New Delhi: Addressing the media a day after NITI Aayog chairman Rajiv Kumar described the liquidity crisis in financial sector as “unprecedented”, Union Finance Minister Nirmala Sitharaman on Friday said her government was going ahead with the Narendra Modi government's agenda of reform.
Giving in to demands from overseas investors, Sitharaman announced a rollback of enhanced surcharge on foreign portfolio investors (FPIs) levied in the Union Budget.
Surcharge on long and short term capital gains arising from transfer of equity shares has been withdrawn, Sitharaman said. "The pre-Budget position is restored," she said, adding that it was being done to encourage investment in the capital market. The decision taken in the Budget to levy enhanced surcharge had spooked the stock markets.
Following the increase in surcharge in the Budget, the effective income tax rate for individuals with taxable income of Rs 2 crore to Rs 5 crore went up to 39% from 35.88% and for those above Rs 5 crore to 42.7%.
Earlier this month, capital market participants and foreign institutional investors presented a charter of demands to Sitharaman, which included rollback of surcharge on FPIs and review of dividend distribution tax.
Sitharaman said henceforth, Corporate Social Responsibility (CSR) violations would not be treated as a civil offence instead of a criminal one.
The minister said the government will infuse Rs 70,000 crore capital upfront into public sector banks. She also announced several measures aimed at making cheaper home, vehicle, and other retail loans.
Sitharaman said that to mitigate genuine difficulties of start-ups and their investors, it has been decided to withdraw angel tax provisions for start-ups registered with the Department of Industrial Policy and Promotion (DPIIT) and banks' lending rates to be linked to Marginal Cost of Funds-based Lending Rate (MCLR), bringing down the rate of home and auto loans.
"To mitigate genuine difficulties of start-ups and their investors, it has been decided that Section 56(2)(viib) of the IT Act shall not be applicable to a startup registered under DPIIT," she said, adding that while the said section will continue to be part of the Income Tax Act, it will not be applicable to the start-ups registered with DPIIT.
A dedicated cell under a member of Central Board of Direct Taxes (CBDT) will be set up to address the problems of start-ups, she said. "After this, if there is a difficulty, it has been decided to set up a dedicated cell under a member of the CBDT. Any start-up that has an issue can approach the cell for quick resolution of the problems," she said.
Multiple start-up founders had claimed that they have received notices under Section 56(2) (viib) of the Income Tax Act to pay taxes on angel funds raised by them.
Keeping in mind individual interests, Sitharaman said that banks have been asked to return loan documents to customers within 15 days of loan closure.
Micro, Small and Medium Enterprises (MSMEs) also featured in Sitharaman's agenda of reform – she said that all pending dues to MSMEs will be paid in the next 30 days. Going forward, all refunds will also be paid within 60 days from the date of application, she added. The MSME Act will soon be amended and a single definition for MSME would be announced, she said.
Sitharaman said at least two more such press briefings would be held in the coming weeks in which several more such measures would be unveiled. Home owners and the fledgling real estate sector are likely to be in for a pleasant surprise, she indicated.
With real estate in mind, which according to some reports is witnessing the largest number of unsold units ever, Sitharaman announced that additional liquidity to housing finance companies by the National Housing Board (NHB) would be increased from Rs 20,000 crore to Rs 30,000 crore.
Sitharaman also announced a new task force that will handle Rs 100 lakh crore for developing modern infrastructure over the next five years.
The flagging auto sector also formed a big part of her action plan of reforms. In a big relief for those concerned about the viability of Bharat Stage (BS) IV-compliant vehicles, Sitharaman said that BS-IV vehicles purchased up to March 2020 will remain operational for their entire duration of registration.
In another measure, all vehicles purchased from now until March 2020 will be eligible for an additional 15% depreciation, up from the earlier 15%. The registration fee hike has now been postponed to June 2020. Sitharaman added that in order to boost demand, the government will lift its ban on purchase of new vehicles in government departments.
Sitharaman said earlier this month, she had held a range of consultative meetings with representatives from various sectors of the industry to address concerns of economic slowdown. The minister added that she would talk about ways of tackling the slowdown across sectors after studying the feedback from the representatives.
(With inputs from agencies)