Union Finance Minister Nirmala Sitharaman presented her first Union Budget and also the first Budget of the Narendra Modi 2.0 government. Sitharaman began her first budget speech with a reference to New India "for which people voted the government in Lok Sabha election."

She said, "We have set the ball rolling for a New India" and sounded optimistic that the country will become a $5 trillion economy in a few years. Prime Minister Narendra Modi recently spoke about his government's target of making India a $5 trillion economy. Currently, it stands at $2.7 trillion.

Budget 2019-20: 10 points

Income Tax

Income tax slabs and rates have not been changed in the Budget 2019-20 presented by Nirmala Sitharaman but she gave some other incentives for tax payers. She enhanced interest deduction up to Rs 3.5 lakh for purchase of an affordable house.

The Budget proposes a surcharge on personal income tax for individuals earning more than Rs 2 crore a year. A three per cent surcharge on income between Rs 2 crore and Rs 5 crore, and seven per cent on income above Rs 5 crore.

She also promised to launch a scheme of faceless electronic assessment involving no human interface to be launched this year. There will be a central cell with a phone number that will be the single-point contact between the Income Tax Department and assessees.

The Budget also proposed interchangeability of Aadhaar and Permanent Account Number (PAN). Sitharaman said an income tax return filer can mention either Aadhaar or PAN in filing the ITR.

Corporate Tax

Sitharaman brought 99.3 per cent companies under 25 per cent corporate tax slab in her first Budget. This had been a long-pending demand - at least since 2009-10 - from the world of corporates and experts.

Sitharaman announced that corporate tax rate of 25 per cent - available to companies with annual turnover of up to Rs 250 crore - to all companies with turnover up to Rs 400 crore.

The finance minister said this move brings 99.3 per cent companies under this tax bracket. "Only 0.7 per cent companies will pay more corporate tax now," she said. This tax rate is 30 per cent.

Digital Push

The finance minister said the government intends to give greater push to digital payment. To achieve this objective, the Budget 2019 proposes a tax deduction at source (TDS) of 2 per cent on cash withdrawal exceeding Rs 1 crore.

This was proposed with the objective to discourage the practice of making business transaction in cash and push cashless economy.

No charges or MDR on specified digital mode of payments will be levied. These modes are to be compulsorily provided by large businesses, Sitharaman said in her budget speech.

5 Trillion Dollar Economy

To achieve the target of making Indian economy a $5 trillion economy, Sitharaman said the country needs to make structural reforms to achieve USD 5 trillion economy in the next few years.

Sitharaman said the Indian economy stood at $1.85 trillion in 2013-14 and today it stands at $2.7 trillion. It is within our capacity to reach $5 trillion in the next few years, she said.

However, Sitharaman did not give details of the structural reforms that the government intends to roll out to achieve that target.

Public-Private Partnership in Railways

This proposal is likely to stir political controversy. Sitharaman said railway infrastructure needs an investment of Rs 50 lakh crores by 2030 if it has to be effective. She said with the capital earning of the railways, this would take decades to develop railway infrastructure.

To bridge this time gap, the Budget proposed public-private partnership in railway infrastructure. She said PPP will be used to unleash faster development and delivery of passenger freight services.

Har Ghar Jal

Half of India is reeling under drinking water crisis. Monsoon is weak this year. During his election campaign, Modi had promised to create a separate ministry to deal with the issues related to drinking water, irrigation and fishery. The Jal Shakti ministry was created soon after the government was voted to power.

In this Budget, Sitharaman said the government will ensure "har ghar jal" (water to every household" by 2024. This will be done under Jal Jeevan Mission, which will focus on integrated demand and supply side management of water at the local level, including creation of local infrastructure for source sustainability like rainwater harvesting, groundwater recharge and management of household wastewater for reuse in agriculture.

FDI

Norms for foreign direct investment (FDI) has been relaxed in Budget 2019 for sectors such as aviation, media, insurance, and single brand retail with a view to attract more overseas investment.

Sitharaman said India's FDI inflows in 2018-19 grew by 6 per cent to $64.37 billion. She said 100 per cent FDI will be permitted for insurance intermediaries, and local sourcing norms will be eased for FDI in single brand retail sector.

Currently, 49 per cent foreign investment is allowed in the insurance sector including insurance broking, insurance companies, third party administrators, surveyors and loss assessors.

Disinvestment

Budget 2019 proposes to increase disinvestment target to Rs 1.05 lakh crore for the current financial year. It was Rs 90,000 crore in the interim budget presented in February.

Sitharaman said strategic disinvestment of select public sector undertakings will remain a priority area. Privatisation of Air India will be re-initiated.

She said the government is considering going below 51 per cent stake to an appropriate level on case to case basis for PSUs.

Rural Infrastructure

Sitharaman proposed steps to scale up infrastructure including augmenting 1.25 lakh km rural roads under the Pradhan Mantri Gram Sadak Yojana at a cost of Rs 80,250 crore and creating a national highways grid.

The finance minister said "We need to invest in infra, digital economy and job creation in small and medium enterprises...Schemes such as Bharatmala, Sagarmala and Udaan are bridging rural urban divide and improving our transport infrastructure."

Petrol, Diesel costlier

The government has hiked tax on petrol and diesel and raised import duty on gold. Sitharaman raised special additional excise duty and road cess on petrol and diesel by Re 1 per litre each. This came a day after the Economic Survey said the crude oil prices are likely to go down.

Customs duty on gold and precious metals was raised from 10 per cent to 12.5 per cent to mobilise resources. Basic customs duty was raised on an array of products including tiles, cashew kernels, vinyl flooring, auto parts, some synthetic rubber, digital and video recorder and CCTV camera.

An excise duty of Rs 5 per 1,000 will be imposed on cigarettes of length exceeding 65 mm. And, an excise duty of 0.5 per cent duty has been levied on chewing tobacco, zarda and tobacco extracts and essence.