India Union Budget 2019 20

India Union
Budget 2019-20
Gearing up for a brighter future
July 2019
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Foreword
With the Modi 2.0 government coming into power with of behavioural economics, recalibration of public data to
an overwhelming majority, the nation expected a public- revolutionise development in the country, importance of
friendly and pro-growth Union Budget 2019. India’s first policy consistency, emphasis on legal reforms and support
full-time lady Finance Minister presented the second to MSMEs.
term full-fledged Union Budget 2019 and aimed to boost
The public sector banks are now proposed to be provided
infrastructure and foreign investment against the backdrop
INR70, 000 crore capital to boost credit and provide a
of a slowing economy, weak consumption demand,
strong impetus to the economy. In order to harness the
rural distress, high unemployment, and lack of private
prowess of India as a more attractive FDI destination, the
investment. The Union Budget 2019 aims to change gears
government will invite suggestions for further opening up
and put India on a fast forward mode to spur growth and
of FDI in aviation, media, animation and insurance sectors
development.
in consultation with all stakeholders. 100 per cent FDI will
The world economy is slowing down with anti-globalisation be permitted for insurance intermediaries. Local sourcing
sentiment, protectionism, nativism and trade wars norms for FDI to be eased for single-brand retail trading
pulling down growth everywhere. Even in this backdrop, sector. Further various measures have been proposed
India continues to take giant strides forward and has in the Budget to promote a coherent and hassle free
also managed to become the sixth largest economy by investment experience for FPIs/NRIs. To further promote
sustaining growth rates higher than China, and is also one development, several tax incentives have been awarded
of the fastest growing economy in the world. to IFSC and similar benefits have also been rolled out to
certain NBFCs in larger public interest.
The Economic Survey 2018-19, imbued with the ‘blue
sky thinking’ approach, forecasts a positive GDP growth Taking a pragmatic approach, the Budget has no changes
rate of 7 per cent for FY19-20 while expecting general in personal income tax rates but proposes to levy
fiscal deficit to be at 5.8 per cent. The Survey also additional surcharges on the super rich. The Budget
opined that India should accelerate and sustain a real also sought to spur growth with various sops to housing
GDP growth rate of 8 per cent to become a USD5 trillion sectors, start-ups and electric vehicles. The Budget
economy by 2025. Fruitful outcome of ‘Swachh Bharat’ proposed to bring under 25 per cent tax ambit companies
Mission, reduction in NPAs, considerable decline in oil with an annual turnover of upto INR400 crore, in place of
prices are some of the positive facets of the Survey. The the earlier criteria of INR250 crore. Further, with a keen
Survey outlines challenges such as the slow growth in focus on resolving the long drawn angel tax issue, the
investments, delays in dispute resolution, complex labour Budget provides relief to start-ups and its stakeholders
laws and mounting NBFC stress. The survey elucidates by proposing to introduce a mechanism to steer clear of
the importance of prudent technology and innovation regular scrutiny assessments and also proposes to relax
as a key driver of demand, jobs, exports and overall carry forward and set off of rules for business loss. Further
productivity. The Survey’s nucleus comprises the principles the provisions of carry forward of set off of past losses
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss
entity. All rights reserved
are also proposed to be relaxed to safeguard losses Advance Ruling for resolution of diverse views of state
of companies in case of change in shareholding and specific Advance Ruling Authorities, has been mooted.
directorship pursuant to NCLT process. For convenience
Customs duty on various products has been increased
of taxpayers, PAN and Aadhaar can now be used
in line with the ’Make in India’ initiative. Furthermore,
interchangeably including for filing of income tax returns.
amendments are proposed in the Customs Act to
To improve governance, it is also proposed to introduce incorporate stringent provisions for arrest, penalty and
pre-filled tax returns which will make available information prosecution, etc. where unfair practices are followed to
from salaries, bank interest, capital gain and dividend avail undue concessions and export incentives.
income. Further, with an intent to eliminate undesirable
The Union Budget 2019 has also laid emphasis on
practices of tax officers, a centralised faceless electronic
closure of existing litigation. To liquidate past disputes
scrutiny assessment would be launched in a phased
under Central Excise, Service tax and Cesses ’Legacy
manner. To promote digital payments and discourage
Dispute Resolution Scheme’ is proposed which grants
the practice of making business payments in cash, it is
waiver from 40 per cent to 70 per cent of the disputed
proposed to levy TDS of 2 per cent on cash withdrawal
tax amount. Further, this scheme provides relief from
exceeding INR1 crore in a year from a bank account.
payment of interest, penalty and protection from
To reduce compliance burden under GST measures prosecution.
like single monthly return, fully automated refund for
To sum up, the Budget provisions aim to balance priority
export of services, issuance of refund by single authority,
and give directions to the economy. However, the
implementation of e-invoicing from 01 January 2020,
proof of the pudding would be in the action that the
etc. were announced. The implementation of e-invoicing
government actually takes to ensure implementation such
would result in pre-filled taxpayers’ returns and would
that people’s expectations and India’s objective of more
eliminate the need for generation of e-way bills, resulting
inclusive growth is met.
in reduction in data collection points by the government.
For simplification of the new tax regime, relaxations
such as facility to transfer an amount from one head
to another head in the electronic cash ledgers, new
composition scheme for supplier of services or mixed
suppliers, charging of interest on net cash tax liability,
higher threshold exemption limit, etc. have also been
announced.
Further, in order to bring consistency in tax positions
under GST, creation of National Appellate Authority for
Table of
contents
Economic Budget
indicators financials
page 01 page 07
Budget Glossary
proposals
page 09 page 35
-- Direct tax 09
-- Indirect tax 17
-- Key regulatory 27
proposals
-- Direct tax rate card 29

01 | India Union Budget 2019-20 Economic indicators
Economic indicators
GDP growth
The Indian economy registered a growth rate of Moody’s Investors Service kept India’s sovereign
6.8 per cent in FY19. The GDP growth fell to 5.8 rating unchanged that was upgraded in 2017 from
per cent in the last quarter, a 17-quarter low.1 Baa3 to Baa23, thus endorsing the government’s
reform policy.
The economy is projected to grow at 7 per cent in
FY 2020 on the back of political stability and removal Food grain production in FY19 stood at 283.4 million
of infrastructure bottlenecks and boost from public tonnes.4 The agricultural sector grew at a rate of 2.9
sector expenditure.2 per cent in FY19 as against previous year’s growth
rate of 5 per cent.5
GDP growth (2011-12 base) (YoY, %)
7.2 8.0 7.0 6.6 5.8 6.8 7.0

1Q17 2Q17 FY17 1Q18 2Q18 FY18E FY18E
Source: India’s GDP Growth Slumps to 5.8% in Fourth Quarter, The Wire, 31 May 2019
The industrial sector grew at 6.9 per cent in FY19

from 5.9 per cent in FY18.6 This was on account
1. Economic Survey 2018-19, Ministry of Finance, Accessed on 5 July 2019 of a healthy growth of 8.7 per cent and 6.9 per
2. India’s GDP growth may accelerate to 7.2% in FY20: Goldman Sachs, cent in the construction and manufacturing sector
Economic Times, 7 June 2019
3. Moody’s upgrade Sovereign Credit Rating of India to Baa2 from Baa3,
respectively in FY19. The service sector grew at 7.5
Press Information Bureau, 17 November 2017 per cent in FY19 compared to 8.1 per cent in FY18.7
4. Economic Survey 2018-19, Ministry of Finance, Accessed on 5 July 2019
© 2018
2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss
Economic indicators India Union Budget 2019-20 | 02
Consumer Price Index (CPI) and Index of In FY19, IIP grew 3.5 per cent as against 4.6 per
Industrial Production (IIP). cent in FY1810. The moderation in IIP is mainly
due to subdued manufacturing activities in Q3
The CPI inflation has been volatile throughout and Q4 due to slower credit flow to medium
FY19, with the average rate of approximately and small industries. However, the index
3.4 per cent.8 demonstrated strong performance during 3Q of
The CPI-based inflation declined to 3.4 per cent in FY19, registering a growth rate of 8.4 per cent in
FY19 (April-February) from 3.6 per cent in FY18.9 October 2018.11
Inflation declined to a low of 2 per cent during

January 2019. Since then it has been on a
consistent upward trajectory.
CPI growth (YoY, %) IIP growth (2011-12 base) (YoY, %)
6.0 8.5 7.5 8.4

7
5.0 7.3 6.9 6.5
4.8
5.3 4.8
4.0 4.1
3.2 2.9 4.5 4.6 3.4
3.8 2.5
3.0 1.6
1 1.8
2.0
0.2 0.4 0.1
1.0 0.3
2017 average 3.4 2018 average 4.0
0.0
Mar-17
Mar-18
Mar-19
Feb-17
May-17
Jun-17
Aug-17
Feb-18
Jun-18
Jan-17
Jan-18
May-18
Aug-18
Feb-19
May-19
Apr-17
Jan-19
Sep-17
Oct-17
Apr-18
Sep-18
Oct-18
Apr-19
Jul-17
Nov-17
Nov-18
Dec-17
Jul-18
Dec-18
Source: Monthly Economic Report-January 2019, DEA, accessed on 26 June 2019; Source: Key Economic Indicators, MOSPI, Updated as on 14 June 2019
Key Economic Indicators, MOSPI, Updated as on 14 June 2019
8. Economic Survey 2018-19, Ministry of Finance, Accessed on 5 July 2019 10. Economic Survey 2018-19, Ministry of Finance, Accessed on 5 July 2019
9. Economic Survey 2018-19, Ministry of Finance, Accessed on 5 July 2019 11. Economic Survey 2018-19, Ministry of Finance, Accessed on 5 July 2019
© 2018
Government expenditure Net FII flow (USD billion)
In FY19, Government Final Consumption

Expenditure (GFCE) and Private Final 9.57
Consumption Expenditure (PFCE) are likely to
grow at a slower pace, reflecting a slowdown in 3.05
both GVA and GDP growth figures. 0.68 3.41 1.16
(0.57)
In FY19, GFCE grew by 9.2 per cent as against 15 1.95
per cent in FY18 due to reduced spending by the 1.01 2.73 0.32 0.97
government which was aimed at meeting its fiscal
deficit target of 3.3 per cent in the current FY1912. (4.06)
(4.20)
In FY19, the PFCE grew by 8.1 per cent as against
Apr-17
Jun-17
Feb-18
Apr-18
Jun-18
Feb-19
Oct-17
Oct-18
Dec-17
Dec-18
Aug-17
Aug-18
7.4 per cent in FY18. Private Final consumption has
been affected on account of stress in the NBFC
sector.13
Source: Key Economic Indicators, MOSPI, Updated as on 14 June 2019
Foreign investments
In terms of ouflows from the Indian capital
The net outflow by foreign portfolio investors (FPIs)
markets, 2018 is likely to be the worse year for
in the debt market was more than USD 7.6 billion
FIIs owing to increased volatility in the Indian
while equities saw a net outflow of USD4.6 billion in
market.
FY19 (April to December).14,15
In FY19 (April to December), India had overall net
outflow of USD12 billion in FII flows. Rate hikes On the back of high crude oil prices, foreign portfolio
in the U.S. and the reshuffling of portfolio money outflows and the U.S. dollar index in 2018, the
globally, rupee depreciation and rise in crude oil Indian rupee witnessed depreciation. The Indian
prices contributed to higher FPI pullout. India also rupee tumbled to an all-time low of 74.48 in October
lost to emerging markets in terms of foreign money 2018.16
allocation due to lower valuations in other markets in
early 2018.
12. Government meets fiscal deficit target of 3.4% for FY19, Business Today, 9 April 14. 2018 in review: Why foreign investors gave India a miss this year, Business Today,
2019 24 December 2018
13. Growth slowdown worsens as January-March’19 GDP growth falls to a five year 15. FIIs outflows near ₹1 trillion so far in 2018, Live Mint, 17 December 2018
low, India Macro Advisors, 31 May 2019 16. What will drive the rupee in 2019?, The Hindu Business Line, 31 December 2018
© 2018
Exchange rate (INR/USD) Merchandise trade growth %
73.6 49.07
70.9 30.55 28.81
15.42 26.1
67.5 17.62 11.02
68.3 68.1
66.2 69.4 2.44
64.0 19.77
66.5
62.0 -2.15 1.44
Jul-15
Jul-16
Jul-17
Jul-18
Oct-15
Oct-16
Oct-17
Oct-18
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Export growth (%)
Source: Key Economic Indicators, MOSPI, Updated as on 14 June 2019 Source: Key Economic Indicators, MOSPI, Updated as on 14 June 2019
Indian trade Overview of economic measures

While India’s merchandise exports witnessed undertaken in India during FY19
an increase during the year, imports outpaced The government undertook several reforms during
exports, owing to the increased inbound FY19 to drive structural changes in the economy and
shipments of gold and other precious stones address underlying issues.
along with increased crude oil prices, thereby
widening India’s trade deficit. Huge investments have been made in the
infrastructure sector with total investment
India’s merchandise trade has seen a growth in in road infrastructure increasing more than
exports by 10 per cent in FY 18 which has slowed to three times from INR51,914 crore in 2014-15 to
8.75 per cent in FY 19 which stands at USD330.07 INR158,839 crore in 2018-19.18
billion. Simultaneously, growth in merchandise
imports has fallen from a growth rate of 21.13 per
cent in FY 18 to 10.41 per cent in FY 19, which
stands at USD514.03 billion. The total trade deficit
has widened from USD162.06 billion in FY 18 to
USD183.96 billion in FY 19.17
© 2018
The RBI’s Monetary Policy Committee has cut the India’s improving regulatory framework received
repo rate by 0.25 per cent to bring it down to 5.75 widespread international acclaim, as it jumped
per cent19 to boost economic growth of the country. 23 places to the seventy- seventh rank in the
The RBI along with the government is constantly World Bank’s Ease of Doing Business 2018
working towards addressing the challenge of rising report.
NPAs in India’s banking system. In the medium-
The government revised its fiscal deficit target
term, various NPA accounts identified by the RBI
for FY 2020 to 3.1 per cent22. Achieving the fiscal
are expected to undergo redressal proceedings,
deficit, FY 2020 requires cutting GoI’s expenditures.
with the IBC and NCLT playing key roles.
PSU banks got INR1.95 lakh crore capital
infusion in 18 months as part of a proposed INR
2.5lakh crore recapitalisation plan during March
2019 to facilitate credit growth20. These measures
are expected to help banks improve their lending
capacities and their balance sheets.21
Fiscal deficit as % of GDP
3.9 3.5 3.5 3.3 3.1
FY16 FY17 FY18 FY19* FY20E**
Source: Key Economic Indicators, MOSPI, Updated as on 14 June 2019
19. Reserve Bank of India slashes repo rate to 5.75%, bank loans may get cheaper, 21. India jumps 23 spots to 77 in World Bank’s ease-of-doing-business rankings,
India today, 6 June 2019 Business Standard, Live Mint, 1 November 2018
20. PSU Banks got Rs 1.95 lakh crore capital infusion in 18 months; govt completes 22. Economic Survey 2018-19, Ministry of Finance, Accessed on 5 July 2019
massive recapitalisation, Financial Express, 2 April 2019
© 2018
Going forward, the government’s

focus on infrastructure, job creation
and agriculture sector could provide
the necessary thrust to the economy.
As FY 2020 approaches, the
government is expected to
undertake several reforms such
as streamlining GST, revamping
labour laws, divestments, promote
electric vehicles, lower tax rates for
companies with turnover up to INR400
crore and agriculture infrastructure
investments.
© 2018
07 | India Union Budget 2019-20 Budget financials
Budget financials
Expenditure Receipts
2018-19 2019-20 2018-19 2019-20
48% 47% 26% 25%

General Service Debt receipts
30% 30% 60% 61%
Note: The total receipts have been calculated as the summation of capital receipts and revenue receipts
Economic Service Tax revenue
16% 17% 10% 10%

Grants-in-aid Non-tax revenue
Note: Conversion rate USD/INR – 68.5 as on 5 July 2019, Source: Oanda

Source: Union Budget 2019-2020, Ministry of Finance, 5 July 2019
5% 5% 3% 3%
`
Social services Miscellaneous capital
1% 1% 1% 1%
Loans & advances Recoveries of loans and advances
2018-19 2019-20 2018-19 2019-20

100% = USD358.72 100% = USD406.45 100% = USD352.70 100% = USD398.96
billion billion billion billion
© 2018
Budget financials India Union Budget 2019-20 | 08
Expenditure
Capital Revenue Capital Revenue
46.22 312.50 49.10 357.35

TOTAL
TOTAL
358.72 406.45
2018-19 2019-20E
Receipts
Capital Revenue Capital Revenue
100.20 252.50 110.25 288.71

TOTAL
TOTAL
352.70 398.96
2018-19 2019-20E
2018-19 2019-20E 2018-19 2019-20E

(INR cr.) (INR cr.) (INR cr.) (INR cr.)
6.8% 7.0% 3.3% 3.1%
GDP Growth rate Fiscal Deficit
Note: The total receipts have been calculated as the summation of capital receipts and revenue receipts
Source: Union Budget 2019-2020, Ministry of Finance, 5 July 2019
Note: Conversion rate USD/INR – 68.5 as on 5 July 2019, Source: Oanda
© 2018
09 | India Union Budget 2019-20 Budget proposals - Direct tax
Budget proposals
Direct tax a case where NCLT has suspended the board of
directors and appointed new directors pursuant
Corporate Tax to an operation and mismanagement petition by
• The benefit of reduced tax rate of 25 per cent the Government and the change in shareholding
extended to companies with turnover upto has taken place pursuant to the resolution plan
INR400 crore approved by NCLT after affording an opportunity
to be heard to the jurisdictional Principal CIT.
• In a tax neutral demerger, the provisions for
recording properties and liabilities at book value • The benefit of deducting aggregate amount of
by the resulting company made inapplicable unabsorbed depreciation and brought forward
where resulting company follows Ind As in loss in computing the book profit for the purpose
accordance with the corporate law provisions. of levy of MAT extended to companies before
NCLT in case of oppression and mismanagement.
• The beneficial provisions for taxing interest on The extention covers the company, its subsidiary
certain categories of bad and doubtful debts on and the subsidiary of such subsidiary, where
receipt basis inter alia available to banks and new directors are appointed and old Board of
financial institutions extended to deposit taking Directors are suspended by NCLT pursuant to
NBFC or a systemically important non-deposit an application by the government under the
taking Non-Banking Financial Company. On the provisions of oppression and mismanagement.
same principle, the deduction of interest on
any loan/borrowings from such NBFCs to be Start-ups
allowed to the borrower only on payment basis as
stipulated. • The exemption from deemed taxable income
provisions for issue of shares exceeding the
• The buy-back tax applicable on buy-back of stipulated FMV available to eligible start-up
shares of unlisted companies extended to listed revoked if there is a failure in fulfilment of
companies. This amendment applies from 5 July specified conditions. In such case, the start-up
2019. The income arising to the shareholder as a subjected to tax for the excess of consideration
result of such buy-back to be exempt from tax. in the year of failure.
• Notwithstanding any change in shareholding • The roll-over benefit for long term capital gain
or voting beyond the stipulated threshold, the on sale of residential property where the net
benefit of carry forward and set-off of business consideration is invested in equity shares of an
losses to companies extended to a company, its eligible company or an eligible start-up modified
subsidiary and the subsidiary of such subsidiary in as under:
© 2018
Budget proposals - Direct tax India Union Budget 2019-20 | 10
-- The sunset date for this benefit for investment be subjected to any kind of scrutiny in respect of
in eligible start-up extended from 31 March valuations of share premiums. An e-verification
2019 to 31 March 2021. mechanism to be put in place.
-- For investment in eligible start-up, the
Non-resident taxation
restriction on transfer of new asset within five
years from the date of acquisition has been • The deemed taxable income provisions relating
relaxed to three years in respect of new assets to gift of money or property extended to gifts
being computer or computer software. received by non-resident from residents. This
provision will apply to sums paid or property
-- The condition of minimum shareholding to
transferred to Non-Residents on or after 5 July
either 50 per cent of share capital or voting
2019.
rights relaxed to 25 per cent.
• he two conditions out of the many conditions to
T
• In case of an eligible start-up company, the
be fulfilled by an eligible investment fund (fund)
business losses allowed to be carried forward
for not constituting a business connection in
and set-off in a previous year on satisfaction
India or becoming a resident of India modified as
of either of the conditions i.e. (a) On the last
under:
day of the previous year, the shares of the
company carrying not less than 51 percent of -- A fund established/incorporated in the
the voting power are beneficially held by persons previous year is required to fulfill the corpus
who beneficially held shares of the company condition of INR100 crore within a period of
carrying not less than fifty-one percent of the six months from the last day of the month of
voting power on the last day of the year or years its establishment/incorporation or at the end of
in which the loss was incurred; or (b) all the the previous year, whichever is later.
shareholders of such company who held shares
-- The remuneration paid by the fund to the
carrying voting power on the last day of the year
manager to be not less than the amount
or years in which the loss was incurred, continue
calculated in the prescribed manner (erstwhile
to hold those shares on the last day of such
requirement was as per the arm’s-length
previous year and such loss has been incurred
principle).
during the period of seven years beginning from
the year in which such company is incorporated. • he application for lower or nil TDS certificate
T
to AO in respect of payments to non-residents
• The FM’s budget speech clarifies that start-ups
by payers streamlined by eliminating manual
and their investors who file requisite declarations
filing and prescribing use of technology to
and provide information in their returns will not
speed up the process and provide administrative
© 2018
benefits. This amendment will take effect from 1 • The SA provisions also stand amended with
November 2019. effect from 1 September 2019 to provide an
option of payment of additional tax to stop its
• The earlier announcement with respect to tax
applicability as under:
exemption for interest payable by an Indian
company or a business trust to a non-resident -- If the excess money or part thereof has not
including a foreign company on specified rupee been repatriated in time, the taxpayer granted
denominated bond issued from 17 September an option to pay a one-time additional tax at
2018 to 31 March 2019 is enacted. This provision 20.16 per cent (18 percent tax plus a surcharge
to apply from AY 2019-20 and onwards. of 12 per cent) on such non-repatriated
amount.
Transfer Pricing
-- The tax on interest calculation for the excess
• The power of AO in case of a modified return money would continue to apply till the date of
filed pursuant to a signed APA for year(s) of payment of such additional tax.
completed assessment or reassessment
-- This additional tax paid would be non-
restricted to merely modifying the total income
deductible in nature.
in accordance with the terms of the APA. This
amendment will take effect from 1 September -- Once the taxpayer pays the additional tax and
2019. interest as above, there would not be any
obligation on him to repatriate the excess
• he Secondary Adjustment (SA) provisions stand
T
money and SA provisions would not apply
modified with effect from AY 2018-19 as under:
from that date.
-- SA provisions to apply only in case of APAs
• The provisions of filing Master File (MF) stand
signed on or after 1 April 2017
amended as under from 1 April 2020:
-- The existing two conditions made alternative
-- The MF to be filed by every constituent
to each other i.e. (a) primary adjustment
entity of an international group irrespective of
not exceeding INR1 crore; or (b) primary
whether the constituent entity has entered
adjustments made on or before AY 2016-17.
into an international transaction/s or not.
-- No refund to be given for taxes paid under the
-- The powers of the Tax Officer and the
pre-amended section.
Commissioner (Appeal) to call for MF is done
-- Excess money repatriation back to India can away with.
be from any of the Non-Resident AEs of the
• he CbCR of a Non-Resident Parent filed by an
T
taxpayer.
Indian Resident Alternate Reporting Entity would
© 2018
be as per the accounting year followed by the • he exemption to non-resident for any capital
T
Non-Resident Parent in its jurisdiction and not gains tax on the transfer of specified securities
as per the financial year followed by the Indian made on recognised stock exchange in IFSC is
Reporting Entity. now extended to Category-III AIF located in IFSC
provided all its unit holders are non-residents and
International Financial Services Centre it derives its income solely in convertible foreign
exchange. The ambit of specified securities
• The ten years tax holiday eligible to a unit in
widened to include ‘other securities’ to be
IFSC at 100 per cent of profits for first five years
notified in this regard.
and 50 per cent for next five years liberalised
to 100 per cent deduction for 10 consecutive
Tax holidays/incentives
years within 15 years from the year of obtaining
necessary permission. • The FM in her Budget speech announced
investment linked deduction for mega
• o facilitate overseas borrowings, interest payable
T
manufacturing plants to be set-up through
to non-residents by units located in IFSC in
competitive bidding by global companies in
respect of monies borrowed on or after
sunrise and advanced technology areas such as
1 September 2019 would be tax-exempt.
semi-conductor fabrication, computer servers,
• he benefit of exemption from levy of DDT to
T laptops, etc. The Finance Bill incorporates no
IFSC-Unit also extended to dividend paid out of such proposals at this stage.
accumulated income derived from operations in
• The definition of ‘affordable housing’ aligned with
IFSC after 1 April 2017. This amendment will take
the GST Act and the conditions for claiming profit
effect from 1 September 2019.
linked deduction for such projects approved on or
• pecified Mutual Fund (mutual fund located in
S after 1 September 2019 modified as under:
IFSC deriving its income solely in convertible
-- The carpet area of the residential unit in
foreign exchange and of which all the units are
the housing project shall not exceed 60
held by non-residents) provided with relief from
square meters in metropolitan cities and 90
additional tax on distribution of any amount. This
square meters in cities or towns other than
amendment will take effect from 1 September,
metropolitan cities.
2019.
-- The definition of metropolitan cities have
• A unit in IFSC of a non-resident taxpayer
been extended and now includes Bengaluru,
receiving income in the nature of interest,
Chennai, Delhi National Capital Region (limited
specified investment income and dividend now
to Delhi, Noida, Greater Noida, Ghaziabad,
made eligible for tax holiday.
Gurugram, Faridabad), Hyderabad, Kolkata
© 2018
and Mumbai (whole of Mumbai Metropolitan TDS

region)
• The ambit of TDS on transfer of immovable
-- The stamp duty value of the residential unit in property expanded to include all charges of the
such project not to exceed INR45 lakh. nature of club membership fee, car parking fee,
electricity and water facility fees, maintenance
• The taxability of Category I and Category II AIF
fee, advance fee or any other charges of similar
and its unit holders modified as under:
nature, which are incidental to transfer of the
-- Business loss shall be carried forward and set immovable property. This amendment will take
off at the AIF level. effect from 1 September 2019.
-- The loss other than in the nature of business • All Individuals and HUF otherwise not obliged to
loss shall be allowed to be carried forward and deduct tax at source including cases of personal
set off in the hands of the unit holder of an AIF use made liable to deduct tax at 5 per cent
where the unit holder has held unit of the AIF on payments for contractual work or fees for
(on which loss is incurred) for atleast twelve professional services payable to any resident if
months. the sums paid during a financial year exceeds
INR50 lakh. Such deductors can deposit the TDS
-- The accumulated losses at the AIF level as on
using their PAN and are not required to obtain
31 March 2019 which is not in the nature of
TAN. The recipient made eligible to apply for
business loss shall be deemed to be loss of
obtaining lower TDS certificate in such cases.
the unit holders which have held such units as
This amendment will take effect from
on 31 March 2019 and allowed to be carried
1 September 2019.
forward and set off for the remaining eligible
period. • All banks and post offices obliged to deduct
TDS at 2 per cent on cash withdrawal by any
Capital gains person in excess of INR1 crore in aggregate in
• The special provisions deeming stipulated FMV a financial year from any account maintained
of unquoted shares as full value of consideration with them by the recipient. This TDS will not
for computing capital gains relaxed for specified apply to withdrawals by specified persons such
class of persons to be notified and subject to as government, banks, post office, business
such conditions as may be prescribed by CBDT. correspondents of banks, white label ATM
operator and other notified persons. This
• The concessional STCG tax rate of 15 per cent amendment will take effect from 1 September
extended to transfer of units of eligible fund of 2019.
fund (Mutual Funds) in line with benefit available
to it for LTCG.
© 2018
• The withholding tax rate increased to 5 per cent • In order to enable pre-filling of return of income,
from 1 per cent for payment of any sum under a the scope of furnishing statement of financial
non-exempt life insurance policy including bonus. transactions or reportable account by specified
This amendment will take effect from person has been widened. Further, the monetary
1 September 2019. threshold of INR50,000 has also been removed.
This amendment will take effect from
Return and assessment 1 September 2019.
• The obligation with respect to the maximum
Penalty
amount not chargeable to tax for filing an income-
tax return by any person other than a company • The provisions stipulating levy of penalty for case
or a firm to be computed before claiming any of under reporting extended to case where an
specified exemption and rollover benefits in assessee files return of income pursuant to issue
respect of eligible capital gains. of notice for income escaping assessment. This
amendment will take effect retrospectively from
• Any person other than a company or a firm who
AY 2017-18
is otherwise not required to furnish an income
tax return is now obliged to do so if he enters
Other amendments
into any of the following high value transactions
during the previous year: • For granting registration, the Principal
Commissioner or the Commissioner to be
-- has deposited aggregate of the amounts
satisfied about the compliance of the trust or
exceeding INR1 crore in one or more current
institution to the requirements of any other law
accounts or
which are material for the purpose of achieving
-- has incurred aggregate expenditure of the its objectives. The Principal Commissioner
amounts exceeding INR2 lakh for himself or or Commissioner to cancel the registration if
any other person towards travel to a foreign an undisputed order/direction/decree holds
country or that the trust or institution has violated such
requirements.
-- has incurred aggregate expenditure of the
amounts exceeding INR1 lakh towards • The relaxation from deemed taxable income
electricity expense or provisions for issue of shares by venture capital
undertakings exceeding the stipulated FMV inter
-- fulfils such other conditions as may be
alia available to AIF Category I (sub-category VCF)
prescribed.
extended to AIF Category II.
© 2018
• The deemed taxable income provisions for • In order to encourage other electronic modes
receipt of money or specified property by of payment, several provisions amended to
recipients for no or inadequate consideration include such other electronic mode as may be
relaxed for specified class of recipients to be prescribed, in addition to the already existing
notified and subject to such conditions as may be permissible modes of payment/receipt in the
prescribed by the CBDT. form of an account payee cheque or an account
payee bank draft or the electronic clearing system
• In line with provision for payment to residents,
through a bank account.
a taxpayer who fails to deduct whole or any
part of tax on payments made to a non-resident
Personal tax
will not deemed to be an assessee in default
(though interest would be liable) if the payee has • No changes in basic exemption limit, income
furnished his return of income after taking into slabs, tax rates and cess for individuals
account the underlying sum and paid tax due
• Surcharge to be increased to 25 per cent and 37
thereon and the payer furnishing an accountant
per cent from 15 per cent where the total income
certificate to that effect in a prescribed form. In
exceeds INR20,000,000 and INR50,000,000
such situation, the payer would be eligible for
respectively
deduction of the underlying expenditure as if he
has deducted and paid the tax on the date of • Tax free withdrawal from NPS on closure/opting
furnishing of return by the non-resident payee. out, enhanced to 60 per cent from 40 per cent
• Person carrying on business with total sales, • All individuals made eligible for interest deduction
turnover, or gross receipts, exceeding INR50 up to INR1.5 lakh on loans for purchase of a
crore during immediately preceding previous year residential house subject to satisfaction of the
to provide facility for accepting payment through following conditions:
prescribed electronic modes, in addition to similar -- The loan has been sanctioned by any financial
facilities already being provided. Failure to comply institution during FY 2019-20
may lead to penalty of INR5,000 for every day
during which such default continues. These -- Stamp duty value of the residential house
provisions take effect from 1 November 2019. property does not exceed INR45 lakh
• very claim of refund to be made by furnishing
E -- The individual does not own any residential
a return of income in accordance with the house property on the date of sanction of the
applicable provisions of the Act. This provision loan.
takes effect from 1 September 2019.
© 2018
-- No other deduction is being claimed or eligible

for such interest
• All individuals made eligible for interest deduction
upto INR1.5 lakh on loans taken for purchase of
electric vehicles from any financial institution
including NBFCs during the period from 1 April
2019 to 31 March 2023.
• The tax relief eligible in case of income in the
nature of salary received in advance or in arrears
has been put on par with prepaid taxes and the
computation of advance tax and income-tax
liability under various provisions to be made after
allowing of such relief. This amendment will apply
with retrospective effect from 1 April 2007.
• PAN and Aadhaar allowed to be used

interchangeably in cases of persons who has not
been allotted a PAN but possesses an Aadhaar
number or a person who has been allotted PAN
and has linked his Aadhaar Number to such
PAN. An obligation also cast on recipient of such
declaration to authenticate the details provided in
the prescribed manner.
© 2018
17 | India Union Budget 2019-20 Budget proposals - Indirect tax
Indirect tax provided on import of defence equipment to

enable modernisation and up gradation of the
Indirect tax highlights defence sector
• The Finance Minister reiterated recent • Special Additional Excise duty and Road and
recommendations of the GST Council on a Infrastructure Cess, each proposed to be
simplified return structure, automated refund increased by INR1 a litre on petrol and diesel, to
mechanism, E-invoicing which obviates the need boost government revenue
for a separate E-way bill from January 2020 and
reduction in GST rate for electrical vehicles from • Excise duty increased on cigarettes and tobacco
12 per cent to 5 per cent products
• Some other key amendments proposed in • Proposal for setting up of legacy dispute
the GST laws are introduction of composition resolution scheme for speedy disposal of pre-
scheme for supplier of services, increase in GST litigations.
exemption threshold to INR40 lakh in case of
exclusive supplier of goods, mandatory Aadhaar Goods and Services Tax
authentication for new registrations, constitution • rovision inserted to make interest applicable
P
of National Appellate Authority for Advance on net cash liability of tax declared in the return
Ruling (NAAAR) (i.e. cash paid by debiting electronic cash ledger
• Customs duty rates realigned by increasing rates/ instead of gross liability), except in those cases
withdrawing exemptions, to boost domestic where returns have been filed subsequent to
manufacturing of several products initiation of any proceedings relating to short
payment, non-payment of tax or wrong availment
• Customs duty rate reduction proposed on certain of ITC, etc.
raw materials and capital goods (such as inputs
for manufacture of artificial kidney, disposable • Increase in exemption threshold for registration
sterilised dialyzer and fuels for nuclear power to INR40 lakh (from INR20 lakh) in case of
plants or capital goods for manufacture of exclusive supplier of goods [to be decided at the
specified electronic items) to further promote request of State and on the recommendations of
domestic manufacturing the Council]
• Customs duty exempted proposed on certain • Central Government may disburse refund amount
parts of electric vehicles to incentivise e-mobility, to the taxpayers in respect of state taxes as well
while Customs duty increased on some • Introduction of penalty of 10 per cent of
automobile parts. Also, Customs duty exemption profiteered amount, in case National Anti-
© 2018
Budget proposals - Indirect tax India Union Budget 2019-20 | 18
profiteering Authority concludes that the taxpayer Customs duty

is guilty of profiteering. However, the said penalty
General
is not payable where the profiteered amount is
deposited within 30 days of the date of passing • General Basic Customs Duty (BCD) rate remain
of the order by the Authority unchanged.
• Facility introduced to transfer any amount from Amendments (effective from enactment of
one head to another head in electronic cash Finance Bill (No.2), 2019)
ledger
Customs Act, 1962 (Customs Act)
• In order to bring consistency in tax positions
• To ensure compliances under the Customs Act
under GST, NAAAR constituted, for resolution of
or any other act, the Customs authorities are
diverse views of State specific Advance Ruling
empowered to verify the identity of the person
Authorities
through Aadhaar or other mechanisms. Non-
• An alternative composition scheme for supplier compliance of the above provision may lead to
of services or mixed suppliers, having an annual suspension of import/export of goods, refunds,
turnover in the preceding financial year up to drawback, exemptions, licence/registrations or
INR50 lakh, has been introduced. The rate of tax other benefits
payable under composition scheme, has been
• Customs authorities are empowered to screen
capped at 3 per cent
or scan person suspected to be secreted goods
• Commissioner empowered to extend the liable for confiscation in his body, subject to the
due date for furnishing of monthly and annual specific procedure
statement by the person collecting tax at
• Offence committed outside India may also be
source, Annual Return (i.e. Form GSTR-9/9A) and
prosecuted by the Customs authorities
reconciliation statement (i.e. Form GSTR-9C)
• Fraudulently availment or attempting to avail
• Aadhaar authentication mandatory for specified
drawback or any exemption from Customs duty
class of new taxpayers. Manner, in which certain
exceeding INR50 lakh, made a cognisable offence
class of registered taxpayers are required to
undergo Aadhaar authentication, to be prescribed • Fraudulently obtaining of an instrument of
value exceeding INR50 lakh and utilisation
• Specified suppliers (to be notified) shall have to
thereof under Customs Act or Foreign Trade
mandatorily give the option of specified modes of
(Development and Regulations) Act, 1992 is
electronic payment to their recipients.
made a cognisable and non-bailable offence
© 2018
• Person obtaining any instrument (and utilisation • Penalty for non-compliance of provisions of
thereof) by fraud, collusion, wilful mis-statement rules or regulations made under Customs Act,
or suppression of facts will be liable for penalty increased from INR50 thousand to INR2 lakh
(not exceeding face value of such instrument)
• General penalty i.e. where no specific penalty
and with imprisonment upto seven years and fine
is provided under Customs Act, increased from
irrespective to the fact whether the instrument
INR1 lakh to INR4 lakh.
was utilised by him or any other person
• Specific provision introduced to empower Customs Tariff Act, 1975
seizure of goods where removal, transport, store
• Extension of Countervailing duty on article
or possession of goods is not practicable for
imported by alteration of description, name,
Customs authorities
composition, or condition (assembled or
• Scope of seizure provisions extended to the disassembled form) to circumvent Countervailing
attachment of bank account for a period not duty on specific goods
exceeding six months, with a further extension of
• Specific provision introduced to extend the
six months
appellate provision to specific circumstances
• Fine in lieu of confiscation will not be applicable, requiring the imposition of Safeguard duty.
where duty and interest has been paid voluntarily
© 2018
Amendments in BCD (effective from 6 July 2019)
Effective duty rates

Heading, sub-heading (per cent)
S.No Commodity
tariff item
From To
Petroleum and Petrochemicals
1 2709 00 00 Petroleum Crude Nil INR 1 per
tonne
2 2710 Naphtha 5 4
3 2903 15 00 Ethylene dichloride (EDC) 2 Nil
4 2910 20 00 Methyloxirane (Propylene Oxide) 7.50 5
Plastic and Rubber
5 3904 Poly Vinyl Chloride 7.50 10
6 3926 90 91, Articles of plastics 10 15
3926 90 99
7 4002 31 00 All goods i.e. Butyl Rubber 5 10
8 4002 39 00 Chlorobutyl rubber or bromobutyl rubber 5 10
Construction Materials
9 3918 Floor covering of plastics, Wall or ceiling cover- 10 15
ings of plastics
10 6905, Ceramic roofing tiles and ceramic flags and 10 15
6907 pavings, hearth or wall tiles
11 8302 Base metal fittings, mountings and similar 10 15
articles suitable for furniture, doors, staircases,
windows, blinds, hinge for auto mobiles
© 2018
Paper and Paper products

12 48 a. Newsprint Nil 10
b. Uncoated paper used for printing of
newspapers
c. Lightweight coated paper used for printing
of magazines
13 4901 10 10, 4901 91 00, Printed books (including covers for printed Nil 5
4901 99 00 books) and printed manuals, in bound form
or in loose-leaf form with binder, executed on
paper or any other material including transpar-
encies
Textiles
14 5101 Wool Fibre 5 2.5
15 5105 Wool Tops 5 2.5
Flooring materials
16 2515 12 20, 6802 10 00, Marble Slabs 20 40
6802 21 10, 6802 21 20,
6802 21 90, 6802 91 00,
6802 92 00
Iron and Steel, Other base metals
17 7218 Stainless steel in ingots or other primary forms; 5 7.50
semi-finished products of stainless less
18 7224 Other alloy steel in ingots or other primary 5 7.50
forms; semi-finished products of other alloy
steel
© 2018
19 7225, 7225 19 90 Inputs for the manufacture of CRGO steel:- 5 2.50

a. MgO coated cold rolled steel coils
b. Hot rolled coils
c. Cold-rolled MgO coated and annealed steel
d. Hot rolled annealed and pickled coils
e. Cold rolled full hard
20 7226 99 30 Amorphous alloy ribbon 10 5
21 7229 Wire of other alloy steel (other than INVAR) 5 7.50
22 8105 20 10 Cobalt mattes and other intermediate products 5 2.50
of cobalt metallurgy
Capital goods
23 8474 20 10 Stone crushing (cone type) plants for the con- Nil 7.50
struction of roads
24 82, 84, 85 or 90 Capital goods used for manufacturing of Applica- Nil
following electronic items, namely: ble rate
• Populated PCBA
• Camera module of cellular mobile phones
• Charger/Adapter of cellular mobile phone
• Lithium Ion Cell
• Display Module
• Set Top Box
• Compact Camera Module
25 84, 85 or 90 Capital goods used for manufacturing of Nil Applicable

specified electronic items, namely-
• Cathode Ray tubes;
• CD/CD-R/DVD/DVD-R;
• Deflection components, CRT monitors/CTVs;
• Plasma Display Panel
© 2018
Automobile parts
26 6813 Friction material and articles thereof (for ex- 10 15
ample, sheets, rolls, strips, segments, discs,
washers, pads), not mounted, for brakes, for
clutches or the like, with a basis of asbestos,
of other mineral substances or of cellulose,
whether or not combined with textile or other
materials.
27 7009 Glass mirrors, whether or not framed, including 10 15
rear-view mirrors
28 8301 20 00 Locks of a kind used in motor vehicles 10 15
29 8421 23 00 Oil or petrol filters for internal combustion 7.50 10
engines
30 8421 31 00 Intake air-filters for internal combustion engines 7.50 10
31 8421 39 20, 8421 39 90 Catalytic converters 5 10
8421 39 90
32 8512 10 00, 8512 20 10, Lighting or visual signaling equipment of a kind 10 15
8512 20 20, 8512 30 10 used in bicycles or motor vehicles; Horn for
vehicles
33 8512 20 90, 8512 30 90 Other visual or sound signaling equipment for 7.50 15
bicycles or motor vehicles
34 8512 90 00 Parts of visual or sound signaling equipment for 7.50 10
bicycles or motor vehicles
35 8512 40 00, 8539 10 00, Windscreen wipers, defrosters and demisters, 10 15
8539 21 20, 8539 29 40 Sealed beam lamp units and other lamps for
automobiles
36 8702, 8704 Completely Built Unit (CBU) of vehicles falling 25 30
under heading 8702, 8704
© 2018
37 Any Chapter Following parts of electric vehicles: - Applica- Nil

a. E-Drive assembly, ble rate
b. On board charger,
c. E-compressor and
d. Charging gun
38 8706, 8707 Chassis fitted with engines, for the motor vehi- 10 15
cles of headings 8701 to 8705, Bodies (includ-
ing cabs), for the motor vehicles of headings
8701 to 8705
Oil rigs and other goods used for oil exploration
39 84 or any other chapter Providing option to pay BCD at transaction Appli- 7.5 on
value on the disposal of goods, imported with- cable transac-
out payment of customs duty for petroleum rate on tion value
operations/coal bed methane operations where depre-
such disposal is made in unserviceable and ciated
mutilated condition value
Electronics and Electrical equipment
40 8504 40 Charger/Power adapter for CCTV camera/IP Nil 15
camera/DVR/NVR
41 8415 90 00 Indoor and outdoor unit of split –system air 10 20
conditioner
42 8518 21 00, 8518 22 00 Loudspeaker 10 15
43 8521 90 90 Digital Video Recorder (DVR) and Network 15 20
Video Recorder (NVR)
44 8525 80 CCTV camera and IP camera 15 20
45 9001 10 00 Optical Fibres, optical fibre bundles and cables 10 15
© 2018
• BCD exempted on import of specified goods are presently classified as others, to rectify the
imported by the Ministry of Defence or the errors and align it with HSN.
defence forces
Sabka Vishwas (Legacy Dispute Resolution)
• BCD exempted on raw materials, parts or
Scheme, 2019 (the Scheme)
accessories for use in manufacture of artificial
kidney, disposable sterilised dialyzers and micro • The Scheme has been introduced for resolution
barrier of artificial kidney. and settlement of tax dues of Central Excise,
Service Tax, Cess, other specified ancillary
Amendments (effective from a date to be Indirect Tax Acts or any other Act that may be
notified) notified
• he changes proposed in various Customs tariff
T • elief within the range of 40 per cent to 70 per
R
to create tariff lines for specific products, which cent of the tax dues available as follows:
Scenario Amount of Tax/Duty Relief

Tax dues relatable to Show Cause Notice Less than or equal to INR50 lakh 70 per cent of tax dues
(SCN) or Appeal pending as on 30 June More than INR50 lakh 50 per cent of tax dues
2019
Tax dues relatable to SCN for late fee or Only late fee and penalty is under Entire amount of late fee
Penalty only and the amount of duty in dispute or penalty
the said notice has been paid or Nil
Tax dues relatable to an amount in arrears Less than or equal to INR50 lakh 60 per cent of tax dues
as defined in the scheme More than INR50 lakh 40 per cent of tax dues
Tax dues relatable to an amount in arrears Less than or equal to INR50 lakh 60 per cent of tax dues
and declarant has indicated the amount More than INR50 lakh 40 per cent of tax dues
payable in indirect tax return but not paid
it
Tax dues linked to an enquiry, Less than or equal to INR50 lakh 70 per cent of tax dues
investigation or audit against the
declarant on or before 30 June 2019
Tax dues as per voluntary disclosure Any amount No relief
© 2018
• The Scheme provides immunity from payment of • Excise duty increased from Nil to INR1 per
interest, penalty and prosecution, under specified litre on crude petroleum; however petroleum
circumstances produced in specified oil fields under New
Exploration Licensing Policy is exempted
• The duty payable under the Scheme cannot be
paid by utilising Input Tax Credit (ITC). • Road and Infrastructure Cess on petrol/ diesel
increased from INR8 per litre to INR9 per litre
Excise duty
• Special Additional Excise duty on petrol increased
Rate changes (effective from 6 July 2019) from INR7 per litre to INR8 per litre
• Excise duty increased from Nil to 0.5 per cent on • Special Additional Excise duty on diesel increased
following: from INR1 per litre to INR2 per litre.
-- ‘Homogenised’ or ‘reconstituted’ tobacco
Service tax
-- Chewing tobacco and preparations containing
chewing tobacco • Service tax exemption is proposed on
-- Jarda scented tobacco -- Grant of liquor licence by the state
-- Snuff, preparations containing snuff government, during the period from 1 April
-- Tobacco extracts and essence 2016 to 30 June 2017
-- Hookah or gudaku tobacco -- Specified educational programmes, provided
• Excise duty increased from Nil to 1 per cent on by Indian Institute of Management to their
smoking mixtures for pipes and cigarettes students, during the period 01 July 2003 to
31 March 2016
• Excise duty increased from Nil to INR5 per
thousand, on non-filter cigarettes of lengths -- Upfront amount payable by developers to
less than 70 millimetres, filter cigarettes of State Government Industrial Development
lengths less than 75 millimetres and cigarettes of Corporation or any entity having 50 per cent
tobacco substitutes. Excise duty increased from or more ownership of Central Government,
Nil to INR10 per thousand on all other kinds of State Government, Union Territory, for grant of
cigarettes long-term lease of 30 years or more of plots,
for development of infrastructure for financial
• Excise duty increased from Nil to 5 paisa per business, in any industrial or financial business
thousand on other than paper rolled biris, area, for the period from 01 October 2013 to
manufactured without the aid of machine 30 June 2017.
© 2018
27 | India Union Budget 2019-20 Budget proposals - Key regulatory proposals
Key regulatory proposals • RBI to have more powers to govern NBFCs

such as removal of directors of NBFCs (except
Financial service sector government company), supersession of Board of
• As a measure to boost capital growth, the Directors, taking action against the auditors and
government proposes to infuse capital of inspect/audit the NBFC group companies
INR70,000 crore in PSU banks • In order to instill confidence in the NBFC sector,
• SEBI to consider proposal to raise minimum the RBI has now been empowered to enhance
public shareholding in the listed companies from the Net Owned Fund up to INR100 crore
25 per cent to 35 per cent with SEBI • NBFCs will be permitted to directly participate on
• An electronic fund raising platform (Social Stock the TReDS platform
Exchange) to be setup under the regulatory • In addition to special reserve, NBFCs are required
purview of SEBI which will enable social welfare to maintain DRR for public placement of debt.
and voluntary organisations to raise capital as Such requirement of DRR is now done away
equity, debt or units like mutual fund with.
• FDI upto 100 per cent will be allowed for • In order to facilitate on-shoring of international
insurance intermediaries such as brokers, insurance transactions, the Net Owned Fund for
corporate agents, third party administrators. branch of foreign reinsurers in IFSC has been
• To enable sound NBFCs to continue to get bank reduced from INR5,000 crore to INR1,000 crore
funding, the government to provide first loss • Government to introduce a regulatory road map
cover up to 10 per cent on portfolio sold to PSU to develop the IFSC as a hub for aircraft financing
banks and leasing.
• At present, the NHB is the regulatory authority
for HFC and is also the refinancer and lender Infrastructure, energy and transportation
to the housing finance sector. To resolve this • Under Phase-II of FAME scheme the government
conflicting mandate of NHB it is proposed that is to encourage faster adoption of Electric
regulatory authority will now re-shift to RBI Vehicles and offer an upfront incentive on
purchase of Electric Vehicles and establish the
necessary charging infrastructure.
© 2018
Budget proposals - Key regulatory proposals India Union Budget 2019-20 | 28
• To meet the capital expenditure outlay of railways, Other sectors

the government is to adopt PPP model for railway
• Various liberalisation measures introduced to
infrastructure and metro-rail initiatives to ensure
augment investments by FPIs.
faster completion of the projects
• The local sourcing norms under FDI guidelines
• Government to upgrade roads connecting villages
to be relaxed for the single-brand retail trading
to rural markets under various schemes over the
sector.
next five years.
• The opening up of FDI on anvil for aviation, media
• Government to announce a new package of
and other sectors.
power sector tariff and structural reforms.
• Government to develop 17 iconic world-class
• Government to tap the benefits of R&D carried
tourist sites.
out by ISRO by commercialisation of various
space products through a separate incorporated • The government to set-up a new payment
entity. platform for MSMEs.
• The mission LED bulb method to be used to • The government announced a new television
promote the use of solar stoves and battery channel for start-ups.
chargers in the country.
• Aadhaar may be applied by NRI passport holders
on return to India without waiting for 182 days
© 2018
29 | India Union Budget 2019-20 Direct tax rate card
Direct tax rate card

These rates are subject to enactment of the Finance • Tax rates need to be further increased by
Bill (No. 2), 2019. The rates are for the FY2019-20. the applicable surcharge and cess.
1. Income tax rates iii. For Domestic Companies
i. For Individuals, Hindu Undivided Families, • Domestic companies, whose total turnover
AOPs, BOIs and Artificial Juridical Persons or gross receipts in the FY 2017-18 does not
exceed INR4,000,000,000 are taxable at 25
Total income Tax rates per cent
Up to INR250,000 (a)(b) NIL • Companies set up and registered on or
after 1 March 2016 engaged solely in the
INR250,001 to INR500,000(c) 5%
business of manufacture or production
INR500,001 to INR1,000,000 20% of article or thing may at their option be
taxable at 25 per cent provided they do not
INR1,000,001 and above 30% claim specified benefits or deductions.
a. For a resident individual aged sixty or • Other domestic companies are taxable at
above but less than eighty, the basic 30 per cent
exemption limit is INR300,000 • Special method for computation of total
b. For a resident individual aged eighty income of insurance companies. The rate of
or above, the basic exemption limit is tax on profits from life insurance business
INR500,000 is 12.5 per cent
c. Rebate from tax of upto INR12,500 or • Special code of tonnage tax on income
100 per cent of the tax whichever is less earned by domestic shipping companies
available for a resident individual whose • Presumptive tax regime applies to certain
total income is below INR500,000 businesses
d. Tax rates need to be further increased by • Tax rates need to be further increased by
the applicable surcharge and cess.(refer the applicable surcharge and cess.
point 4)
iv. For Foreign Companies
ii. For Firms (including Limited Liability
Partnerships) • Foreign companies are taxable at 40 per
cent
• LLPs are taxable at 30 per cent
© 2018
Direct tax rate card India Union Budget 2019-20 | 30
• Presumptive tax regime applies to foreign • AMT will not apply to an Individual, HUF,
companies in certain businesses AOP, BOI or an Artificial Judicial Person if
the adjusted total income of such person
• Tax rates need to be further increased by
does not exceed INR2,000,000
the applicable surcharge and cess.
4. Surcharge and cess
2. Minimum Alternate Tax
i. For Individuals, Hindu Undivided Families,
• MAT is levied at 18.5 per cent of the
AOPs, BOIs and Artificial Juridical Persons
adjusted book profit for companies where
income-tax payable on the total income
Total income Surcharge
(according to the normal provisions of
the Act) is less than 18.5 per cent of the More than INR5,000,000 but 10%
adjusted book profit less than INR10,000,000
• MAT is levied at 9 per cent of adjusted book More than INR10,000,000 15%
profit for companies being units located but less than INR20,000,000
in an IFSC which derives income solely
in convertible foreign exchange where More than INR20,000,000 25%
income-tax payable on the total income but less than INR50,000,000
(according to the normal provisions of the Exceeds INR50,000,000 37%
Act) is less than 9 per cent of the adjusted
book profit. Health and education cess at 4 per cent
is applicable on income-tax (inclusive of
• Tax rates will further increase by the surcharge, if any)
applicable surcharge and cess.
ii. For Firms (including Limited Liability
3. Alternate Minimum Tax Partnerships)
• AMT is levied at 18.5 per cent of the
adjusted total income in case of persons Total income Surcharge
other than a company where income-tax More than INR10,000,000 12%
payable on the total income (according to
the normal provisions of the Act) is less Health and education cess at 4 per cent
than 18.5 per cent of the adjusted total is applicable on income-tax (inclusive of
income applicable surcharge)
© 2018
iii. For Companies 15 per cent (plus applicable surcharge and cess)
on gross amount of such dividends.
Surcharge
6. Dividend Distribution Tax
Total income Domestic Foreign
• Domestic company, other than unit of an IFSC,
Company Company
is liable to pay DDT at:
More than INR
• 15 per cent (plus applicable surcharge and
10,000,000
7% 2% cess) on dividends distributed [other than
but less than
dividend under section 2(22)(e)]. Amount of
INR100,000,000
dividend distributed shall be increased to
Exceeds INR such amount as would after reduction of tax
12% 5% on such increased amount be equal to the
100,000,000
net distributed profits.
Health and education cess at 4 per cent • 30 per cent (plus applicable surcharge and
is applicable on income-tax (inclusive of cess) on amounts deemed as dividends
applicable surcharge) under section 2(22)(e).
4. Dividends earned by an assessee resident • Equity Oriented Fund is liable to pay DDT at
in India other than domestic company and 10 per cent on income distributed. Amount
specified funds, trusts, etc. of income distributed shall be increased to
Dividend income exceeding INR1,000,000 such amount as would after reduction of tax
received by an assessee resident in India other on such increased amount be equal to the
than a domestic company or specified funds or net distributed income.
institutions or trusts is taxable at 10 per cent (plus • Surcharge at 12 per cent is applicable.
applicable surcharge and cess) on gross amount
of such dividends in addition to DDT payable by • Health and education cess at 4 per cent is
the company. applicable on DDT (inclusive of applicable
surcharge)
5. Foreign dividends earned by an Indian
company 7. Tax on buy-back of shares
Dividends earned by an Indian company from a • Any amount of distributed income by the
foreign company in which it holds 26 per cent or company on buy-back of shares (including
more equity shares shall be taxable at the rate of shares listed on a recognised stock exchange)
© 2018
from a shareholder shall be charged to tax at

• On issue of rupee denominated
the rate of 20 per cent on such distributed
bond upto 30 June 2020(a)
income.(Computed as prescribes)
• Surcharge at 12 per cent is applicable. Royalty for agreements entered into 10%
on or after 1 April 1976
• Health and education cess at 4 per cent
is applicable on tax (inclusive of applicable Fees for Technical Services for 10%
surcharge) agreements entered into on or after
1 April 1976
8. Key rates for Non-Residents
The following incomes in the case of non- a. Exempt where rupee denominated
resident are taxed at special rates on a gross bond issued during the period from 17
basis: September 2018 to 31 March 2019
Nature of income Rate Tax rates need to be further increased by the
applicable surcharge and cess.
Interest received on loans given in 20%
foreign currency to Indian concern or
Government of India
• Interest received from Indian 5%
company or business trust on
monies borrowed from a source
outside India
-- in foreign currency and
approved by the central
government:
-- On issue of long-term
infrastructure bond from 01
July 2012 to 30 June 2014
-- Under a loan agreement from
01 July 2012 to 30 June 2020
-- On issue of long-term bond
from 01 October 2014 to 30
June 2020
© 2018
9. Capital Gains c. Provided STT is paid on transfer.

d. Rate of 10 per cent applies to long term capital
Short-term Long-term
gains exceeding INR100,000 without benefit of
Particulars capital gains capital gains
indexation and foreign currency fluctuation.
tax rates(a) tax rates(a)
e. Rate of 20 per cent with indexation and 10 per
Sale transactions
cent without indexation applies in respect of
of listed equity
listed securities and zero coupon bonds (other
shares(b)/unit of
15% 10%(d) than units).
an equity orient-
ed fund(c)/unit of f. Rate of 10 per cent applies to long term capital
business trust(c) gains of non residents/foreign companies from
transfer of unlisted securities or shares of a
Sale transaction other than mentioned above(e)
company, not being a company in which the
Individuals public are substantially interested, without
Progressive benefit of indexation and foreign currency
(resident and
slab rates fluctuation.
non-residents) 20%/10%(f)
Resident 10. Securities Transaction Tax
30%
companies
STT in the range of 0.001 to 0.2 per cent is payable
Overseas financial 40% by purchaser/seller as the case may be on the value
organisations (corporate) of taxable securities transactions.
10%
specified in 30% (non-
section 115AB corporate) 11. Equalisation levy
FIIs 30% 10% Equalisation Levy at 6 per cent is applicable on the
amount of consideration for online advertisement,
Foreign any provision for digital advertising space or any
40% 20%/10%(f)
companies other facility or service for the purpose of online
advertisement.
a. These rates need to be further increased by
the applicable surcharge and cess.
Note: The tax rates indicated are key rates for general reference
b. Provided STT is paid both on acquisition and purpose only.
transfer (other than those notified).
© 2018
© 2018
35 | India Union Budget 2019-20 Glossary
Glossary
AIF Alternative Investment Fund FMV Fair Market Value
APA Advance Pricing Agreement FII Foreign Institutional Investor
ATM Automated Teller Machine FY Financial Year
AMT Alternate Minimum Tax FPIs Foreign Portfolio Investments
AY Assessment Year GST Goods and Services Tax
AO Assessing Officer GDP Gross Domestic Product
AOP Association of Person Government Final Consumption

GFCE
Expenditure
BCD Binary-coded Decimal
GVA Gross Value Added
BOI Body of Individual

HFC Housing Finance Company
CBDT Central Board of Direct Taxes
HUF Hindu Undivided Family
CBCR Country-by-Country Report Insolvency and Bankruptcy

IBC
Code
CPI Consumer Price Index International Financial Services

IFSC
Centre
DDT Dividend Distribution Tax
IIP Index of Industrial Production
Drug Enforcement Administra-
DEA INR Indian Rupees
tion
DRR Debenture Redemption Reserve LED Light Emitting Diode
© 2018
Glossary India Union Budget 2019-20 | 36
LLP Limited Liability Partnerships RBI Reserve Bank of India
LPG Liquefied Petroleum Gas SA Secondary Adjustment
LTCG Long Term Capital Gain Securities and Exchange Board

SEBI
of India
MAT Minimum Alternate Tax
STCG Short Term Capital Gain
MF Master File
STT Securities Transaction Tax
Ministry of Statistics and
MOSPI
Programme Implementation TDS Tax Deducted at Source
Micro, Small and Medium
MSMEs Tax Deduction and Collection
Enterprises TAN
Account Number
NBFC Non-Banking Financial Company Ujjwal DISCOM Assurance
UDAY
Yojana
NCLT National Company Law Tribunal
Unnat Jeevan by Affordable
UJALA
NHB National Housing Bank LEDs and Appliances for All
USD United States Dollar

NPS National Pension Scheme
VCF Venture Capital Fund
NPA Non-Performing Asset
NRIs Non Resident Indians
PAN Permanent Account Number
Private Final Consumption

PFCE
Expenditure
© 2018
KPMG in India contacts:
Nilaya Varma Hitesh D. Gajaria
Partner and Leader Partner and Head
Markets Enablement Tax
T: +91 124 6691 000 T: +91 22 3090 2110
E: [email protected] E: [email protected]
home.kpmg/in
Follow us on:
home.kpmg/in/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate
and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on
such information without appropriate professional advice after a thorough examination of the particular situation.
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG Interna-
tional), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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India Union

GDP growth (2011-12 base) (YoY, %)

7.2 8.0 7.0 6.6 5.8 6.8 7.0

The industrial sector grew at 6.9 per cent in FY19

Inflation declined to a low of 2 per cent during

CPI growth (YoY, %) IIP growth (2011-12 base) (YoY, %)

6.0 8.5 7.5 8.4

Government expenditure Net FII flow (USD billion)

In FY19, Government Final Consumption

Exchange rate (INR/USD) Merchandise trade growth %

Indian trade Overview of economic measures

Fiscal deficit as % of GDP

3.9 3.5 3.5 3.3 3.1

FY16 FY17 FY18 FY19* FY20E**

Source: Key Economic Indicators, MOSPI, Updated as on 14 June 2019

Going forward, the government’s

2018-19 2019-20 2018-19 2019-20

48% 47% 26% 25%

30% 30% 60% 61%

16% 17% 10% 10%

Note: Conversion rate USD/INR – 68.5 as on 5 July 2019, Source: Oanda

Social services Miscellaneous capital

Loans & advances Recoveries of loans and advances

2018-19 2019-20 2018-19 2019-20

Capital Revenue Capital Revenue

46.22 312.50 49.10 357.35

Capital Revenue Capital Revenue

100.20 252.50 110.25 288.71

2018-19 2019-20E 2018-19 2019-20E

6.8% 7.0% 3.3% 3.1%

GDP Growth rate Fiscal Deficit

and Mumbai (whole of Mumbai Metropolitan TDS

-- No other deduction is being claimed or eligible

• PAN and Aadhaar allowed to be used

Indirect tax provided on import of defence equipment to

profiteering Authority concludes that the taxpayer Customs duty

Amendments in BCD (effective from 6 July 2019)

Effective duty rates

Paper and Paper products

19 7225, 7225 19 90 Inputs for the manufacture of CRGO steel:- 5 2.50

• Camera module of cellular mobile phones

• Charger/Adapter of cellular mobile phone

• Lithium Ion Cell

• Set Top Box

• Compact Camera Module

25 84, 85 or 90 Capital goods used for manufacturing of Nil Applicable

• Deflection components, CRT monitors/CTVs;

• Plasma Display Panel

37 Any Chapter Following parts of electric vehicles: - Applica- Nil

Scenario Amount of Tax/Duty Relief

Key regulatory proposals • RBI to have more powers to govern NBFCs

• To meet the capital expenditure outlay of railways, Other sectors

Direct tax rate card

from a shareholder shall be charged to tax at

9. Capital Gains c. Provided STT is paid on transfer.

APA Advance Pricing Agreement FII Foreign Institutional Investor

ATM Automated Teller Machine FY Financial Year

AMT Alternate Minimum Tax FPIs Foreign Portfolio Investments

AY Assessment Year GST Goods and Services Tax