The thrust of the Budget on infrastructure spending and revival of the capital expenditure cycle is most welcome and will spur growth.
First, there were no nasty surprises. There was no introduction of a wealth tax, estate duty, and no enhancement of capital gains tax.
The changes the new Special Economic Zone regime will bring or those coming from the venture capital/private equity committee will have to be examined when they are introduced.
The Gujarat International Finance Tec-City continues to expand its ambit and will now have the ability to deal in derivatives, be an arbitration centre, host education, and so on, in a tax-free manner. Hopefully, we will see more such cities being introduced in the future.
Introduction of a virtual amnesty scheme in the Income-tax Act is a massive change. What is now provided is that a taxpayer who has filed a return and finds that there is income beyond what has been returned as liability to tax, she could update the return by paying the incremental tax and interest, including additional tax at the rate of 25 percent if the revision happens within 12 months and at the rate of 50 percent if the revision happens within 24 months. This would incentivise taxpayers who do not want to litigate the matter raised by the revenue authority to update their returns by paying tax, interest and additional tax and resolve the matter without consequences of penalty and prolonged litigation.
While the Crypto Bill is still to see the light of the day, it is proposed that tax at the rate of 30 percent on a gross basis will be payable on income arising from transfer of any digital asset with no set-off against losses. While this puts taxation of digital assets on par with speculation income, it appears from a plain reading of the provisions that gains from each asset would be separately taxable and even if in the same year there is a loss on transfer of digital assets, it cannot be set off.
The reduction in surcharge to 15 per cent on capital gains is very welcome and will reduce the effective tax on capital gains by about 45 per cent.
A change has been made in respect of dividends received from foreign companies. These were earlier taxable at a concessional rate of 15 percent. They are now fully taxable unless, of course, the receiving companies declare an onward dividend.
Finally, in the Goods and Services Tax law, there is a limitation on the amount of input tax credit that can be used to pay output tax liability. This will be a huge setback to the value-added system.
Overall, this is a very welcome Budget at a macro level which should spur growth but the fine print on direct taxes does throw up a number of surprises.
The author is CEO, Dhruva Advisors.
Views are personal and do not represent the stand of this publication.