The startup ecosystem in the country has much to rejoice as Union Finance Minister Nirmala Sitharaman on Friday has very categorically declared that the dreaded Angel Tax will be withdrawn for startups and the investors into such companies.
India's economic growth has slowed in the past three consecutive quarters, losing its status as the world's fastest-growing major economy to China, with unemployment at its highest since the 1970s.
Taxation: The FM's biggest announcement is that the enhanced surcharge on Long Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) arising from the transfer of equity shares has been revoked.
Speaking on the occasion, the Finance Minister said, India's growth in comparison to other countries is relatively better.
In order to encourage investment in capital market, the government has chose to withdraw enhance surcharge levied by the Finance No. 2 Act 2019.
Section 56 of the Income Tax Act, which is also called Angel Tax provision, has been a contentious issue for the startup ecosystem. Further, the minister said that the government will set up a dedicated cell under a member of CBDT for addressing problems of startups.
Banking: To facilitate additional credit expansion, the government will be releasing Rs 70,000 crore announced in the budget upfront, which will make additional lending and liquidity of Rs 5 lakh crore available by providing this upfront capital to PSBs.
And as banks, which have now made a decision to link interest rates to an external benchmark like repo rate to enable faster transmission of RBI policy rate cuts, retail purchases (and also others like home and consumer durable sales) will likely pick up. However, she remained tin-eared on the eagerly-awaited GST rate reduction from 28 to 18 per cent on autos, as it's 'the prerogative of the GST Council'.
This will lead to EMIs of housing, vehicle and other retail loans coming down.
Clearing the air, BS-IV vehicles purchased up to March, 2020 will remain operational for the entire period of registration, while the increase of one-time registration fee, which pushed up on-road auto and vehicle prices - was deferred till June, 2020. The government has also raised the rate of depreciation on all vehicles, irrespective of their type, and acquired from now till March 2020, by 15 percent bringing the total depreciation to 30 percent. "There was an across the board grievance", Sitharaman said.
Sitharaman also addressed concerns over alleged harassment of taxpayers. Furthermore, she added that communication without a Director Identification Number (DIN) need not be taken seriously. "Startups with an I-T issue can approach this panel", reported NDTV.
The data also showed that domestic passenger vehicle production was down almost 17% in the month.
The finance ministry had increased the effective tax rate on individuals with taxable annual income of above Rs 2 crore rupees by about 3 pc, and for those earning above Rs 5 crore by 7 pc.
Further, Non-Banking Finance Companies (NBFCs) will now be permitted to use Aadhaar authenticated bank KYC.