Key Growth Measures By FM Nirmala Sitharaman To Boost Economy
Finance Minister Nirmala Sitharaman, on friday, 23rd August 2019, announced growth measures while addressing the current economic slowdown. Here are the key takeaways of Finance Minister’s 5-steps plan to revive Indian economy.
Finance Minister’s 5-Steps Plan To Revive Indian Economy
1.Withdrawal of Enhanced Surcharge on FPIs & Domestic Investors
- Taking into account the demand of overseas investors, Finance Minister Nirmala Sitharaman has announced the withdrawal of enhanced surcharge on foreign portfolio investors (FPIs) levied in the Budget FY2019 presented on 5th July, 2019.
- Surcharge on long and short term capital gains arising from transfer of equity shares has also been withdrawn.
- This surcharge has affected FPIs adversely and made investment in Indian equity market unattractive for FPIs. As a result, FPIs have withdrawn Rs.23,000 Cr from domestic markets post-Budget. The Budget announcement of surcharge on higher tax-income groups reportedly affected 40% of FPIs.
- The Budget announcement of the surcharge had pushed the effective income tax rate for individuals with taxable income of Rs.2-5 Cr up to 39% from 35.88% and for those above Rs.5 Cr to 42.7%.
- But now, the government has withdrawn this enhanced surchage and thus, Pre-Budget position is restored. So the investment in Capital market is expected to be increased.
2.Measures to Accelerate Auto Sector
- The auto sector is facing its worst crisis in almost 20 years. Sales of cars, tractors and other vehicles have been declining for months.
- As per the announcement made by Finance Minister, BS IV vehicles bought before 31st March 2020 will remain operational for their full period of registration.
- Also, the Finance Minister has postponed the decision of increasing the one time registration fee on vehiles till June 2020.
- The FM also lifted the ban on purchase of vehicles by government departments. Government asked its departments to replace old vehicles.
- Depreciation increased to 30% for all vehicle purchased till March 2020 with the additional 15% depreciation.
- Moreover, both electric vehicles (EVs) and Internal Combustion Vehicles (ICV) will continue to be registered.
- The government’s focus will be on setting up of infrastructure for development of ancillaries/components, including batteries for exports.
- Also, the government will soon come up with a scrapping policy for the vehicles.
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3.No Angel Tax – Relief for Startups
- Earlier, the Angle tax was paid by the start-up on its end after recieving the funding from the investors. Angel tax has been a major issue among entrepreneurs and in the startup ecosystem. Although the government announced some measures earlier, but the startups were not satisfied and wanted a complete revocation of the tax liability.
- Thus, Government has decided to withdrawn this ‘Angel tax’ provision for startups and their investors, which is a big relief to entrepreneurs and startups.
- As per the announcement by FM Nirmala Sitharaman, several other measures to ease tax liabilities and address the ongoing concerns of tax harassment by tax officials.
- The government is going to set up a dedicated cell under a member of CBDT for addressing the problems of startups. A startup having any income tax issue can approach the cell for quick resolution of the same.
4.Affordable Home, Auto & Retail Loans
- Banks have agreed and are going to soon pass on RBI rate cut benefits to borrowers through MCLR reduction.
- Further, banks will launch repo rate and external benchmark-linked loan products. It will lead to reduced easy monthly installments for housing, vehicle and other retail loans.
- Banks are going to ensure mandated return of loan documents to customers within 15 days of loan closure. It wil benefit customers who have mortgaged assets.
- Micro, Small and Medium Enterprises (MSMEs) are going to get all their pending GST refunds within 30 days.
- Further, all GST refunds of MSMEs will be paid within 60 days from the date of application.
- As mentioned by the Finance Minister, the decision regarding the ease of credit, marketing, technology and delayed payments to MSMEs will be taken within 30 days.
- The government would also consider amendment to the MSMEs Act to move towards a single definition.