As a taxpayer, our interest in the budget is usually limited to the changes in the tax slab that we belong to. If there is any significant change on it, then we communicate it as a good or bad budget.

However, a budget is more than that.

There are other aspects in the economy that substantially impact our wealth creation which are covered under the budget. And as investors, we should prudently take an interest in understanding it’s impact. Of course, we will speak about tax reforms in this article too and we shall cover other aspects that will directly impact your wealth in the long term.

1. Aadhar now interchangeable with PAN cards for Tax filing

Slowly, Government seems to be in the mood of saying a good bye to PAN cards. Why? Because they were easily made before. People used to make multiple PAN cards for tax evasion purposes. This had become a rampant exercise.

Mandating Aadhar number for filing of tax returns is a welcome move for tax collection.

2. Aadhar card for NRIs

Earlier Non Resident Indians had to stay for 180 days in India in a year which would classify them as Resident Indian citizens. Only then their Aadhar card could be generated. However, this has now been done away with.

NRI can simply make their Aadhar card and no need to wait for 180 days.

3. Tax collection increased by whopping 78% during last 5 years

After Piyush Goyal thanked all the tax payers in this year’s Interim Budget speech, so did Mrs. Nirmala Sitharaman. We are glad that finally someone understood a taxpayer’s effort in national development.

There has been an Increase in tax collection by 78% from ₹6.4 lakh crore in 2013-14 to ₹11.4 lakh crore in 2018-19.

This is good news as Governments start to collect more taxes, they are more comfortable to widen their tax base in the future. So good times to come!

4. Increase in Minimum Public Shareholding of Listed Companies from 25% to 35%

It’s a good thing as more shares will be available in the market for investors to buy. Will also provide for more liquidity in the market. It will further boost investing in times to come.

5. Social Stock Exchange for Voluntary and Social Organizations

It’s a boost to the social organizations to receive more funds for the amazing work they do. Also, they will become more transparent as the stock exchange has certain listing requirements that ask them to present their Revenue statement and Balance Sheets.

6. Recapitalization of Public Sector Banks by Rs. 70,000/- crores during the year.

Public Sector Banks have been in the focus since 2013 now. After years of irresponsible lending, they had been asked to disclose their Non-Performing Assets with the structure provided by the RBI.

To make them healthy again, a slurry of measures have been taken. Insolvency and Bankruptcy Code has been opened up where banks can get into litigation with such NPAs. Upto Rs. 4 lakh crores have been recovered till date. 6 PSU Banks were put into Prompt Corrective Action framework where RBI basically asked them to clean up their act before lending again. Now these Banks have come out of that framework and healthy to lend again.

Also, there were mergers of bad PSU banks with good PSU banks. This has brought down to PSU bank number to 8 in total.

Flow of credit from these banks have been at 13.8% for the last year. Which is good but we need to increase it to around 18% before any visible impact can be seen.

7. Door Step Banking and Online Loans

With the use of technology, loans will be disbursed quickly. Will benefit middle class the most.

8. Housing Sector

Post IL&FS and DHFL crisis, RBI will now overlook the Housing sector. Earlier National Housing Board (NHB) had been entrusted with that responsibility.

9. Affordable Housing

Enhanced interest deduction up to ₹3.5 lakh for purchase of an affordable house. This will give a breather to the middle class.

10. Disinvestment

Disinvestment target for the year has been kept to Rs. 1 lakh 50 thousand crores.

Re-initiate sale of Air India. This is much needed before it drains out tax payers money.

Strategic sale in Central Public Sector Enterprises (CPSEs) in which Government holds 51% or more will see a strategic disinvestment on case by case basis.

More retail investors participation is encouraged by issuing CPSE ETFs in ELSS segment. ELSS is a tax saving option for investors. It will be seen how these CPSEs perform and create wealth for ELSS holders rather than simply being a tax saving option.

11. The Big Infrastructure Push

Rs. 100 lakh crores to be invested in Infrastructure sector of India over the next 5 years. This doesn’t mean every company in this sector will start to generate returns immediately. An investor must remember that most of these companies are under huge debt obligations which needs to paid out first before creating profits for shareholders.

12. Bond Markets

Retail investors will be encouraged to invest in Treasury Bills through stock exchanges. This is a welcome move!

Finance Ministry will work with RBI and SEBI to allow stock exchanges to use Triple A rated Bonds as collateral. This move will definitely add some liquidity with stressed housing finance companies. Flow of money will improve.

Bond and CDS Markets will be notified for an Infrastructure focus investments.

13. Boost to Electric Vehicles

Rs. 1.5 lakhs of deduction provided on taking loans for electric vehicles.

14. Change in Securities Transaction Tax in Options

Something to cheer for options market. Earlier, STT was levied on the Option price which used to make it costly.

Now, STT will be levied on the difference in Option Price and Strike Price. Will bring the cost down substantially for an option trader.

15. Petrol and Diesel to get costly by Rs. 1 cess per liter

Hopefully, crude prices will come down in the future and this impact will not be felt.

16. Hike in customs duty on Gold and Precious Metals from 10% to 12.5%
17. Nominal excise duty on crude and tobacco products.
18. Hike in surcharge of taxable income

Income from Rs. 2 crores to Rs. 5 crores – 3% effective tax hike

Income above Rs. 5 crores – 7% effective tax hike

19. 2% TDS on cash withdrawal of more than Rs. 1 crores in a year.
20. In case of Buy Back by listed companies, additional tax of 20% to be imposed. As is the case with unlisted companies currently.

Conclusion

It’s a decent budget with not much visible changes. Although the reforms carried out in the housing and banking sector will help the middle class of India in a big way. Not to mention the Infrastructure push by the Government which is need of the hour, this will give our next generation a great place to live in.

The overall budget proposals are good, how they will be implemented in the future is something every Indian citizen should keep an eye on.

– Jinay Savla

Disclaimer : The article has been prepared based on our first reading of the Budget 2019. A reader should not consider taking any action based on the same.