Key highlights of the budget covering Direct and Indirect Tax proposals are given below :

➢ Deposit taking and systemically important non-deposit taking NBFCs can now pay tax in the year they receive interest for certain bad or doubtful debts.

➢ Companies up to an annual turnover of Rs.400 crores would qualify for the lower rate of tax of 25% (plus surcharge and cess).

➢ Super Rich Taxation – Highest Individual Tax Rate increased from 35.88% to 42.744%. The highest surcharge rate has been proposed of 37% for those having total income exceeding Rs. 5 crores and at 25% for those having total income between Rs. 2 crores to Rs. 5 crores.

➢ NPS Withdrawal Exemption limit hiked to 60% – Any payment from the NPS Trust to an assessee on closure of his account or on his opting out of the pension scheme, to the extent of 60% (earlier 40%) of the total amount payable to him at the time of such closure or on his opting out of the scheme, is exempt from tax

➢ Re-incarnation of 1/6 Scheme – Mandatory furnishing of return of income by certain persons

Persons who enter into certain high value transactions have to furnish their return of income mandatorily for that relevant year. The transactions are:

• deposited Rs. 1 one crore or more in bank accounts
• incurred expenditure more than Rs. 200,000 for foreign travel
• electricity bill above Rs.100,000 or
• claiming any benefits of capital gains exemption on investment in a house or a bond or other eligible assets; or
• other prescribed conditions
• This is similar to the earlier scheme of mandatory filing of returns on fulfilment of certain criteria but which was subsequently withdrawn.

➢ Deduction for interest on electric vehicles loan (Proposed section 80EEB)

With a view to improve environment and to reduce vehicular pollution, it is proposed to allow deduction in respect of interest on loan taken for purchase of one electric vehicle from any financial  institution up to Rs. 150,000. This is subject to the condition that the loan is being taken during the period from 1 April 2019 to 31 March 2023 and the assessee does not own any other electric vehicle on the date of sanction of loan.

➢ Deduction for interest on Housing loan (Proposed section 80EEA)

With a view to provide impetus on affordable housing, it is proposed to allow deduction in respect of interest on loan taken for purchase of an affordable house (worth not above Rs. 45 Lakhs) up to Rs. 150,000. This is subject to the condition that the loan is being taken during the period from 1 April 2019 to 31 March 2020 and the assessee does not own any other residential house on the date of sanction of loan. This is in addition to interest deduction of Rs.  200,000 which can be claimed as interest on self-occupied property.

➢ Inter-changeability of PAN & Aadhaar and mandatory quoting in prescribed transactions

The Inter-changeability of PAN & Aadhaar and mandatory quoting in prescribed transactions or for filing or return is a very welcome move and would help to increase the tax base.

➢ TDS on property scope widened to include all additional charges including the consideration.

For purpose of TDS on purchase of property @ 1%, it has been clarified that the consideration for immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property. This would put additional compliance burden on home buyers for other residuary payments.

➢ Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and professionals

It is proposed to insert a new section 194M in the Act to provide for levy of TDS at the rate of 5% on account of contractual work or professional fees by an individual or a Hindu undivided family, who are not required to deduct tax at source under section 194C and 194J of the Act, if such sum, or aggregate of such sums, exceeds Rs. 50,00,000 in a year. However, in order to reduce the compliance burden, it is proposed that such individuals or HUFs shall be able to deposit the tax deducted using their Permanent Account Number (PAN) and shall not be required to obtain Tax deduction Account Number (TAN).

➢ TDS on cash withdrawal to discourage cash transactions

In order to discourage cash transactions and move towards less cash economy, it is proposed to levy TDS @ 2% on cash payments in excess of Rs. 1 crore in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from an account maintained by the recipient.

➢ Buy-back tax extended to listed companies

Any buy back of  shares from a shareholder by a company listed on recognised stock exchange, on or after 5th July 2019, shall also be covered by the provision of section 115QA of the Act and have to pay tax @ 23.296%. This would be a barrier for the companies who have already made announcement for buy-back or are in process. The gains on buy-back would be exempt in the hands of the shareholders.

➢ Proposal to give relief on levy of securities transaction tax

➢ Section 35AD scheme would include units set up in the areas of solar photovoltaic cells, lithium storage batteries, solar electric charging infrastructure, computers servers, laptop etc.

➢ Faceless and anonymous assessment system for income tax being rolled out this year in phases.

➢ Transfer of Tax under One Head to Another Head

Presently, as per the GSTN architecture, a taxpayer is required to deposit tax or other amount under different head. The amount once deposited cannot be transferred from one head to another. Now it has been proposed to allow such a facility to taxpayer and is a welcome step to save the taxpayer from the rigours of refund processes.

An associated change has been made relating to transfer of money by Central Government to State Government in view transfer of money from CGST / IGST head to SGST head.

➢ Disbursal of Refund by Central Government

Presently, the respective Government disburses their part of refund claim e.g. the State Governments disburse the SGST portion of refund claim, the Central Government disburses the CGST and IGST component. It has been experienced that invariably there are delays in sanctioning the refund by the authority other than the refund sanctioning authority.

It has been proposed that the Central Government will disburse the entire refund amount including the SGST portion of the refund amount

➢ As a move towards curbing litigation, a dispute resolution cum amnesty scheme called “the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019” is being introduced for resolution and settlement of legacy cases of Central Excise and Service Tax. The proposed Scheme shall cover past disputes of taxes which have got subsumed in GST namely Central Excise, Service Tax and Cesses. It may be noted that Customs law and VAT disputes are not covered in this Scheme. All persons are eligible to avail the scheme except a few exclusions including as those convicted under the Act in the case for which he intends to make declaration and those who have filed an application before the Settlement Commission.

➢ A new provision has been proposed requiring a registered person as well as person applying for new registration to undergo authentication under Aadhar or furnish proof of possession of Aadhar. In case of registrants other than individuals, proof of possession of Aadhar is to be furnished by the Karta, Managing Director, Wholetime Director, Partners, Members of managing committee of an association, Board of Trustees, Authorised representative etc.

➢ The expression ‘ Aggregate turnover’ for a person opting for composition scheme shall include the value of supplies from April 1 of the financial year until he becomes liable for registration and shall exclude exempt supply provided by way of extending deposits, loans or advances in so far as it consists of interest or discount.

➢ Returns : It is proposed to empower the commissioner to extend the due date for furnishing Annual Return ( GSTR -9) reconciliation form ( GSTR 9C) , statement of tax collected at source ( GSTR-8) .

➢ It is proposed to remove the current time limit to furnishing return under Section 39 of the CGST Act , 2017 from within 20 days from the end of the calendar month or part thereof. The time limit will be prescribed by the Rules.

➢ It is proposed that composition dealers will be able to pay their taxes on quarterly basis instead of on monthly basis at present.

➢ A return for the entire year or part thereof has been proposed for composition dealers.

➢ Taxpayers having annual turnover of less than ₹5 crore can now file quarterly returns.

➢ Social stock exchange for listing social enterprises and voluntary organisations

➢ E-verification for establishing investor identity and source of funds to resolve tax issues relating to fund raising

➢ Exclusive TV channel for startups