal of more than Rs 1 crore from a bank account in a year. Specified businesses have been mandated to provide the facility to accept payments through electronic modes without imposing any charges

 

* Thin capitalisation rules

Expectation: Benefit of non-applicability of thin capitalisation rules be extended to NBFCs

Delivery: The condition to create debenture redemption reserve for NBFCs seeking public placement of debt has been removed

 

* MAT exemption

Expectation: Minimum alternate tax (MAT) exemption to general insurance be brought on a par with the life insurance sector

Delivery: 100% foreign direct investment (FDI) has been permitted in insurance intermediaries

 

* TDS rules for insurance cancellation

Expectation: Tax deducted at source (TDS) norms be relaxed in case of cancellation of insurance policy during its free-look period

Delivery: Additional tax incentives have been announced for international financial service centres (IFSCs), such as enhanced profit linked deduction, exemption from dividend distribution tax and capital gains, etc.

 

* Withholding tax

Expectation: Exclusion of interest payments to NBFC from withholding tax levy under Section 194A

Delivery: None

 

* Depreciation rules

Expectation: Higher depreciation be permitted on plant and machinery leased out by NBFCs

Delivery: None

 

* Deduction under 80C

Expectation: Deduction of life insurance premium be enhanced under Section 80C of the Act

Delivery: None

 

Real estate

 

* Income-tax deduction

Expectation: Limit of deduction for interest on borrowed capital be enhanced to Rs 300,000 a year

Delivery: Additional annual deduction of up to Rs 150,000 has been allowed for interest on loans taken for affordable housing (stamp duty value of up to Rs 4.5 million)

 

* TDS under Section 194-IA

Expectation: Threshold of consideration for TDS under Section 194-IA be increased from Rs 5 million to Rs 10 million.

Delivery: Scope of consideration for immovable property has been broadened for the purpose of TDS under Section 194-IA.

 

* REITs

* Expectation: Paced-up listing be provided for real estate investment trusts (REITs)

* Delivery: Foreign portfolio investors (FPIs) have been permitted to subscribe to listed debt instruments of REITs and infrastructure investment trusts (InvITs)

 

* Carry-forward of losses

Expectation: The cap of Rs 200,000 on carry-forward and set-off of loss from house property be removed.

Delivery: Model tenancy law will be finalised to promote rental housing.

 

* Duty relief

Expectations: Relief in duty rate for the construction sector

Delivery: Basic customs duty on raw materials like marble slabs and tiles has been increased

 

* Benefits for first-time home buyers

Expectation: Additional tax incentives be provided for first-time home buyers

Delivery: None

 

Automotive sector

 

* Tax sops for R&D

Expectation: Various tax incentives on research & development be restored

Delivery: Promotion of specified manufacturing activities through schemes for attracting global investment and investment-linked tax incentives

 

* Electric vehicles

Expectation: Tax benefits be introduced for promoting the use of electric vehicles

Delivery: Phase-II of Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has been introduced to encourage a faster adoption of electric vehicles

 

* Expectation: Electric vehicles be covered under priority sector lending

* Delivery: Annual deduction of interest up to Rs 150,000 has been provided for on purchase of e-vehicles (for loans taken until March 31, 2023)

 

* Addition deduction for capex

Expectation: 15 per cent additional deduction for capital expenditure on plant & machinery be reintroduced

Delivery: Basic Customs duty for certain parts used exclusively for electric vehicles reduced to Nil

 

* Local manufacturing:

Expectation: Duty sops be introduced to boost local manufacturing

Delivery: Basic Customs duty has been increased on import of motor vehicles used for specified purposes, chassis (fitted with engine), body of motor vehicle and specified goods used for motor vehicles

 

IT & start-ups

Photo: hutterstock

 

* Angel tax

Expectation: Angel tax be abolished to eliminate hardships faced by start-ups

Delivery: Eligible start-ups will not be scrutinised for angel tax, subject to conditions

 

* Investment in start-ups

Expectation: Measure to incentivise investment in start-ups be introduced

Delivery: Conditions governing the eligibility to claim long-term capital gains (LTCG) exemption on sale of residential property for investment in start-ups has been relaxed. Launch of an exclusive TV Channel to promote start-ups

 

* Skill development

Expectation: Policy reforms be introduced for promoting training and skill development in crucial next-generation technologies like artificial intelligence, Blockchain, 5G, machine learning, cyber security, etc.

Delivery: Creation of a skilled manpower pool through increased focus on areas such as artificial intelligence, internet of things, big data, virtual reality, etc.

 

* Carry-forward of tax losses

Expectation: Beneficial provisions relating to carry-forward of tax losses be extended to all start-ups

Delivery: The condition for carry-forward and set off of losses for eligible start-ups has been relaxed

 

* Section 94B

Expectation: The threshold of Section 94B be increased to from Rs 10 million to Rs 150 million for start-ups

Delivery: The Central Board of Direct Taxes (CBDT) will make special administrative arrangements for pending assessment of start-ups and redress of grievances

 

* MAT applicability

Expectations: Start-ups be exempted from applicability of minimum alternate tax

Delivery: Exemption from the applicability of Section 56(2)(viib) has been extended to Category-II alternative investment funds

 

* Duty relief

Expectation: Exemption in duty rates on IT products

Delivery: Basic Customs duty exemption on specified capital goods used for manufacturing of certain specified IT goods. But that on products like router, CCTV camera, optical fibre, bundles and cables.

 

Oil and gas

* Infra status

Expectation: An infrastructure status be granted to the exploration & production sector in order to boost exploration activity in the country

Delivery: Committee recommendation on retirement of old and inefficient plants and addressing low utilisation of gas plant capacity due to paucity of natural gas to be taken up for implementation

 

* Investment-linked deduction

Expectation: Investment-linked deduction be extended to entities engaged in generation and/or distribution and transmission of power

Delivery: A blue print will be made available for developing gas grids

 

* MAT rate

Expectation: MAT rate be reduced for exploration & production operations.

Delivery: Road & infrastructure cess and special additional excise duty has been increased by Re 1 per litre each. It will be levied on petrol and high-speed diesel oil. The levy of basic Customs duty on import of petroleum crude has been imposed at Re 1 a tonne. Basic Customs duty rate on import of certain oil products like methyloxirane, ethylene dichloride and naphtha has been reduced

 

* Private participation

Expectation: Public-private partnership be encouraged in the natural gas sector

Delivery: None

 



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