Budget 2019: Acche din for taxpayers? Here's how paying taxes, tax claims will change in FY20

Finance Minister Nirmala Sitharaman, while talking about taxpayers during her Budget 2019 speech, began by thanking them for being responsible citizens and performing their duties by paying taxes honestly. Direct tax revenue collection has seen a significant jump to Rs 11.37 lakh crore in FY19, compared to single-digit performance of Rs 6.38 lakh crore in FY14. This would be a whopping 78% jump in tax revenue in five years. Going forward, Sitharaman proposed a host tax benefits to home loan borrowers, coporates, electric vehicles and even startups. 

Archit Gupta, Founder & CEO ClearTax said "Taxpayers were expecting more from this budget, given the boost in tax revenues as mentioned in the speech. In line with Niti Aayog's proposals, there is annual tax benefit on interest cost of upto 1.5L for taxpayers for purchase of Electric Vehicles. However, rest of the eco-system for EVs will need to be put in place first, or this remains only symbolic. The higher tax benefits for home loans, are definitely a push for housing sector and may encourage more investment."

Sitharaman proposed to allow an additional deduction of up to Rs 1,50,000/- for interest paid on loans borrowed up to 31st March, 2020 for purchase of an affordable house valued up to Rs 45 lakh. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 lakh. This will translate into a benefit of around Rs 7 lakh to the middle class home-buyers overtheir loan period of 15 years. 

Going forward, Gupta said, "The corporate sector has much to rejoice with lower tax rates for corporates with turnover upto Rs 400cr, this is a big boost."

In regards to corporate tax, Sitharaman proposed to widen the current rate of 25% by allowing a firm whose annual turnover of Rs 400 crore to also pay taxes under this slab. This will cover 99.3% of the companies. Now only 0.7% of companies will remain outside this rate. 

Besides on disinvestment proposals, Gupta said, "there wasn't much in the speech on how the government will increase tax collections. The increase only comes by raising taxes for high income earners (2cr to 5cr, and more than 5cr) by increasing surcharge. A lot more could be done and hopefully it will find place in DTC."

On startup tax reforms, Gupta pointed out saying, "The Budget looks promising for startups and our rating is good. The following promises must be put into practice soon and aggressive scrutiny of startups receiving funding must be put to an end."

Here's what has been introduced for startups:

A capital gains tax exemption is allowed under section  54GB of the Act to an investor who sells a residential house or plot and invests the net consideration in equity shares of a start-up company, which company in turn has to use the amount to purchase a new asset. This exemption is available for investments  made until 31 March 2019. This is now extended to 31 March 2021.

Pending assessment of startups - no inquiry/verification  to be carried out by AO without obtaining approvals of supervisory officer.

Relaxed norms for set off and carry forward of losses for  #startups have been proposed. 

No scrutiny to check the valuation for ‘Angel Tax’ if start-ups  and investors file declaration - via e-verification.