(This article was first published in The Financial Express.)
Union Budget 2019 India: In her maiden Budget presentation, India’s first woman finance minister Nirmala Sitharaman did a stellar job in presenting the roadmap for the coming few years. She called for “reform, perform and transform” at the beginning of her Budget speech and delivered on all three fronts. While this Budget was expected to be an extension of the Interim Budget, the FM did have quite a few big bang announcements to make for the citizens as well as businesses.
The government proposed a way to resolve the much-disputed ‘angel tax’ issue for start-ups. Under new guidelines, start-ups and investors will not be subject to angel tax scrutiny as long as required documents have been presented. This is a welcome move, followed by the widening of the definition of start-ups and increasing the age cap from seven to 10 years.
To get higher investments in start-ups, the FM extended the period of exemptions for capital gains from the sale of a house if the gains are invested in a start-up. Interestingly, the government also plans to start a TV channel exclusively for start-ups.
In the digital payments space, the two announcements that caught our ears are the new payment platform for MSMEs and the waiving off of MDR charges on digital payments. The payment platform will allow MSMEs to file bills easily and make timely payments.
The proposal to remove MDR charges for small businesses is a big move by the government to promote digital payments. Businesses with annual turnover of more than `50 crore will have to provide digital payment options to their customers. To make sure these businesses are properly incentivised to do so, the government plans to scrap merchant charges on these payments. These costs will be absorbed by RBI and banks.
Another step in this direction is the proposal to levy 2% TDS on cash withdrawals of over `1 crore made in a year for business payments. Digital payments on the consumer front are one end of the spectrum, and it’s encouraging to see the FM has taken initiatives to push digital business-to-business payments as well.
While this may seem like a harsh move for some businessmen, the government did attempt to show that it has the interests of businesses in mind by slashing the corporate tax rate to cover 99.3% of all companies in India.
The annual turnover cap for the 25% corporate tax slab was raised from `250 crore to `400 crore.
One the whole, we found the Budget to be a nuanced one. The FM was able to tick the right boxes for the economy. While the micros might be challenging at the moment, the macros are in place for the Indian economy to grow to reach the $5-trillion target the government has set for itself.