In an effort to allay fears over a slowdown in the economy, Finance Minister Nirmala Sitharaman, addressed a press conference on Friday and made several big announcements including facilitating wealth creation, taxation measures, measures for the automotive industry, angel tax and more. The FM stated that many countries are witnessing a slowdown, and while the situation is volatile, the growth rate of India is still higher compared to most other countries.
Here are the FM’s main announcements:
Taxation: The FM’s biggest announcement is that the enhanced surcharge on Long Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) arising from the transfer of equity shares has been revoked. The enhanced surcharge on foreign portfolio investors (FPI) has also been withdrawn, and the position pre-Budget has been restored. The rollback comes after Indian capital markets witnessed massive outflow of foreign funds in the month of July. Since the Budget, the benchmark index, Sensex had fallen over 3,000 points after it touched a life-time high of 40,000 in May.
Angel tax and startups: The FM said that Section 56(2)(viib) of the I-T Act, which taxes any money a company receives on the issue of its shares that exceeds its fair market value, would not be applicable to startups registered with the Department of Industrial Policy and Promotion (DPIIT).
To resolve the problems of startups, the FM announced that there would be a dedicated cell under the Central Board of Direct Taxes for resolution.
Banking: To facilitate additional credit expansion, the government will be releasing Rs 70,000 crore announced in the budget upfront, which will make additional lending and liquidity of Rs 5 lakh crore available by providing this upfront capital to PSBs.
She further announced that banks have decided to pass on all rate cuts through reduction in the Marginal Cost of Funds based Lending Rate (MCLR) to benefit all borrowers. The MCLR is the minimum interest rate, below which a bank is not permitted to lend.
This will lead to EMIs of housing, vehicle and other retail loans coming down.
For customers who take loans from public sector banks, the government has now mandated banks to return loan documents within 15 days of the loan’s closure.
Auto sector: The FM also announced that vehicles conforming to BS-IV emissions which are purchased till March 2020 will remain operational for the entire time period that they are registered. Vehicles would also be depreciated at a higher rate - with a total 30% depreciation rate (currently at 15%) on all vehicles purchased till March 2020.
For both electric vehicles and internal combustion vehicles, the government announced that the government will be setting up infrastructure and also be producing batteries for export.
Scrappage policy — The government also announced that it would be considering a scrappage policy, so that vehicles that are unworthy can be sent for scrap and money can be earned in the form of coupons to aid purchase of new cars.
Wealth creation: Nirmala Sitharaman said that in order to facilitate wealth creators, CSR violations would not be considered as a criminal offence, but as a civil liability. Also, to address complaints of harassment, the FM said that all I-T summons would be issued through a centralised system with a unique ID from October 1. Furthermore, she added that communication without a Director Identification Number (DIN) need not be taken seriously. Current notices will either be cleared by Oct 1 or re-uploaded to the system. They also have to be disposed off within 3 months from the date of reply.
Credit support to NBFCs and HFCs: To offer more credit support for purchase of houses, vehicles, consumption goods, the Finance Ministry also announced additional liquidity support to housing finance companies of Rs 20,000 crore by the National Housing Bank (NHB), thereby increasing it to Rs 30,000 crore.
Further, Non-Banking Finance Companies (NBFCs) will now be permitted to use Aadhaar authenticated bank KYC. The FM said that necessary changes shall be made in PMLA rules and Aadhaar regulations.