Union finance minister Nirmala Sitharaman presented the budget against the backdrop of India seeming to be in danger of losing its “fastest-growing-major-economy" tag. The slack in consumption and investment have created a slowdown in growth. The economy has also been impacted by slowing trade, global turbulences such as the US-China trade war, Brexit, fluctuations in oil prices and inflation.

It is amid this global scenario that the finance minister announced much needed measures to stimulate growth and encourage entrepreneurship. For India Inc. as a whole, the big announcement is regarding the expanded coverage of the lower income-tax rate of 25% to companies having an annual turnover of up to 400 crore, virtually covering 99.3% of corporate India.

Coupled with the investment-linked incentives for sunrise and advanced technology sectors, incentives for purchase of electric vehicles, announcing minimum alternate tax (MAT) relief to certain distressed companies and a slew of measures for affordable housing and simplification of the goods and services tax (GST) regime, the budget proposals seem to be in harmony with the Economic Survey’s objectives of securing a virtuous investment cycle for the Indian economy.

Startup India, one of the flagship programmes of the Narendra Modi government, encountered turbulence when overzealous tax officers sent a slew of notices seeking to tax capital investments from angel investors, at allegedly exaggerated valuations, to bonafide startups.

While certain steps in the form of government notifications were taken to address this issue, the situation on the ground did not see any significant improvement. It seems the finance minister has finally bitten the bullet to resolve this angel tax issue by announcing legislative and administrative changes. On the legislative side, startups adhering to notified conditions will be exempt from justifying valuation of funds received from a larger investor base (Category II AIFs).

Equally important are the announcements regarding administrative reforms that include establishing special administrative arrangements for pending assessments of startups and the redressal of their grievances.

The government seems to be committed to encouraging tax compliance by making the process of filing tax returns more convenient. Apart from the interchangeability of permanent account number (PAN) and Aadhaar, which will simplify tax registration, pre-filled income-tax return forms are a welcome step towards improving accuracy and timeliness of the return filing process, as income details will be sourced from several institutional databases.

This would also dovetail well with the enhanced focus on faceless assessments that seek to take “the taxman out of tax". The idea of the proposed central cell acting as a single point of contact between the taxpayer and the tax department is welcome but would require close monitoring by implementation agencies to fully exploit its benefits.

The strong mandate won by the Modi 2.0 government was largely attributed to the promise of bold economic reforms, with a higher burden of public and corporate expectation. With the announcements of relaxing foreign direct investment (FDI) norms in several sectors and proposing measures to boost public and social infrastructure such as electricity and housing, the finance minister has tried to set up a platform to deliver India’s aspirations while balancing the fiscal constraints.

Accordingly, the fiscal deficit has been brought down from 3.4% to 3.3%. The measures introduced today show that the growth objectives of the economy will be balanced with fiscal prudence. The effectiveness of these measures, however, will lie in the manner of their rollout and implementation.

Given that macroeconomic fundamentals of the Indian economy are strong, one hopes the measures in the Union budget will help unshackle the “animal spirits" of investors and entrepreneurs. The announcements in the budget will undoubtedly play a constructive role in advancing India’s journey towards a $5 trillion economy.

Arun M. Kumar is chairman and CEO of KPMG in India.

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