Finance Minister, Nirmala Sitharaman held a press conference on Friday, the 24th of August 2019. The agenda of the conference revolved around boosting the economy and addressing concerns of investors and corporates arising out of the higher taxes.
The slew of measures announced by her in the press conference will affect MSMEs, automobile sector, labour laws, startups, and foreign portfolio investors (FPIs).
The Finance Minister removes the increased surcharge levied on ‘super-rich’ invested on gains from listed equity shares. The enhanced surcharge will no longer be applied to long-term capital gains (LTCG) and short-term capital gains (STCG) from the sale of listed equity shares.
To provide relief to startups, the FM announced that Sector 56(2)(viib) of the Income Tax Act will no longer be applicable to a startup registered with DPIIT. Any startup registration itself with DPIIT will secure immunity from income tax enquiries.
Also, the government has exempted startups and their investors from ‘Angel tax’ i.e. the tax on share premiums. The startups and their investors who have to file declarations and provide information in their tax returns will not be subjected to any tax scrutiny with respect to the valuation of share premiums.
She also stated that a cell will be set up to address the problems of startups, which will be headed by a member of the CBDT.
Post Budget proposal of levying a surcharge on taxes of higher-income groups, the FPIs pulled out Rs 23,000 crore from domestic equities in July and August this year. The surcharge on tax, increased for high-income earners, affected almost 40% of FPIs operating as trust and AOPs and made an equity investment in India unattractive.
To boost demand for the automobile sector, the FM said all BS-IV vehicles purchased up to the 31st of March 2019 will remain operational for the entire period of their registration.
From the direct tax perspective, additional depreciation of 15% will be allowed on all the vehicles purchased from the 23rd of August 2019 till the 31st of March 2019. Resulting in an increase of cumulative depreciation on new vehicles to 30% for the financial year 2019-20.
In addition to the removal of surcharge on LTCG/STCG, Sitharaman said “Pre-filing of income tax to become a reality soon”. She also stated that the faceless scrutiny of income tax will begin from Vijay Dashami 2019. Going forward, the physical assessment of the income tax scrutiny cases will happen only in random cases.
All the income tax notices, orders, and summons will now go through a centralised system from the 1st of October 2019. Any notice or communication which does not go through the centralised system will not be considered legal in the eyes of law.
All the old income tax notices are to be settled by the 1st of October 2019, says Nirmala Sitharaman. If any of the notices are not settled, the same will be reissued through the centralised system.
No tax officer will be acting on the old notices independently post the aforementioned date. Also, from the 1st of October 2019, income tax assessments to be closed within three months from the date of reply.
Addressing the concerns of the industry on tax-related and other matters, the government has withdrawn 1400 cases for corporate offences. The government does not want to attempt anything in terms of prosecution.
To quicken the credit flow to the borrowers in the country, the FM said NBFCs will now use Aadhaar-based KYC for new Dema accounts and investment in mutual funds. Also, the banks will launch repo-linked loan products that will lead to MCLR rate cut in full.