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This is the first budget of the second term of the Narendra Modi government. It’s a government that has a brutal majority in parliament and should, therefore, be in a position to push through reforms that it believes in.

In the last 5 years, world output grew at 3.6 per cent first in 2014, and again by the same per cent in 2018. In the intervening period, even as it appeared that the world had not changed much, India took a few giant strides forward, emerging as the sixth-largest economy by sustaining growth rates higher than China. It is another matter that there is a lot of debate in the public chatting rooms about the robustness of these numbers.

One of the high points of this government is that the average inflation in these five years was less than half the inflation level of the preceding five years. This matches favourably with achievements in each of the last 70 years, as it is the lowest post-independence. Note, falling inflation means that the rate of price increase is lower and does not mean that prices have, in fact, fallen.

Yet in sharp contrast to what the government had said, including the rather tasteless ‘pakoda’ jibe, unemployment is at its peak. This is the highest in the last 45 years and it says a lot about employment generation and quality of manpower. India needs more entrepreneurs who would turn out to be job providers rather than job seekers as we try to emerge as the third-largest economy in the world. The government cannot and should not be a provider
of jobs.

In the backdrop of this Finance Minister Nirmala Sitharaman, an economics major and a former PwC officer, presented her maiden budget. The target is to become a $3 trillion economy in the current financial year 2019-20 and move towards $5 trillion by 2024-25

So how does the budget stack up in its proposals?

India grew at 6.8 per cent in the year that was making it perhaps the fastest growing economy of in the world. This coming on top of demonetisation and the transition to a transformatory GST regime is significant.

Of course, a slew of people who were once part of this government have questioned quite a few numbers but the inconvenience associated with answering those charges has made people dub them politely as academics with no roots or aggressively as anti-nationals.

A bulk of the GDP growth has come from two sectors: industry and services, while agriculture has been primarily sluggish. India appears to have won the battle against inflation which has been kept under leash, while fiscal deficit has been kept under wraps although a few point to how some part of this has been achieved through means that cannot be repeated.

All told, if you trust the government data, this has been a year well-performed albeit the duress.

The $5 trillion economy:
Economic Survey 2018-19 Highlights 

India aspires to be a $5 trillion economy by 2025. Its current size is $2.8 trillion, which means that the economy has to grow at 12 per cent to crack the $5 trillion mark. The Indian economy was around $388 billion in 1996, touched $920 billion in 2006, and stood at $2300 billion in 2016. These translate into a growth rate of 9 per cent per annum.

To achieve the vision, a lot of emphasis on massive private investment in infrastructure, digital economy and on job creation in the SME sector is to be made. With population demography of 58.9 per cent in the age group of 20-59 years, employment opportunities remain a significant concern. With population demography of 15.9 per cent (by 2041) in the age group of 60+, social security reforms and affordable medical care attain prominence.

The political stability, as represented by the brute majority in parliament should work in favour of this government with no Nehru to be blamed for the ills of the country. India needs to gear up its foodgrain. There is an urgent requirement for redesigning minimum wage system for inclusive growth. The focus will have to be on legal reform, policy consistency, efficient labour markets and use of technology.


N Lakshmi Narayanan is the Vice-Chairman Emeritus of Cognizant Technologies and is Chairman of the ICT Academy of Tamil Nadu. We spoke to the doyen of the IT industry on Budget 2019.


The budget sets a positive tone to stimulate growth. The Union Budget and its presentation, with enthusiasm, is a mood-setting event. By talking about a five trillion dollar economy, the government’s commitment to “less government and more governance,” consistent fiscal policy, the desire to move ahead rapidly have been conveyed. Encouraging investment by opening up sectors, like insurance intermediaries, clearing the air around startup taxation and government’s divestment directions send a right message that would inspire industry into action. The Finance Minister has also demonstrated by her recent actions against tax officials, that she would not stand for ineptitude and dishonesty, which should energize the corporate sector. All said, the budget sets a positive tone to stimulate growth.


This July budget has much more talk, plan and action about the future and growth. The absence of stories from the past like the Nehruvian blunders or the emergency period, which two-thirds of the country doesn’t relate to, is a big first step. Today’s young minds want to hear about the future and industries and opportunities of the future, not of the past.

Successes of ISRO and setting up a New Space India Limited are good news. Giving the electric vehicle industry a nudge, a policy push, and a stick by way of a reasonably short deadline for moving away from ICE is excellent news.
Unleashing the power of Aadhar in our rapid digitalisation and using big data big time for governance is probably the best news. One nation, one mobility card, pre-filled Income Tax forms, and technology in farming are, I hope, only a sample of technology-driven initiatives to drive productivity, transparency and growth.


Emphasis on higher education and research and correspondingly increasing the funding for research will clearly position India for the future. A National Research Foundation that addresses the needs of higher education and research is a welcome move. I hope NRF is kept free of bureaucratic interference and left to be directed by the Principal Scientific Advisor with support from such successful entities as ISRO, Nuclear Power Corporation, DRDO, and the Scientific and Biotech community. This with the New Education Policy/Higher Education Commission with much greater autonomy, will truly position the young minds for a great scientific future in India.


Yes, I would think so. For one, downsizing the government. The salary and pension bills of the Central and State government staff keeps increasing. This is no sign of “less government.” Can the finance minister be bold enough to announce that the wage bill of the government will decline by 5 per cent every year for the next 5 years, through improved productivity, increased accountability and greater use of technology? Computerisation of Income Tax, GST, property and land records have delivered visible improvement with a lower wage bill.

Can the government also incentivise the private sector to create more jobs (matching the governments’ downsizing) in new sunrise sectors like renewable energy, digital services, electronic manufacturing and health services?
Emphasis on a corruption-free country has to come from the top. When I say the top, India has many tops. The prime minister is only one such top, who has set the tone. Can we get every Central minister and every state chief minister and cabinet colleagues to openly and repeatedly state that they want to run a corruption-free government and live by it? Setting the tone and punishing the guilty will drive a sense of pride among the Indians, no better gift than this for India@75.


Yes, not only because they have to pay higher taxes, but also because the higher taxes will go to, in part, to providing Z-Category security, a cavalcade with ambulance in tow and policemen lining the entire length of political leaders’ everyday commute and journey and on top of it inconveniencing the very same HNIs in traffic, who have to wait till their leaders cross into zones of safety. Like the 2 per cent CSR that corporates spend judiciously, HNIs will do a better job of the additional taxation in nation-building on their own, given a chance, than be put in the pouches into which unknown hands dip.

How is the man on the street affected

In the end what matters to most of us is how the budget impacts us. So here we list out the significant tax proposals that have a bearing on each of us.


Personal Tax

The slab rates for individual and HUF has not been changed. The rebate under Section 87A presented in the interim budget has been maintained at Rs 12,500 without providing for any marginal relief. The lack of that relief was pointed out by various bodies but the government has given it a silent burial. Surcharge has been increased to 25 per cent if the income is between 2 crore to 5 crore and to 35 per cent in the income is more than Rs. 5 crore. Heath and Education cess is retained at 4 per cent. Interestingly, the finance minister while presenting her budget had indicated that surcharge is being incr A Summary of the rate of tax is tabulated below:
Particulars Basic tax (in %) Surcharge (in %) Cess (in %) Effective rate (in %)
Less than 50 lakh 30 0 4 31.20
50 lakh to 1 crore 30 10 4 34.32
1 crore to 2 crore 30 15 4 35.88
2 crore to 5 crore 30 25 4 39.00
More than 5 crore 30 35 4 42.12

Most of the HNIs are fuming and rightly so. To cough up anywhere between 35 per cent to 42 per cent at a time when you are also suffering GST at an average rate of 18 per cent is really hard.

Companies Rates

The current lower tax rate of tax at the rate of 25 percent is applicable for companies whose annual turnover is up to Rs 250 crore. This annual turnover threshold is now proposed to be increased to Rs. 400 crore.


Currently buyback of unlisted shares attracts additional tax at rate of 20 per cent (as increased by surcharge and cess) in the hands of the company on account of buy back. Such buyback is exempt in the hands of shareholders. It is now proposed to include such buy back tax on buyback of listed shares. This would now mean that buyback taxation is almost on part with taxation of dividends. The equity market hasn’t taken kindly to this and is one of the reasons for the crash in the market.


Those who buy electric vehicles will receive income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to fund those electric vehicles. The loan should have been sanctioned between 1 April, 2019 to 31 March, 2023.
An additional income tax deduction of Rs. 1.5 lakh is being allowed on interest paid on loan taken to purchase a house. The loan should have been sanctioned between 1 April, 2019 to 31 March, 2020. The value of house should not exceed Rs 45 lakh and it should be the first house for the assessee. This deduction is in addition to Rs 2 lakh which is allowed at present


Upon retirement, an individual can withdraw a lump-sum up to 60 per cent of the corpus fund and balance 40 per cent is required to be invested in an annuity plan under scheme of NPS. Out of the withdrawn amount (ie 60 per cent), 40 per cent shall be exempt and 20 per cent is taxable in the hands of the taxpayer. Now it is proposed to raise exemption limit from 40 – 60 per cent of the corpus fund.
Contribution to NPS is allowed as deduction to the extent of 10 per cent of the salary. It is proposed to increase the exemption from 10 per cent to 14 per cent of the salary of Central Government employees.
This has important ramification for the individual investor.

Immovable property

TDS on immovable property presently is at the rate of 1 per cent if the value of the property exceeds Rs 50 lakh. It is proposed now to levy the withholding tax on all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charge of similar nature, that are incidental to transfer of the immovable property

Payments to professionals and contractors

Presently, individual or HUF who are not liable for tax audit are not liable to deduct taxes on any payment made to a contractor or professional. It is proposed that to introduce levy of TDS at the rate of 5 per cent on the amount paid by an individual or HUF on account of contractual work or professional fees if such person is not able to deduct under section 194C or 194J of the Act. However, such deduction shall not be applicable if the amount does not exceed Rs 5 lakh. For this purpose, TAN is not required.

Withdrawal of cash

New levy of TDS has been proposed at the rate of 2 per cent on cash withdrawal in excess of Rs. 1 crore in aggregate during the year from (i) banking company or (ii) cooperative bank or (iii) post office. However, there will not be any TDS in respect of withdrawal by government, banking company, cooperative society (engaged in carrying on the business of banking) post office, banking correspondents and white label ATM operators and such other categories as the Central government may notify in future.

Insurance amount

TDS is applicable on amount received from insurance if the same is taxable. It is proposed to restrict the tax on the income component as against gross sum. Further, the rate of tax deduction at source is increased from 1-5
per cent.

Assessee in default

In case a person fails to deduct taxes, the assessee will not be treated as a “assessee in default”, if the recipient of income has duly filed its return of income after payment of taxes due and has furnished an chartered accountant’s certificate to this effect. However, this was applicable only for payments to residents. It is now proposed to amend, that such section will be applicable in case of non-residents also.

Further, it is proposed that no disallowance will be made on account of above payments made to non-residents .


A person shall be mandatorily required to file his return of income if he satisfies the below conditions.
• Deposited more than Rs 1 crore in one or more current accounts maintained with banks or co-operative banks; or
• Incurred expenditure exceeding Rs 20 lakh for self/ any other person for travel to a foreign country; or
• Incurred expenditure exceeding Rs 10 lakh
towards consumption of electricity; or
• Any other as may be prescribed.

Further in case a person is claiming exemption from capital gains by investing in specified mode, will necessarily be required to furnish a return, if his total income is more than the maximum amount not chargeable to tax before claiming such benefits.


• Every person who is required to disclose his PAN and who has not been allotted a PAN but possesses the Aadhaar number, may disclose his Aadhaar number in lieu of PAN
• Every person who has been allotted a PAN, and who has linked his Aadhaar number under section 139AA, may disclose his Aadhaar number in lieu of a PAN.
• Every person entering into a prescribed transaction will quote his PAN or Aadhaar number in the documents pertaining to such transaction and authenticate such PAN or Aadhar number; and
• Every person receiving a document relating to such transactions will ensure that the PAN or the Aadhaar number has been duly quoted therein and that it is authenticated.
In case of non-compliance with any other above requirement, it is proposed to provide for the levy of penalty of INR 10,000 for failure to comply with the provisions
It is also proposed that if a person fails to intimate his Aadhaar number to the prescribed authority, the PAN allotted to such person shall be made inoperative.


On Account of sale of residential property, exemption is available if the net consideration is invested in start-ups and then the start-up invests in plant and machinery. For the said case, the following amendments are made.
• The sunset date for transfer of residential property has been extended till March 31, 2021 from March 31, 2019.
• The minimum shareholding in start up company has been reduced from 50 per cent of share capital to 25 per cent.
• Time limit for transfer of computer or software has been reduced from five years to three years.


In case a non-resident receives a gift of any property situated in India then the same is proposed to be considered as deemed to accrue in India and therefore, taxable for such non-resident.

GST: Applicability of interest

Interest on late payment will be charged only on the net liability, ie., on the amount of total tax liability as reduced by input tax credit.

Composition Scheme

Composition scheme has been amended to include other service providers and also to persons providing both goods and services having annual turnover in the preceding financial year of upto Rs 50 lakh. It is now proposed that these persons shall file return annually. However, payment has to be made quarterly.


The threshold for registration has been increased to Rs 40 lakh instead of
Rs 20 lakh for supplier engaged exclusively in the supply of goods.

Transfer from one account to another

The facility to transfer any amount of tax, interest, penalty and fee from one head to another in the electronic cash ledger will be enabled subject to the manner and restriction as may be prescribed by the Government.

K Vaitheeswaran is a distinguished advocate specialising in direct and indirect tax laws.

Do you think the Budget will stimulate growth?
The emphasis on the Budget being an all-pervasive policy statement and solution for all problems, needs to go. In many countries, Budget is a non-event. However, this may take some years to happen in India. More apt at this point is the Economic Survey. It’s a brilliant document; well researched and focuses on the economy being in constant dis-equilibrium. The Budget echoes some of the observations in the Survey. If investment is the focus as per the Survey, then growth is natural.

Is it a please all Budget with more emphasis on welfare than on growth?
Affordable Housing gets tax incentives, which is suitable for the Construction Sector, which employs significant labor. While there are deductions for interest on a loan for the purchase of an electric vehicle, pushing EV as a disruption model may not be a good idea. Combustion vehicles should gradually fade, and a blanket ban approach is not advisable. There is a massive ecosystem around motor vehicles such as vendors, suppliers, contractors, service providers, dealers, and resale markets. Disruption can lead to unemployment and a slump.

As the first Budget of the new government, could it have been bolder?
Yes. It could have been bolder given the massive mandate that the Modi government has received.

Three features that impressed you.
Answer: Affordable housing, emphasis on digital transactions, and the Sabka Vishwas Scheme which would settle pending disputes are some of the big-ticket reforms over which I am gung-ho.

And three you felt were regressive.
The Robinhood approach on the surcharge, amendments to the provisions about charitable trust and TDS on cash withdrawal, which has no nexus to income are reprehensible to the core.

T T Srinivasaraghavan,
Sundaram Finance

I think the budget will stimulate growth and I don’t think it’s a please-all budget. It merely tries to balance various priorities. While one can always have a view on whether the government could have been bolder, I sense that the emphasis seems to be on maintaining fiscal discipline and that is as it should be.

The three features that impressed me are the grand vision of a $5 trillion economy, proposals related to NBFC and the continuous focus on Infrastructure. I feel the increase in the income tax rate at the higher income bracket is regressive and there are no plans for job creation.

P G Babu,
Director – MIDS

I think the unsaid objective of this budget is to stay neutral, or should I say, adherence to no harm principle. This is a reasonably realistic budget and coming as it does in July it was unlikely to experiment much.

The three features that impressed me most are the removal of charges for digital payments, the big hint of forthcoming things through the $5 trillion target, and the willingness to stand the ground in income taxes and even increase for some.

I am upset with the tendency to centralise Higher Education Institutional Research funding, am not too sure if the PPP in railways would work given our experience in highways and am saddened at the zero improvements in GST.

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