The much-awaited union budget for FY 2019-20 was presented by Mrs. Nirmala Sitharaman, the new and first lady Finance Minister of India.

This is the maiden budget of the second Narendra Modi government in Lok Sabha on July 5, 2019.

Nirmala Sitharaman says that “Our economy was at approx $1.85 trillion in 2014, within 5 years, it has reached $2.7 trillion.” and says it is well within the Modi government’s capacity to reach the $ 5-trillion economy target.

Here are the key highlights of the budget 2019-20.

On Taxation

Nirmala Sitharaman quotes from the ‘Puranaanooru‘ that the Indian taxpayers performed their duty.

1. Key Announcements Made

  • In terms of direct taxes, the revenue of government has increased by over 78% to Rs. 11.37 lakh crore.
  • The tax rebate limit has now been raised to Rs 5 Lakhs. Income Tax as per the tax bracket will be applicable for individual taxpayers having an income of more than 5 Lakhs per annum.
  • A number of schemes have been rolled out for middle class homebuyers expected to comprise of total gains worth Rs 7 Lakh , in a move to achieve the goal of ” Housing For All”
  • Lower rate of corporate tax of 25% was so far applicable only to companies with a turnover of Rs. 250 crore. It is further proposed to increase this limit to companies with an annual turnover of Rs. 400 crore. This will cover around 99.3% of Indian companies.
  • Goods and Services Tax(GST), the rate on electric vehicles has been proposed to be lowered to 5%. and an additional income tax deduction of Rs. 1.5 lakhs on interest on loans taken to purchase electric vehicles.
  • To resolve the issues related to angel tax, startups will not be subject to any scrutiny with respect to their valuation.  Funds raised by startups will not require any scrutiny by the Indian income tax department.
  • Period of exemption for capital gains arising from the sale of a house for investment in startups is to be extended till March 31, 2021.
  • There will be an additional deduction of Rs. 1.5 lakhs for interest paid on loans for affordable housing borrowed up till March 31, 2020. This will come up to an enhanced interest deduction of up to Rs. 3.5 lakh on loans for affordable homes.
  • PAN and Aadhaar number can be used interchangeably from now onwards. This is to allow those without a PAN card to file income tax by using Aadhaar number.
  • Faceless and anonymous assessment system for income tax will be rolled out from this year in a phased manner.

Budget 2019 - Tax reforms

2. Key Beneficiaries Of These Announcements

Indian taxpayers especially the lower middle class, Indian startups, and corporates in the business of electric vehicles and ancillaries.

On Cashless Payments

To boost digital payments in India.

1. Key Announcements Made

  • Tax Deducted at Source (TDS) of 2% on cash withdrawals exceeding Rs. 1 crore from bank accounts, to discourage business payments in cash.
  • No charges or merchant discount rates shall be imposed on customers or the merchants. RBI and Indian banks will absorb these extra costs incurred.

2. Key Beneficiaries Of These Announcements

New startups and their customers.

Digital Payments

On Indian Banking And Financial Sector

Modi 2.0 clearly shown focus on clearing the pile of Non-performing assets (NPAs) with the Indian banking sector and stated that the financial gains from the cleaning up of the banking sector are clearly visible.

1. Key Announcements Made

  • NPAs of Indian commercial banks have come down by Rs 1 lakh crore and the number of public sector banks (PSBs) reduced by 8, through the consolidation process.
  • Rs. 70,000 crore re-capitalization for PSBs.
  • Non-Banking Finance Corporations (NBFCs) that are fundamentally sound should continue to get funding from banks and mutual funds. Also, the Government of India (GOI) will provide a one-time 6-months partial credit guarantee for PSBs, for the purchase of pooled assets for financially sound NBFCs.
  • The National Housing Bank is also the regulator of the housing finance sector. The finance minister proposes the regulation to be returned to the RBI.
  • Pension Fund Regulatory Authority to be separated from the National Pension Scheme Trust.
  • Air India disinvestment to be re-initiated and GOI sets an enhanced target of Rs. 1.05 lakh crore from the disinvestment process in FY 2019-20.

2. Key Beneficiaries Of These Announcements

PSBs, NBFCs, and Micro, Small & Medium Enterprises (MSME).

Banking and Financial sector

On Women Empowerment

Being the first woman finance minister of Indian, Nirmala Sitharaman laid special focus on Indian women by saying that in India’s growth story, particularly in the rural economy, the role of women is a sweet story.

She cites record turnout of women voters in the recent general elections and says the Indian Parliament has a record of 78 women MPs.

1. Key Announcements Made

  • GOI wishes to encourage and facilitate the role of women in India’s growth story. She proposes to form a broad-based committee for gender analysis.
  • She proposes to expand the women Self Help Groups (SHGs) interest subvention to all districts in India. For every verified woman SHG member having a Jan Dhan account, an overdraft of Rs. 5,000 shall be announced. And One woman in every SHG will be made eligible for a loan of up to Rs. 1 lakh under the Government’s Mudra scheme.

2.Key Beneficiaries Of These Announcements

Indian women especially rural women.

budget 2019 : women empowerment

On Indian Agriculture And Rural Sector

Finance Minister said that the government will focus more on building and sustaining the agricultural infrastructure in India along with keeping its promise regarding the development of the Indian rural sector.

She announced that the “Gaon, Gareeb aur Kisan are at the center of all our policies.”

1. Key Announcements Made

  • GOI to support private entrepreneurs operating in the agriculture sector.
  • Ease of doing business and ease of living should apply to farmers.” while proposing zero-budget farming, as a model for farmers. “Steps such as this can help to double farmers income in the near future.” This is one of the key poll promises made by Modi.
  •  To all rural households, water will be supplied by 2024. GOI will explore additional funds for Jal Shakti by accessing the Compensatory Afforestation Fund Management and Planning Authority fund.
  • She informed that 9.6 crore toilets have been constructed till now. More than 5.6 lakh villages have become open-defecation free. She proposes to expand Swachch Bharat to solid waste management in every village.
  • Over 2 crore rural Indians have been made digitally literate which will enable them to secure additional income of sources as well.
  • All villages and almost 100% of houses now have access to electricity.
  • She assured that by the year 2022 every single rural family, except those who are unwilling to take the connection, will have electricity and clean cooking gas.
  • The time period completion of house construction has come down from 314 days per house in FY 2015-16 to 114 days now.
  • The Department of Fisheries will establish a fisheries management network.
  • She says the government’s rural road scheme has brought about socio-economic improvements. All-weather connectivity has now been extended to over 97% of such habitations and 30,000 km of roads in this scheme have been built using green technology.
  • Under phase three of PM Gram Sadak Yojana, 1.25 lakh kms of road is to be built in the next five years. The estimated cost of the project is 80,000 Crores.

2. Key Beneficiaries Of These Announcements

The rural Indian population, and people involved in agriculture and animal husbandry

Budget 2019 : Rural Sector

On India’s Urban Sector

1.Key Announcements Made

  • Under Pradhan Mantri Awas Yojana (Urban), over 81 lakh houses at an investment of Rs 4.83 lakh crore have been sanctioned and construction has commenced for about41 lakh houses.
  • More than 95% of all cities have declared themselves open defecation free.
  • Rashtriya Swachchta Kendra will be inaugurated at Gandhi Darshan on 2nd October 2019.
  • Metro Rail initiatives to be enhanced by encouraging Purchasing power parity (PPPs) and faster completion. Construction of a dedicated freight corridor is almost about to be completed.

2.Key Beneficiaries Of These Announcements

The Urban Population of India.

Budget 2019 : Urban Indian

Other key Highlights

  • The Finance Minister put forth a modern tenancy law and proposed loans of up to Rs.1 crore to be given to MSMEs for ease of access. Adding further, she announced the creation of a payment platform for MSMEs to help facilitate easier payment of bills and save time consequently.
  • GOI will extend pension benefits to 3 crore retail traders and shopkeepers who have a revenue of less than Rs. 1.5 crore. This will be called the PM Karam Yogi Maan Dhan scheme.
  • The government will do a restructuring of the national highway program. In the second phase of Bharat Mala, States will be helped to develop State highways.
  • The Finance Minister proposed to allot  50 lakh crores to fortify railway infrastructure between 2018 and 2030. To aid this further, she encouraged public-private partnerships for faster development and completion of tracks and passenger freight services.
  • Minimum public shareholding in listed companies is proposed to be increased from 25% to 35% after discussion with SEBI.
  • 100% FDI for insurance intermediaries. Local sourcing norms to be eased for FDI in single-brand retail.
  • 10 million youth to take up industry-relevant skill training under the Kaushal Vikas Yojana.
  • 35 crore LED bulbs have been distributed through Ujala Yojana, leading to a cost-saving of Rs. 18,341 crore annually.
  • Aadhaar cards will be made available for NRIs with Indian passports, after their arrival in India, without having to wait for 180 days as opposed to the earlier mandatory waiting.
  • New Rs. 20 coins to be made available soon.

Conclusion

Many reforms announced today will prove beneficial for the general public and could give a boost to the economy as well. However, it is still too early to speculate whether the government would be able to perform satisfactorily and deliver on all the proposed changes. I would still give the benefit of doubt to Nirmala Sitharaman and really hope she brings in some wonderful changes to take India on a high growth trajectory.

Happy Investing!

Disclaimer: The views expressed here are of the author and do not reflect those of Groww.