Finance Minister Nirmala Sitharaman on Friday, 23 August 2019, announced a slew of measures to revive economy.
Sitharaman said that the government decided to withdraw the surcharge on foreign portfolio investors (FPIs), which she had unveiled in her budget for the fiscal year ending March 2020.
In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by Finance (No. 2) Act, 2019 on tax payable at special rate on income arising from the transfer of equity share/unit referred to in section 111A and section 112A of the Income-tax Act, 1961 (the 'Act') from the current FY 2019-20. Capital assets such as equity shares in a company, unit of an equity oriented fund and unit of a business trust are mentioned in section 111A and section 112A of the Act.
In order to improve market access for the domestic retail investors, Aadhaar-based KYC is now permitted for opening of demat account and making investment in mutual funds. FM also announced simplified KYC procedure to improve market access for foreign investors including FPIs.
Further, FM also announced withdrawal of angel tax provisions for startups and their investors. To mitigate genuine difficulties of startups and their investors, it has been decided that section 56(2)(viib) of the Income-tax Act shall not be applicable to a startup registered with DPIIT. It has also been decided to set up a dedicated cell under 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, FM said.
For the banking sector, FM announced upfront release of Rs 70,000 crore, additional lending and liquidity to the tune of about Rs 5 lakh crore by providing upfront capital to public sector banks. This will benefit Corporates, Retail borrowers, Micro, Small and Medium Enterprises (MSME), small traders, etc.
Banks will pass on rate cuts through MCLR reduction to benefit all borrowers. EMIs for housing loans, vehicle and other retail loans will reduce by directly linking repo rate to interest rates. Working capital loans for industry will also become cheaper.
To reduce harassment and bring in greater efficiency, public sector banks will ensure mandated return of loan documents within 15 days of loan closure. This will benefit borrowers who have mortgaged assets.
For ease of customer, banks will provide online tracking of loan applications by customers of retail, MSME, housing, vehicle, working capital, limit enhancements, renewals etc. This would increase transparency, reduce harassment, and improve turn around time for customers.
All pending GST refund due to MSMEs shall be paid within 30 days. In future all GST refunds shall be paid within 60 days from the date of application.
To support to non-banking financial companies (NBFCs)/housing finance companies (HFCs), FM announced additional liquidity support to HFCs Rs 20,000 crore by NHB thereby increasing it to Rs 30,000 crore. Partial credit guarantee scheme for purchase of pooled assets of NBFCs/HFCs upto Rs 1 lakh crore, which will be monitored at highest level in each bank. Prepayment notices issued to NBFCs will be monitored by banks.
NBFCs will be permitted to use the Aadhaar authenticated bank KYC to avoid repeated processes. Necessary changes shall be made in PMLA rules and Aadhaar Regulations
FM also announced measures for deepening of bond markets in India. In order to improve access to long term finance, it is proposed to establish an organisation to provide Credit Enhancement for infrastructure and housing projects. This would enhance debt flow towards such projects. The government would soon take further action on development of credit default swap (CDS) markets soon, in consultation with RBI and Sebi.
In order to improve domestic market in bonds, Ministry of Finance will work with RBI to make it more conducive for investors and bond issuers, as well as facilitate increased trading for price discovery. Government has amended the companies (share capital and debenture rules) 2014 to remove the requirement for creation of a Debenture Redemption Reserve (DRR) of outstanding debentures in respect of listed companies, NBFCs and for HFCs.
Meanwhile, to bring offshore Rupee market to domestic stock exchanges and permit trading of USD-INR derivatives in GIFT IFSC, Ministry of Finance is working with RBI to introduce this measure shortly.
To boost infrastructure sector, FM announced Rs 100 lakh crores for developing modern infrastructure over 5 years. An inter-ministerial Task force is being formed by Department of Economic Affairs to finalise the pipeline of infrastructure projects. The above initiative is expected to boost growth and creation of jobs. These projects would be monitored actively to accelerate capital expenditure and investments in the economy.
FM also announced measures to address complaints of harassment on issuing of Income Tax notices and orders by tax authorities. In order to address complaints of harassment on account of issue of notices, summons, orders etc. by certain income-tax authorities, IT orders, notices, summons, letters etc will be issued through a centralized system. Any communication issued without computer-generated unique Document Identification Number shall be non est in law. From 1st October, 2019 all notices to be disposed off within three months from the date of reply.
Moreover, CSR violations will not be treated as criminal offence and would instead be civil liability. Ministry of Corporate Affairs will review the sections under Companies Act. Government has provided companies through revised orders, time for completing ongoing projects towards fulfil their CSR obligations.
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