Finance Minister Nirmala Sitharaman today announced a host of measures to revive the economy and shore up market sentiment, including steps to bring down the lending rates for borrowers and withdrawal of higher surcharge on gains from equity, both for foreign and domestic investors. She also announced steps to boost the auto sector and immediate release of ₹70,000 crore for capitalisation of public sector PSU banks. In this year's Budget the government had announced higher surcharge on individuals earning more than ₹2 crore. It was also applicable for foreign portfolio investors operating as trusts or as association of persons.
Here are 10 key announcements by Finance Minister Nirmala Sitharaman:
1) The government will withdraw enhanced surcharge on long-term/short-term capital gains arising from transfer of equity shares/units. This will be applicable on both foreign and domestic investors.
Experts have welcomed this announcement. Jairaj Purandare, chairman of JMP Advisors, said: "This is a welcome announcement which will bring the much-awaited relief for FPIs, and in turn, provide a boost to the equity markets. However, surcharge should still be applicable on capital gains from debt instruments, futures and options and other income such as interest. The amendment is proposed to be made effective from April 1, 2019 and appropriate notifications will be issued in this regard."
2) The finance minister said that on or after 1st October all notices, summons, orders issued by income tax department will be issued through a centralised computer system and will contain a unique document identification number. And old notices will be decided by 1st October or uploaded again through the new system.
Also, from 1st October all income tax notices will be disposed off withing 3 months from date of reply, she said.
3) The finance minister said that banks have agreed to effect timely rate cuts to pass on the benefits of RBI's repo rate cuts to borrowers. Banks have agreed to reduce their Marginal Cost of Funds based Lending Rate (MCLR) reduction to benefit all borrowers, she said.
The Reserve Bank of India has cut repo rate by 110 basis points since the start of this year. But banks have not yet passed much of the RBI's rate cut to banks.
4) Banks will also launch repo rate/external benchmark linked loan products. Under this mechanism, home and auto loans rates are directly linked to RBI's repo rates. A few banks like SBI and Bank of Baroda have launched repo linked products. SBI chairman Rajnish Kumar earlier this week said that its repo rate-linked home loan product is getting good response from customers. It is the customers' choice either to go with the new product or with the MCLR-linked home loan, he added.
5) Public sector banks will return of loan documents within 15 days of loan closure to bring in more efficiency.
6) The finance minister also announced additional liquidity support of ₹20,000 crore to housing finance companies (HFCs) by the National Housing Bank (NHB).
7) To boost the struggling auto sector, the government announced deferment of revision of one time registration fee on new vehicle purchase till June 2020.
8) The finance minister also announced additional 15% depreciation on all vehicles acquired from now till 31st March 2020. This will benefit business establishments that purchase new vehicles.
9) BS IV vehicles purchased till 31 March 2020 will remain operational for entire period of registrations.
10) The finance minister also clarified that both electric vehicle and internal combustion Vehicles will continue to be registered.