Union Budget 2019 – Key Highlights

India’s first full-time woman Finance Minister Nirmala Sitharaman presented the Union Budget 2019 today in the lower house of the Parliament. Noticeably, she chose to carry the budget document in a traditional four-fold cotton wrap, a departure from the colonial legacy of the enigmatic budget briefcase.

The overall government spend on this budget is expected to be Rs. 27.86 lakh crore,  a 13.4% increase over the revised estimates for 2018-19. Let’s have a look at some of the key highlights of the first union budget of the Modi Government 2.0.

10-Year vision and 5-Trillion dollars

The FM flagged off the 10 pointer vision of the government for the next decade and expressed hope that India is on track to achieve the 5 trillion dollar mark in the next five years. 

Infrastructure

• Rs 100 lakh crore has been allocated for infrastructure in the next 5 years 
• Infrastructural announcements have been made under the Pradhan Mantri Gram Sadak Yojana, Bharatmala and Sagarmala projects etc. and new industrial corridors, dedicated freight corridors, river cargo routes, etc.
• Government plans to use waterways for domestic cargo movement and increase the movement by four times in the next four years.
• The opportunity will arise for participation with the government in building public infrastructure in land parcels held by CPSEs and ministries.

Aviation and beyond

• The FM also disclosed that India is looking to enter into aircraft financing and leasing activities. In order to achieve self-reliance in the aviation sector, an ecosystem for Maintenance, Repair and Overhaul industry will be developed.
• New Space India Limited to be acting as the new commercial arm of Department of Space.

Transport

• New metro rail of 300 km have been approved and inter-operable transport card will be introduced. 
• In phase II of Bharatmala, states will be helped to develop state road networks.
• An outlay of Rs. 10,000 crore to be earmarked for the electric vehicle segment, to emphasise on the affordable and environment-friendly mode of transportation.
• For suburban transport, special purpose vehicle structures to be built through PPP initiatives. This is likely to be part of the Rs. 48,032 crore allocated to urban development.
• Massive railway station modernisation programme to be undertaken.

Quality and Ease of Living

• Package of power sector tariffs and structural reforms to be introduced by the government.
• A model tenancy law will be circulated to the states to replace the existing archaic tenancy laws.
• India to be made Open Defecation free by Gandhi Jayanti 2019.
• Promote the use of solar stoves and battery chargers in line with the successful LED bulb mission.

MSME and Entrepreneurs

• FM declared ease of credit scheme for MSMEs, with loans up to Rs. 1 crore within 59 minutes. 350 crore has been made available for interest subvention for all GST registered MSMEs.
• Faster release of government payments to be facilitated and a payment platform specifically for MSMEs. 
• The government will extend pension benefits to retail traders and shopkeepers with an annual turnover of up to Rs. 1.5 crore under the Pradhan Mantri Karam Yogi Maandhan Scheme.
• The availability of low-cost capital is to be ensured through measures like the setting up of a Credit Guarantee Enhancement Corporation and an action plan to deepen the market for long term bonds including corporate bond repos, credit default swaps etc.
• Television programme for start-ups across Doordarshan bouquet channels.

Investments including FDI

• SEBI will be asked to reconsider the minimum public shareholding threshold in public companies from 25% to 35%.
• The government plans to discuss with RBI and SEBI to increase retail investment in treasury bills and securities issued by the government. 
• Government plans to invite FDI in sectors like aviation, media and insurance after consultation with stakeholders. Besides, 100% FDI will be allowed in insurance intermediaries while the local sourcing norms will be eased in the single-brand retail segment. 
• The FM has highlighted the importance of making investment opportunities available for Foreign Portfolio Investors. This will also ease the access of NRIs to the equity market.

Rural

• The government has allocated Rs. 151,718 crore on agriculture, Rs. 140,762 crores on rural development and Rs. 50,850 crore on social welfare.
• Every rural family to have clean cooking facility and electricity connection by 2022.
• Through the Pradhan Mantri Matsya Sampada Yojana, the Department of Fisheries will be able to establish a robust fisheries management framework.
• The Pradhan Mantri Gram Sadak Yojana will upgrade 1,25,000 km of road length in the next five years, at a cost of Rs. 80,250 crores.
• Under the ‘Scheme of Fund for Upgradation and Regeneration of Traditional Industries scheme, Bamboo, Honey and Khadi will get focus through Livelihood Business Incubators and Technology Business Incubators.
• 10,000 new Farmer Producer Organisations to be formed in the next five years.
• The FM mentioned the need for Zero Budget Farming and aimed to double farmer’s income by 2022.
• Piped water supply to all rural household by 2024.
• Expansion of the Swachh Bharat Mission to take up sustainable solid waste management in every village.
• Internet connectivity in local bodies in every panchayat in the country through public-private partnership (PPP) arrangement.

Education and Skill Development

The government will allocate 3.4% of the budget on education, and another 2.3% on health-related expenses, around Rs. 94 and 65 thousand crores).

• Initiatives like new education policy to transform higher education, a National Research Foundation to fund, coordinate and promote research, Global Initiative of Academic Networks to improve quality of teaching, Rs. 400 crores dedicated to building World Class Institutions in India and reform of the higher education regulatory system.
• A National Sports Education Board for Development of Sportspersons to be set up under the Khelo India scheme.
• Industry relevant skills like new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics under the Pradhan Mantri Kaushal Vikas Yojana.

Banking and Financial Sector 

The government has allocated Rs. 6,60,471 crore as payment of interest on loans.

• Credit guarantee has been offered for the purchase of high-rated pooled assets of NBFCs. The regulatory authority of RBI over NBFCs is likely to be increased. The waiver of maintenance of a Debenture Redemption Reserve by NBFCs was announced.
• Changes in the government holding threshold of PSUs is proposed, with a reduction in the minimum government stake from the present 51%, on a case to case basis. The 51% will include the stake of government-controlled corporations as well.
• Encouragement in public participation in Central Public Sector Enterprises – strategic disinvestment plans, targeted Rs. 1,05,000 crore in disinvestment receipts, long-term ETF investment schemes in CPSEs are indications of this direction.
• The lower rate of corporate tax of 25% has been made applicable to companies with an annual turnover of up to Rs. 400 crore (from 250 crore). This covers all but 0.7% of all companies in India.
• Government to launch a scheme to invite global companies to set-up mega manufacturing plants in India.
• Digital payments to be encouraged with low or nil charges within the banking system as cash payments are being discouraged simultaneously.
• State-run banks to get Rs 70,000 crore as credit boost.

Duties and Taxes

Rs. 117,285 crores have been allocated in the budget towards tax administration. 

• Government plans to resolve the “angel tax” issue and reduction in the stringency of scrutiny for start-ups. Beside, valuation of shares issued to Alternative Investment Funds by start-ups will entirely be outside the scope of Income Tax scrutiny. Start-ups will also enjoy relaxation in the set-off and carry forward of losses.
• Relaxation in return filing under GST is proposed, along with free accounting software, automated refund, electronic invoice system and even elimination of e-ay bill by January 2020.
• Lower GST for Electric vehicles and additional income tax deduction (Rs.1.5 lakh) on interest paid on the purchase of an electronic vehicle.
• Tax benefit of up to Rs. 7 lakh over a period of 15 years for owners under the affordable housing scheme.
• Promote the International Financial Services Centre in GIFT City through profit-linked tax deductions. 
• Relief in the levy of Securities Transaction Tax in case of exercise of options.
• Interchangeability of PAN and Aadhaar to be introduced in activities like Income Tax return filing.
• Import of defence equipment will be exempt from basic customs duty.
• Imported books will be taxed more.
• Special cess of a rupee per litre of petrol and diesel.
• Increase in the customs duty of gold and precious metals from 10 to 12.5%.
• Simplification of tax administration and assessment procedures with initiatives like faceless assessment.
• Income tax to be applicable only if income is over Rs. 5 lakh.
• Pre-filled tax return will be made available to taxpayers covering heads of income and tax deductions.