Interim Budget’19

Contents
Foreword .................................................................................................................................. 3
Easy availability of credit for MSMEs........................................................................................ 4
Single point collection of stamp duty ..................................................................................... 10
Affordable housing gets more affordable .............................................................................. 20
Budgeting in on Banking and Bankruptcy (IBC) ...................................................................... 23
Anticipated boost in the agriculture credit market ................................................................ 25
All talk no show for the infrastructure sector......................................................................... 27
Bagful of goodies for the organized and unorganized labours in India .................................. 30
Adding flexibility in PMLA proceedings .................................................................................. 33
Direct Tax amendments proposed by Finance Bill, 2019........................................................ 36
Status Quo of Indirect Taxes- post Budget ............................................................................. 41
Foreword
An interim budget has its own limitations and one was not
expecting the Finance Minister to go all out into a reforms
agenda; however, considering the limitations, the precious
bit that has been attempted in terms of reforming the stamp
duty, investments in the real estate and housing sector, etc.,
are commendable.

The country continues to be still immersed into doldrums

post the demonetisation; there have been noises about job
creation etc having been affected. In the financial sector,
even as the NPA crisis continues to cripple the banking
sector, the failure of a leading NBFC and the likely
repercussions on several others are huge risks to the stability
of the system. In essence, we are in the midst of significant
uncertainty.

In light of all of this, one would expect ardent and confident

measures to bring the economy back on the path of growth
– one will obviously have to wait for people’s verdict for that.
However, as an interim exercise, Minister Piyush Goyal has
done an appreciable job.

The push for MSME-driven growth seems clear. The MSMEs

form the backbone of the country’s economy. Similarly,
investment in the real estate sector is typically associated
with a multiplier effect. Therefore, there is right stress in
right direction.

In terms of reforms on the GST, it is evident that measures

to amend both the law and the levies have been taken from
time to time. Therefore, the Budget did not have to tinker
with it much.

Last 2 years of implementation of the new insolvency regime

have brought about a huge cultural change in the country. It
not the data about the recoveries through the Code that
matters – what matters is that every industrialist now
realises the perils of trading on a thin equity and with high
leverage. That one cannot continue to carry the mandate of
equity holder without keeping the creditors satiated has
become quite clear. That is the biggest achievement of the
law.

Our colleagues have done a good job over a short span of

time. We have pleasure presenting this small work. We will
look forward to readership and reviews.
 Easy availability of credit for MSMEs
- Simran Jalan

Introduction
Micro, Small and Medium Enterprise (MSME) Sector has
Snapshot of key initiatives during the emerged as a growing engine of the Indian Economy over the
previous year: last few years. The MSMEs contribute about a third of India’s
manufacturing output and provide employment to a large
1. 59 minutes loan portal to enable
chunk of the population. MSMEs are complementary to large
easy access to credit for MSMEs
2. Mandatory registration on TReDS industries as ancillary units and this sector contributes
3. Mandatory 25% procurement enormously to the socio-economic development of the
from MSMEs country. Despite the important role played by them in the
4. Mandatory registration of economic structure of the country, they continue to face
vendors on GeM constraints in procuring adequate finance. Recognizing the
5. Delayed payment monitoring
importance of the MSME sector in India, the government has
mechanism
been bringing in several initiatives for facilitating the growth
of this sector.

Meaning of MSMEs
The basis of classifying MSMEs is proposed to change from
‘investment in plant and machinery/equipment’ to ‘annual
turnover’1.

The existing definition of MSMEs is as follows:

Manufacturing Sector Service Sector

Investment in plant & machinery
Micro Does not exceed Rs. 25 lakhs
Small More than Rs. 25 lakhs but does not
exceed Rs. 5 crores
Medium More than Rs. 5 crores but does not
exceed Rs. 10 crores.
Investment in equipment
Does not exceed Rs. 10 lakhs
More than Rs. 10 lakhs but does not
exceed Rs. 2 crores
More than Rs. 2 crores but does not
exceed Rs. 5 crores.

1
http://www.prsindia.org/billtrack/the-micro-small-and-medium-enterprises-development-
amendment-bill-2018-5289/
 The revised definition2 of MSMEs shall be as follows:

•A unit where annual turnover does not exceed Rs. 5 crore;

Micro

•A unit where annual turnover is more than Rs. 5 crores but does not exceed Rs. 75
Small crores;

•A unit where annual turnover is more than Rs. 75 crores but does not exceed Rs. 250
Medium crores;

Developments in the MSME sector

Development in every sector depends upon the key
initiatives taken by the government to nurture a particular
sector. In the past, the government and concerned
regulators have introduced various measures for the MSME
sector. Earlier, the Reserve Bank of India (RBI), on February
7, 2018, had come out with a notification to allow relaxation
to banks and NBFCs with respect to asset classification in
case of MSME accounts. Another respite was given by the
RBI on June 6, 2018, which allowed banks and NBFCs to
classify their exposure on all MSMEs, whether registered or
not under GST, as per the 180 days past due (DPD) criterion.

The government on November 2, 2018, launched a “Historic

support and outreach programme”3 for the growth,
expansion and facilitation of MSMEs across the country. The
Prime Minister (PM), in his speech, said that there are five
key aspects for facilitating the growth of MSME sector. These
are access to credit, access to market, technology
upgradation, ease of doing business, and a sense of security
for employees. The initiatives launched by the PM shall
address each of the aforesaid aspects for facilitating the
MSME sector.

The key initiatives4 taken by the government during the

previous year are as follows:

1. 59 minutes loan portal to enable easy access to credit

for MSMEs

2
http://pib.nic.in/newsite/PrintRelease.aspx?relid=176353
3
http://www.pib.nic.in/PressReleseDetail.aspx?PRID=1551771
4
Our article on the subject matter can be referred here: http://vinodkothari.com/2018/11/snapshot-
of-the-initiatives-for-msmes/

In Budget 2019, The Finance
Minister said that all GST-registered
MSMEs will get 2% interest rebate
on incremental loan of Rs. 1 crore.
Government had launched a portal5 to enable easy access to
credit for MSMEs. The portal6 has been set up by Sidbi along
with SBI, PNB, Bank of Baroda, Indian Bank and Vijaya Bank
with other banks joining in with the passing of time. Any
MSME can avail business loan from Rs. 1 Lakh to Rs. 1 Crore
through this portal, in just 59 minutes. The MSME, seeking
for loan, can register itself on the portal without paying any
registration fees. Post registration, they have to provide the
required details. The existing MSMEs can apply for loan
through this portal only if it is GST, IT compliant and has net
banking facility. By linking online loan approvals with GST and
tax returns, the government is seeking to reward those
MSMEs who have obtained GST numbers. The MSME,
applying for loan through this portal, get an in-principle
approval in just 59 minutes. Post approval, the time taken for
loan disbursement is expected to be 7-8 working days,
subject to accuracy of the information and documents
provided by the MSME borrower. This initiative of the
Government is aimed to ensure easy access to credit by the
MSME sector which would be a step to solve the liquidity
crunch faced by this sector.

2. Mandatory 25% procurement from MSMEs by CPSEs

Government had notified a Public Procurement Policy7 for
Micro & Small Enterprises (MSEs) on April 25, 2012. The
policy mandated that 20% of procurement of annual
requirement of goods and services by all public sector
companies (PSC) shall be from the MSEs.

The PSCs have now been asked to compulsorily procure 25%,

instead of 20%, of their total purchases from MSME.8 This
policy of the government is expected to promote the MSME
sector by improving their market access and competitiveness
through increased participation by MSEs.

Further, the PM announced that out of the 25%

procurement mandated from MSMEs, 3% shall be reserved
for women entrepreneurs to give a boost to the women
entrepreneurs in India.

3. Mandatory registration of vendors on GeM

5
http://pib.nic.in/PressReleseDetail.aspx?PRID=1547245
6
https://www.psbloansin59minutes.com/home
7
http://www.dcmsme.gov.in/pppe/2.pdf
8
http://www.egazette.nic.in/WriteReadData/2018/192790.pdf
 The Finance Minister in his Budget speech for FY 2016-17,
had announced setting up of a technology driven platform to
facilitate procurement of goods and services by various
government departments, organizations and public sector
undertakings in India. Government e-Marketplace
(GeM)9 platform, hosted by DGS&D, is such an initiative by
the government for increasing transparency and combating
corruption. It is a dynamic, self-sustaining and user-friendly
portal to ease the procurement process for the Government
officers.

The PM had announced that all the public sector

undertakings of the Union Government shall be a part of
GeM and all the vendors of such PSUs are also required to be
registered on GeM platform. This will enhance transparency,
efficiency and speed in public procurement. This is a major
step in creating a level playing field for all manufacturers and
traders. There will be bigger markets and more opportunities
for the MSMEs making it a win-win situation for them.

In the Interim Budget, 2019, the Finance Minister stated that

transactions of over 17,500 crores have taken place in GeM,
resulting in average savings of 25-28% for the MSME
suppliers.

4. Mandatory registration on TReDS

An institutional framework was devised for facilitation of

electronic bill factoring exchanges, which could electronically
accept and auction the MSME bills against large companies,
to make the payment to MSMEs more prompt. The RBI also
considered it necessary to address concerns relating to
financing of this sector and introduced Trade Receivables e-
Discounting System (TReDS).

The TReDS platform enables discounting of invoices/bills of

exchange of MSME sellers against large corporates, including
government departments and public sector undertakings,
through an auction mechanism to ensure prompt realisation
of trade receivables at competitive market rates. Multiple
financiers can participate in the auction.

In its latest attempt to address the concerns of MSMEs, the

Ministry of Micro, Small and Medium Enterprises (the

9
https://gem.gov.in/
 Ministry), in exercise of powers conferred by section 9 of the
Micro, Small and Medium Enterprises Development Act,
2006, vide its Notification dated November 02, 2018 had
mandated all companies with a turnover more than Rs. 500
crore and all Central Public Sector Enterprises, to get
themselves onboard with the TReDS platform. This measure
is expected to enable MSME entrepreneurs to access credit
from banks, based on their upcoming receivables and resolve
their problems of cash cycle, by transferring the risk from a
weak seller to a strong buyer.10

5. Delayed payment monitoring mechanism

The Government had launched an online delayed payment

monitoring system called the MSME Samadhaan11 for the
ease of filing application under the MSEFC. Any MSME,
having a valid Udyog Aadhaar (UAM) can make an application
in this portal.

From the date of launch of MSME Samadhaan portal, i.e.

30th October 2017, MSMEs have filed 2927 applications
related to delayed payments. These cases involve an amount
of Rs. 744.65 Crore. This portal has also helped in mutual
settlement of the delayed payments between sellers and
buyers. 105 mutual settlements have been done amounting
to Rs. 8.87 Crore so far.12

Further, the Government issued a notification on November

2, 2018 stating all companies who buy goods or avail services
from micro and small enterprises and whose payment to
such suppliers have exceeded 45 days shall submit a half
yearly return to the Ministry of Corporate Affairs (MCA)
stating the outstanding amount and the reasons for delay. To
give effect to this notification, MCA issued a notification on
22nd January, 201913 instructing Specified Companies to file
half yearly return to the MCA in Form MSME I (Form). The
initial reporting of all outstanding dues is to be done within
30 days from the date of publication of this notification i.e.,
by 21st February, 2019.

10
Our article on the subject matter can be referred here: http://vinodkothari.com/2018/11/big-step-
for-small-industry-finances/ and http://vinodkothari.com/2019/01/faqs-on-treds/
11
https://samadhaan.msme.gov.in/MyMsme/MSEFC/MSEFC_Welcome.aspx
12
All the data has been taken from: https://msme.gov.in/sites/default/files/MSME-AR-2017-18-
Eng.pdf
13
http://www.mca.gov.in/Ministry/pdf/MSMESpecifiedCompanies_22012019.pdf
 The Specified Companies are required to file the Form by
31st October for the half year beginning from April to
September and by 30th April for the half year beginning from
October to March. However, other companies whose
outstanding dues does not exceed forty-five days from the
date of acceptance or from the date of deemed acceptance
are not covered under this notification. There is also no
requirement of filing a NIL return by such companies, since
the notification is applicable only on Specified Companies.
That is to say, the reporting requirement shall be attracted
only when an entity become a Specified Company and not
otherwise. Also, the classification as a Specified company
shall be determined for every half year and accordingly the
reporting shall be done.14

Relief provided in Budget 2019

The Finance Minister, in Interim Budget, 2019, incentivized
the MSMEs by providing an interest rebate of 2% on
incremental loan of Rs. 1 crore. However, it is pertinent to
note that this rebate is provided only to the MSMEs who
have registered themselves under the GST framework. This
is another initiative by the government to lure the MSMEs to
register themselves under the GST framework.

To give effect to the aforesaid announcement, a notification

is expected to be issued by the RBI or Ministry of Finance.

Conclusion
The government had introduced various initiatives for the
growth and development of the MSME sector during the
previous year. Despite the initiatives already taken by the
government, the MSMEs were expecting the government to
take further initiatives in Budget 2019, to uplift this sector.
However, the deliverables of Budget provided a meagre
relief to this sector. In line with the various reforms already
made, ease of doing business and financial challenges still
remain a concern.

14
Our article on the subject matter can be referred here: http://vinodkothari.com/2018/11/filing-of-
return-for-delayed-payment-for-msmes-effective-or-frittering/
Single point collection of stamp duty
- Anita Baid
The Finance Bill, 2019 seeks to amend the Indian Stamp Act,
1899 (‘Act’) for levy and administration of stamp duty on
securities market instruments by the states at one place
through one agency, viz., through stock exchanges or its
clearing corporation or depositories on one instrument, and
for appropriately sharing the same with respective State
Governments based on state of domicile of the ultimate
buying client.

In the past there was considerable confusion about stamp

duty in things like contract notes. This amendment tries to
resolve the difficulty by inserting the definition of ‘securities’
and ‘debenture’.

Chargeability of stamp duty

In terms of Section 3 of the Act, every instrument executed
in the territories of India and received in India after being
executed outside India shall be chargeable with the duty
indicated in the Schedule I of the Act. Earlier the definition of
the term instrument was limited to include every document
by which any right or liability is, or purports to be, created,
transferred, limited, extended, extinguished or recorded.
However, in the Finance Bill, 2019 the applicability has been
expanded, wherein the revised definition is read as-

(14) “instrument” includes—

(a) every document, by which any right or

liability is, or purports to be, created,
transferred, limited, extended,
extinguished or recorded;
(b) a document, electronic or otherwise,
created for a transaction in a stock
exchange or depository by which any
right or liability is, or purports to be,
created, transferred, limited, extended,
extinguished or recorded; and
(c) any other document mentioned in
Schedule I,

but does not include such instruments as may be

specified by the Government, by notification in the
Official Gazette;

The government has imposed stamp duty on transactions in

stock exchanges and depositories, instead of abolishing
stamp duty, given the fact that securities transaction tax
(STT) is already levied on all such transactions.

On one hand the Government is moving towards ensuring

100% dematerialisation, but on the other hand levy of stamp
duty, becomes demotivating. Levy of both stamp duty and
STT on transactions through stock exchange would increase
cost of transaction for investors.

Definition of Securities
The new insertion of the definition of securities is intended
to include even negotiable instruments under its purview.
The definition is as follows:

(23A) “securities” includes—

(i) securities as defined in clause (h) of section

2 of the Securities Contracts (Regulation)
Act, 1956;
(ii) a “derivative” as defined in clause (a) of
section 45U of the Reserve Bank of India Act,
1934;
(iii) a certificate of deposit, commercial usance
bill, commercial paper, repo on corporate
bonds and such other debt instrument of
original or initial maturity upto one year as
the Reserve Bank of India may specify from
time to time; and
(iv) any other instrument declared by the Central
Government, by notification in the Official
Gazette, to be securities for the purposes of
this Act

In view of the marketability, commercial papers are not

security but these are only in the form of a promissory note
and a negotiable instrument, which is transferable by
negotiation between two parties unlike a security which is a
marketable instrument transferable by registered transfer
only. Also, considering the nature and characteristics of CPs,
they are in the nature of short term borrowings and not
securities.

Separate category for Debentures

The existing definition of bond has been modified to exclude
debentures and define it separately. Revised clause (5), shall
read as follows:

(5) “Bond” includes—

 (a) any instrument whereby a person
obliges himself to pay money to another,
on condition that the obligation shall be
void if a specified act is performed, or is
not performed, as the case may be;
(b) any instrument attested by a witness
and not payable to order or bearer,
whereby a person obliges himself to pay
money to another; and
(c) any instrument so attested, whereby a
person obliges himself to deliver grain or
other agricultural produce to another

but does not include a debenture;

Further, the definition of ‘debenture’ has been inserted,

after clause (10), as follows:–

‘(10A) “debenture” includes––

(i) debenture stock, bonds or any other

instrument of a company evidencing a debt,
whether constituting a charge on the assets
of the company or not;
(ii) bonds in the nature of debenture issued by
any incorporated company or body
corporate;
(iii) certificate of deposit, commercial usance
bill, commercial paper and such other debt
instrument of original or initial maturity upto
one year as the Reserve Bank of India may
specify from time to time;
(iv) securitised debt instruments; and
(v) any other debt instruments specified by the
Securities and Exchange Board of India from
time to time;

The aforesaid definition is in contradiction to the definition

under Companies Act, 2013 which categorically excludes
instruments covered under Chapter III-D of RBI Act, 1939.

Earlier, the term’ debenture’ was not defined in the Act but
was specified in Schedule I. In the absence of such definition
and as specified in Schedule I, stamp duty was levied only in
case the debenture was a “Marketable Security” transferable
by endorsement or by a separate instrument of transfer or
by delivery.

Further, as per Schedule I, debenture issued in terms of a

registered mortgage-deed, duly stamped in respect of the
full amount of debentures to be issued thereunder, was
exempted from the applicability of stamp duty. However, the
said exemption seems to be removed from Schedule I. This
will lead to an increase in the cost of raising debt.

Further, the term “marketable security” as defined under

Section 2 (16A) of the Act has also been amended to remove
the reference to United Kingdom, as follows:

(16A) “marketable security” means a security

capable of being traded in any stock exchange in
India;

Securitised Debt Instrument

Securities issued by a Special Purpose Vehicle or SPV, has
been classified as debenture. In last year’s Budget Speech,
the Finance Minister announced appropriate changes to
permit listing and trading of Security Receipts (SRs), issued
by a securitisation company or a reconstruction company
under the SARFAESI Act, in SEBI registered stock exchanges.
This was done to enhance capital flows in to the
securitisation industry and particularly deal with bank NPAs.
However, the levy of stamp duty on the issuance and transfer
of SDI is not in line with the intentions of the government.

Pursuant to the insertion of the definition of debenture,

there is no difference between a debenture and a securitised
debt instrument. Stamp duty is a crucial issue for
securitization transactions. It can add up to a substantial cost
in the transaction.

SDIs are pro-rated interest in receivables held by the SPV in

trust. Hence, transfer of SDI is only a transfer of beneficial
interest, or re-alignment of the proportions in which
beneficial interest is recorded by the SPV. There is no
transfer of assets as the SPV continues to hold the
receivables. Therefore, the question of stamp duty
applicable on such transfer of SDIs must not arise.

Moody's in a Special report titled An Overview of U.K. Stamp

Duty and its Impact on UK Securitisation Transactions have
opined that the grant of trust interest by the trustees by
issue of notes is NOT a stampable transfer, as the trustees do
not transfer any asset, but merely indicate beneficial
interest. By the same ground, transfer of such notes is only a
re-adjustment of beneficial interests, and will not, therefore,
be liable to duty.

However, the major issue of stamp duty of assignment of

receivables still remains unaddressed. The securitisation
 industry has been awaiting for relief in this regard, which has
not been considered by the Government in the budget.

Securities dealt in depository

Upon issuance of securities by a company or issuer to their
respective depositories, the same is chargeable with duty on
the total amount of security issued. Section 8A of the Act no
where specifically mentions that the shares issued in physical
form are only chargeable to stamp duty or share issued in
demat form are not chargeable to stamp duty. Hence, stamp
duty is payable at the time of issue of shares as per the
provisions of the Stamp Act, 1899. However, the transfer of
securities held in demat form, were not chargeable with
stamp duty.

The proposed amendment to section 8A seeks to remove the

exemption given to transfer of beneficial ownership of
securities and mutual funds, dealt with by a depository. The
same has been specifically covered by the insertion of
Section 9A.

Existing Provision Proposed Amendment

8A. Securities dealt in depository not liable
to stamp duty. —
Notwithstanding anything contained in
this Act or any other law for the time being
in force, —
(a) an issuer, by the issue of securities to
one or more depositories, shall, in
respect of such issue, be chargeable
with duty on the total amount of
security issued by it and such
securities need not be stamped;
(b) where an issuer issues certificate of
security under sub-section (3) of
section 14 of the Depositories Act,
1996 (22 of 1996), on such certificate
duty shall be payable as is payable on
the issue of duplicate certificate
under this Act;
(c) the transfer of—
(i) registered ownership of securities
from a person to a depository or from
a depository to a beneficial owner;
(ii) beneficial ownership of securities,
dealt with by a depository;
(iii) beneficial ownership of units, such
units being units of a Mutual Fund
including units of the Unit Trust of
India established under sub-section
8A. Notwithstanding anything contained in this
Act or any other law for the time being in force,
(a) an issuer, by the issue of securities to
one or more depositories, shall, in
respect of such issue, be chargeable
with duty on the total amount of
securities issued by it and such
securities need not be stamped;
(b) the transfer of registered ownership
of securities from a person to a
depository or from a depository to a
beneficial owner shall not be liable to
duty.
Explanation.—For the purposes of this section,
the expression “beneficial ownership” shall
have the same meaning as assigned to it in
clause (a) of sub-section (1) of section 2 of the
Depositories Act, 1996
 (1) of section 3 of the Unit Trust of
India Act, 1963 (52 of 1963), dealt
with by a depository, shall not be
liable to duty under this Act or any
other law for the time being in force.

Explanation
1.—For the purposes of this section, the
expressions ―beneficial ownership‖,
―depository‖ and ―issuer‖ shall have the
meanings respectively assigned to them in
clauses (a), (e) and (f) of sub-section (1) of
section 2 of the Depositories Act, 1996 (22
of 1996).
Explanation 2.—For the purposes of this
sec on, the expression ―securi es‖ shall
have the meaning assigned to it in clause
(h) of section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956).

Instruments chargeable with duty

For transactions in stock exchange and depositories
With the insertion of a separate chapter namely, AA- Of the
liability of instruments of transaction in stock exchanges and
depositories to duty, the intention is to bring all transactions
through stock exchange under the purview of stamp duty.
Accordingly stamp duty shall be levied on the following
transactions:

a. sale of securities through a stock exchange,

b. transfer of securities of a consideration through a
depository,
c. creation or change in the records of a depository
pursuant to issue of securities.

Further, the stock exchange or a clearing corporation or

depository shall collect the stamp duty from the person liable
to pay such duty, mentioned below.

For transactions otherwise than through stock

exchanges and depositories
The insertion of section 9B shall impose stamp duty on the
issue or sale or transfer or reissue of securities other than
through stock exchange or depository. The relevant extract
is produced herein below:

9B. Notwithstanding anything contained in this Act,–

–
 (a) when any issue of securities is made by
an issuer otherwise than through a stock
exchange or depository, the stamp-duty
on each such issue shall be payable by
the issuer, at the place where its
registered office is located, on the total
market value of the securities so issued
at the rate specified in Schedule I;
(b) when any sale or transfer or reissue of
securities for consideration is made
otherwise than through a stock
exchange or depository, the stamp-duty
on each such sale or transfer or reissue
shall be payable by the seller or
transferor or issuer, as the case may be,
on the consideration amount specified in
such instrument at the rate specified in
Schedule I.

On a combined reading of section 9A and 9, stamp duty shall

be lived on the following types of transaction:

Nature of transaction Stamp duty Stamp duty When On

to be to be
collected by collected
from
Sale of securities through a Stock Buyer At the time of Market value
stock exchange exchange settlement of of such
or clearing transactions securities
corporation
Transfer of securities by a Depository Transferor/ At the time of Consideration
depository, otherwise than on Seller transfer amount
the basis of any transaction
on stock exchange
Issue of securities Depository Issuer At the time of Market value
creation or of securities
any change in specified in
records of a allotment list
depository.

Issue of securities otherwise Issuer On each issue total market

than on stock exchange or value of the
depository securities
Sale or transfer or reissue of seller or on each such Consideration
securities for consideration is transferor sale or specified in
made otherwise than or issuer
through a stock exchange or transfer or such
depository reissue instrument

Liability to pay stamp duty

The rate of stamp duty shall be as provided in Schedule I.
Accordingly, amendments have been made in Section 29 of
the Act providing the details of the person who shall pay the
duty. The obligation to pay stamp duty in case of transactions
for sale or transfer of security through a stock exchange or
otherwise is to be borne by the following:

Transaction Duty payable by

In the case of sale of security through stock exchange Buyer of such security
In the case of sale of security otherwise than through Seller of such security
a stock exchange
In the case of transfer of security through a depository Transferor of such security
In the case of transfer of security otherwise than Transferor of such security
through a stock exchange or depository
In the case of issue of security, whether through a Issuer of such security
stock exchange or a depository or otherwise
In the case of any other instrument not specified Person making, drawing or
herein executing such instrument

Market Value
Market value has been defined as well as explained under
proviso to Section 21 as under:

Nature of security Market Value will be

Security traded in a stock exchange Trading price
Security transferred by depository but not traded in Consideration mentioned in the
the stock exchange instrument
Security dealt otherwise than in the stock exchange Consideration mentioned in the
or depository instrument
Options in any security Premium paid by buyer
Repo on corporate bonds Interest paid by the borrower
Swap Only first leg of cash flow

Collection of stamp duty

The stock exchange or the authorised clearing corporation
and the depository shall be required to submit to the
Government details of the transactions in the manner to be
prescribed in the rules. Further, the amounts collected on
behalf of State Government is to be transferred to such State
Government determined as under within 3 weeks of the end
of each month:
 Particulars State Government eligible to receive stamp duty
Where buyer is located in India Where the residence of buyer is located
Where buyer is located outside India Where the registered office of the trading member
or broker of such buyer is located.

In case no such trading member or broker, where

the registered office of participant is located.
Issue of securities by issuer Place where its registered office is located
otherwise than through a stock
exchange or depository,

Any failure to submit or submission of false document or

declaration will be punishable with fine of one lakh rupees
for each day during which such failure continues or one crore
rupees, whichever is less. [Section 62A (2)]. Further, Section
62A (1) provides fine payable in case of failure to collect duty
or failure to transfer duty to the State Government within 15
days of expiry of the 3 weeks’ time specified above, which
shall not be less than one lakh rupees, but which may extend
up to one per cent. of the collection or transfer so defaulted.

Rates of stamp duty revised

Duty on debentures (Article 27)
The Central Government has the power to levy stamp duty
on issue of debentures pursuant to Entry 91 of List I (Union
List). State government has power to levy stamp duty on
transfer of debentures. In terms of order bearing S.O. 2189(E)
dated September 12, 2008, issued by the Department of
Revenue, Ministry of Finance, it was required that the issuer
to pay the stamp duty on issue of debentures, being a
marketable security transferable (a) by endorsement or by a
separate instrument of transfer (b) by delivery; at the rate of
.05% per year of the face value of the debentures, subject to
the maximum of 0.25% or Rs 25 lakh, whichever is lower.

Pursuant to the Finance Bill, 2019, Article 27 has been

amended to provide ad-valorem rate of duty on issue of
debentures (0.005%) and on transfer and re-issue of
debenture (0.0001%). Accordingly, the rate of stamp duty on
debentures will be:

 Upon Issuance – Rs 500 for every Rs 1 crore

 On Transfer – Rs 10 for every Rs 1 crore

As already mentioned above, the exemption available

formerly in case of issue of debentures by an incorporated
company or body corporate in terms of a registered
mortgage-deed now stands omitted.
Duty on security other than debentures (Article 56A)
State Government has the power to levy stamp duty in case
of issue of shares. However, for transfer of shares, Central
Government has the power to levy stamp duty on issue of
debentures pursuant to Entry 91 of List I (Union List).

With the proposed insertion of Article 56, the stamp duty in

case of securities other than debentures, for eg. equity
shares, preference shares, warrants, has been specified.

 Issue will be subject to stamp duty of 0.005%;

 Transfer on delivery basis will be subject to 0.15%;
 Transfer on non-delivery will be subject to 0.003%
 Rate for derivatives, government securities and repo
on corporate bonds has also been specified.

The existing duty specified for transfer of shares and

debentures, specified in Article 62, has been omitted,
subsequent to the aforesaid insertions.

Conclusion
The proposed amendments seek to increase the base of
investors for SDIs, by removing the difference between
debenture and SDI. Further, a single point of collection for
stamp duty would streamline the process altogether.
However, the major issue of stamp duty of assignment of
receivables still remains unaddressed.
Affordable housing gets more
affordable
- Vineet Ojha
It was re-assuring to find out that the Government has not
forgotten about the ambitious promises made for making
affordable housing accessible to reduce the ever-growing
housing shortage in India. India was facing a housing
shortage of around 5.4 crore as of FY 2018 where the rural
housing shortage accounted for 4.4 crore. The urban housing
shortage in India has been addressed to a great extent after
the 12th Five Year plan and as at the end of the November,
2017, the urban housing shortage has been reduced to 1
crore units. During the period 2014-18, as many as 1.53 crore
houses have been constructed under the flagship housing
scheme Pradhan Mantri Awas Yojana (PMAY), interim
Finance Minister stated in his Budget speech on February 1.
Additionally, the government has approved over 4 lakh
houses under scheme, taking the total number of houses
sanctioned under the scheme to over 72.5 lakh. The figure
below shows the progress of PMAY-U:

Houses sanctioned Under PMAY-U (Lakh Units)

80
70
60
50
40
30
20
10
0
FY16 FY16 FY16 FY17 FY17 FY17 FY17 FY18 FY18 FY18 FY18 FY19 FY 19 FY 19 FY 19
(Q2) (Q3) (Q4) (Q1) (Q2) (Q3) (Q4) (Q1) (Q2) (Q3) (Q4) (Q1) (Q2) (Q3) (Q4)

Figure 1: Number of houses sanctioned under PMAY (Urban)

Source: MoHUPA; VKC analysis

The Housing for All by 2022 initiative was launched by the

Modi government within five months of assuming office. The
developments on the same has been unexpectedly
promising.

State of the market

The market for housing finance has been growing steadily
over the years and one of the major reasons behind this
 growth is the constant push by various regulators for shaping
up the housing finance system in India. The outstanding
housing credit as at the end of March 2019 is expected to
stand at Rs. 10.77 lakh crore15, as against Rs. 9.75 lakh crore
at the end of March 2018 and Rs. 8.60 lakh crore at the end
of March 2017. Rising interest rates impacted buyer
sentiments in 2018-19. The overall credit growth of the
sector has been presented below:

22.00%

18.00%
17.00%
16.00%

13.00%
11.00% 11.00% 11.20%
11.00%

7.00%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Figure 2: Overall credit growth of the housing finance

segment

Source: VKC Analysis

Developments in the Budget

The government seems to be effectively tackling the housing
shortage for the urban sector however the same cannot be
said about the rural sector. This year’s budget did not see any
direct measures taken by the government to reduce rural
housing shortage, which was expected of them. However,
through other reforms, have attacked the poverty and
accessibility of finance in India so that housing credit can be
availed by the poor easily. This year’s budget still saw
reforms to grow affordable housing for the middle income
group. The same is explained below:

 Relocating middle class families saw leisure in tax on

rent payable. Previously, income tax on notional rent is
payable if one has more than one self-occupied house.
Considering the difficulty of the middle class having to
maintain families at two locations on account of their
job, children’s education, care of parents etc. A proposal

https://economictimes.indiatimes.com/wealth/borrow/indian-households-debt-doubles-in-fy17-18-
15

what-are-we-borrowing-for-and-how-much/articleshow/67700374.cms
 to exempt levy of income tax on notional rent on a
second self-occupied house was given by the interim
finance minister.

 The TDS threshold for deduction of tax on rent is

proposed to be increased from Rs. 1,80,000 to Rs.
2,40,000 for providing relief to small taxpayers.

 Earlier, a home owner could save the capital gains tax

on a sold property by reinvesting the amount into
another property. But the guidelines did not allow him
to invest the amount into two properties. The benefit of
rollover of capital gains under section 54 of the Income
Tax Act will be increased from investment in one
residential house to two residential houses for a tax
payer having capital gains up to Rs. 2 crore. This benefit
can be availed once in a life time. Under section 54, to
save on the capital gains made on the sale of a
residential property, one is currently allowed to invest
only in one other house property. The proposal is to
increase it to two houses in one’s lifetime. To claim the
exemption, a new residential house property must be
purchased or constructed and only one house property
was allowed to be purchased or constructed.

 For making more homes available under affordable

housing, the benefits under Section 80 - IBA of the
Income Tax Act is being extended for one more year, i.e.
to the housing projects approved till 31st March 2020.
According to section 80-IBA, deduction of 100% of
profits derived from development of affordable housing
projects approved on or after 1st June 2016 is available,
subject to fulfilment of specified conditions.

Conclusion
Although the reforms show that the affordable housing
segment of the housing market to gain, the budget did not
meet the expectations for the rural housing sector. To
effectively tackle the housing shortage of the economy,
focus should be highly on the rural sector. However, the
budget showed that the 2019 budget gave immense
importance to the real estate sector of the country to
counter the low demand. Increasing investment in the
housing market will not only boost the Indian economy but
also motivate housing credit to be taken by the middle-
income group.16

16
For detailed analysis of the subject matter you can purchase our India Housing Finance report, 2018.
The link to the brochure is: http://vinodkothari.com/wp-content/uploads/2018/09/HFR-Brochure.pdf
 Budgeting in on Banking and
Bankruptcy (IBC)
- Beni Agarwal

Introduction
With the intent to redeem the health of the banking
industry and quash the nemesis of banks, that is, the
plaguing NPAs, the Budget put in several data and
rationale to do the needful. It put forth several
justifications for increased NPAs and the role of
Insolvency and Bankruptcy Code in facilitating
transparency and fuss free procedure adopted during
bankruptcy.

Placed both big and small businessmen
on an equal footing with respect to loan
repayment.
Rationalizing NPA
The budget has whitewashed the spurt in NPAs by
intricately weaving growth in NPAs with growth in credit.
According to the budget pronouncement, the period of
2008-14 witnessed aggressive growth in credit. As per
RBI, owing to a whopping 190 % increase in outstanding
loans of public sector banks, non-performing loans and
stressed assets ballooned up. Many of these projects
could not pay back the loans due to their incompletion
and inefficient capacity utilization. In 2014, Rs. 5.4 lakh
crore NPAs were brought to the surface and quite a lot
were discovered during Asset Quality Review and
Inspections.

Remarks:

The major contributor for increasing NPA has been

attributed to extraordinary credit growth. However, this
brings under the radar the banks who are giving out
these loans. It is the banks’ inseparable responsibility to
assess the customers’ ability and willingness to pay and
their credit-worthiness, before any amount can be
sanctioned. Hence, their ability and efficiency to credit
analyze the customers is brought to question.

Role of IBC
The Budget aims to emphasize the amount of work done
to heal the woes of the banking sector. It suggests that

You can also refer our page: http://vinodkothari.com/housing_finance/

 the culture of “phone banking” is questionable and has
been alleviated to a great extent.

It has vocalized the 4Rs approach of “Recognition,

Resolution, Re-capitalization and Reforms” assisting in
baptizing the banking sector. Numerous other measures
have been implemented to ensure Clean Banking.

To encourage the idea of “transparency and

accountability”, IBC has played a cardinal role as it has
institutionalized a resolution-friendly mechanism. This is
helping in recovery of non-performing loans while
preserving the underlying businesses and jobs.

The Budget went on to present that there existed a time

when the only set of businessmen who would be under
pressure to repay loans were the ones operating on a
small scale. The bigger businessman would be breathing
a sigh of relief while their banks would be bearing the
weight of loan repayment. However, now the
Increase in NPAs accountability and responsibility has shifted on to the
attributable to rapid defaulting management, who will either pay or exit the
business. Thus, sanity has set in.
credit growth.
With the above stated contentions, the Budget stated
that a recovery of Rs. 3 lakh crore has been done in favor
of the banks and other creditors. Also, to aid the public
sector banks, recapitalization and amalgamation has
been done to reap the benefits of economies of scale.
This has turned out to be conducive to improved capital
access.

Conclusion
Speaking conclusively on the banking sector and IBC
front, there was only a narration of “what we have done
budget”, as there was no concrete amendment
introduced. It also entailed whitewashing the increased
NPAs and how the big shots would also now be equally
responsible for repayment of loan. But these served as
reminders assisted with statics and not as a change to
the existing.
Anticipated boost in the agriculture
credit market
-Vineet Ojha

As always, agriculture continues to be the main driver of the

rural economy and the economy as a whole. This budget
shows that the government tries to keep its promise to the
farmers about doubling their income by 2022. With
increasing investment income by farmers, agriculture credit
is expected to surge in the coming years.

Major reform for agriculture loans

The following reforms were introduced to boost agriculture
credit in India:

1. In Budget 2018, the Government announced the facility

of extension of Kisan Credit Card scheme (KCC) to Animal
Husbandry and Fisheries farmers. This budget, the
proposal is to provide the benefit of 2% interest
subvention to the farmers pursuing the activities of
animal husbandry and fisheries, who avail loan through
Kisan Credit Card. Further, in case of timely repayment
of loan, they will also get an additional 3% interest
subvention.

To ensure provision of easy and concessional credit and

to bring all farmers under KCC fold, the Government has
decided to initiate a comprehensive drive with a
simplified application form.

2. For farmers affected by natural calamity, and who are

provided funds via the National Disaster Relief Fund
(NDRF), an interest subvention of 2%, topped with 3%
will be given for the entire loan restructuring period.
Presently, the crop loans are rescheduled for such
affected farmers and they get benefit of interest
subvention of 2% only for the first year of the
rescheduled loan. The Government has now decided
that all farmers affected by severe natural calamities,
where assistance is provided from NDRF, will be
provided the benefit of interest subvention of 2% and
prompt repayment incentive of 3% for the entire period
of reschedulement of their loans.

Other reforms for farmers

To provide an assured income support to the small and
marginal farmers, the Government is launching a historic
programme namely “Pradhan Mantri KIsan SAmman Nidhi
(PM-KISAN)”. Under this programme, vulnerable landholding
farmer families, having cultivable land upto 2 hectares, will
be provided direct income support at the rate of Rs. 6,000
per year. This income support will be transferred directly into
the bank accounts of beneficiary farmers, in three equal
instalments of Rs. 2,000 each. This programme will be
funded by Government of India itself. Around 12 crore small
and marginal farmer families are expected to benefit from
this. The programme would be made effective from 1st
December 2018 and the first instalment for the period upto
31st March 2019 would be paid during this year itself. This
programme will entail an annual expenditure of Rs. 75,000
crore.

PM-KISAN would not only provide assured supplemental

income to the most vulnerable farmer families, but would
also meet their emergent needs especially before the
harvest season. PM-KISAN would pave the way for the
farmers to earn and live a respectable living.

Conclusion
Rural distress has been a major issue in recent times. During
the last five years, for providing affordable loans to farmers,
the amount of interest subvention has been doubled. The
crop loan to farmers increased to Rs. 11.68 lakh crore in year
2018-19. This shows that genuine efforts have been made to
remove the hardships of farmers by providing them Soil
Health Cards, quality seeds, irrigation scheme and Neem
Coated Urea to remove shortage of fertilizers.
All talk no show for the infrastructure
sector
-Rahul Maharshi & Kasturi Chowdhury

The Infrastructure sector in a country plays a pivotal role in

the Indian economy largely affecting the growth and overall
development of the country. The infrastructure sector is not
only crucial upon all segments of the economy but also has a
magnanimous impact on the quality of life. There is a direct
correlation between economic development and the state of
Infrastructure in a country. Infrastructure development is
dependent primarily upon the Government as most of the
areas such as electricity, roads, telecommunications,
railways, irrigation, water supply and sanitation, ports and
airports amongst others are majorly regulated by the
Government. However, privatisation and government
initiatives over the years have resulted in accelerated
development in this sector.

The sector as witnessed over a decade has been the primary

focus of annual budget, however, the vision of Budget 2019
seems to diverge, irrespective of rooms of improvement left
in this sector. One would be ambitious to expect new
infrastructure projects galore in this Budget, akin to the fact
that current initiatives in this sector are in progress and
Budget 2019 being an interim budget.

Initiatives and progress in the

Infrastructure Sector- Budget 2019
Calling the Infrastructure sector as the backbone of the
nation’s development, the hon’ble FM profoundly stated that
the growth in this sector has been beyond incremental levels
attaining transformative achievements. The FM further
stated that with the number of operational airports in the
country crossing 100, and an average of 27 kms of highway
built per day the sector has witnessed a growth supported by
verifiable data.

The key developments in specific sectors are provided below:

a) Airways
The FM spoke of The (RCS-UDAN) Regional Connectivity
Scheme – “UdeDeshkaAamNaagrik” Udaan Connectivity
scheme launched in October 2016 and stated that the
Scheme has made tremendous strides and that an ordinary
citizen is also travelling by air today suggesting that air travel
 has become affordable and significantly more accessible to a
wider demographic As the number of operational airports in
India crossing 100, with the commissioning of Pakyong
airport in Sikkim seen as a major feat of connecting difficult
areas. the Government appears to be keen to achieve the
target figure of 1-billion-flights-in-a-year figure proposed in
the early budget 2018.

With major infrastructure initiatives taken in the North East

with an increase in budget allocation by 21% to 58,166 crore
in 2019-20 over 2018-19, Arunachal Pradesh has also
registered itself on the air map of the country, resulting in
every Indian state having achieved air connectivity.

It is noteworthy that earlier in January 2019, in an address to

a joint sitting of Parliament, the President of India had also
commended the Udan Yojana and indicated the
developments of the project with 19 new airports to be built
in Eastern India out of which 5 of them coming up in the north
east states of India. The growth in the Airway sector has
resulted in generation of employment as the domestic
passenger traffic has doubled during the last 5 years.

b) Railways
The FM stated that Indian Railways has experienced the
safest year in its history, reflected in reduced incidences of
train accidents and derailments. The Government has
proposed a capital support from budget for railways at Rs.
64,587 crore for 2019-20, with the Railways’ Overall capital
expenditure programme of Rs. 1,58,658 crore seen as the
highest ever allocation till date also exceeding the last year’s
allocation of Rs. 1.48 crores. The FM also expressed an
expectation of improvement in the Operating ratio to 95% in
2019-20 as compared to the increase achieved from 98.4% in
2017-18 to 96.2 in 2018-19 (Budget Estimates).

The FM recorded progress in employment generation in the

sector under Make in India programmes carried on by the
Government. The FM also mentioned the introduction of the
first indigenously developed and manufactured semi-high
speed “Vande Bharat Express” popularly known as Train-18
packed with world class experience for passengers with
speed, service and safety. Currently the Train-18 is plying
from Delhi to Varanasi.

c) Roadways and Waterways

The FM claimed India to be the fastest highway developer
with an average of 27 kms of highways built daily. This budget
has been seen as a report card for completed projects and a
progress on the ongoing initiatives by the Government.
 Completion of the eastern Peripheral highway around Delhi
or the Bogibeel rail-cum-road bridge in Assam and Arunachal
Pradesh are noteworthy in this regard. The FM also pointed
out the developments in waterways with the Sagarmala along
the coastal areas of the country aimed at faster handling of
import export cargo. The initiation of container freight
movements from Kolkata to Varanasi has also been
undertaken and prospects of container cargo freight
movements in the North East by improving the navigation
capacity of the Brahmaputra river has been proposed.

d) Power and Renewable Energy

The budget highlighted a major change in the power
generation and consumption trend of the country. The
increase in solar generation capacity has grown over ten
times in last five years. The same has also contributed in
employment generation. The government has also taken
steps towards promotion and extensive use of renewable
energy.Setting up of the International Solar Alliance, the first
treaty based international inter-governmental organisation
headquarter in India is a clear indicator of government’s
focus in the area.. The alliance of more than 121 countries
initiated by India is also extended to the members of the
United Nations.

With increase in crude oil prices and sustained demand, the

import dependence on crude oil and natural gas has been
reason for concern to the economy. The FM pointed out that
increasing the production of hydrocarbons could be an
effective measure in mitigating the problem . It was also
mentioned that a high level Inter- Ministerial Committee,
constituted by the Government has made the following
recommendations in this matter:

-Transforming the system of bidding for exploration

-Shift from revenue sharing to exploration programmes for

the category II and III basins.

The recommendations are yet to be implemented by the

Government.

Conclusion
Ministry of Finance has made an attempt to bridge the
existing gaps in the infrastructure sector. However,
expectations from this interim budget have been lowand the
same was not received as revolutionary in the session.
However, it can be stated that the FM has focused on each of
the sub-sectors and the same is reflected in the progress
report of the Budget 2018.
Bagful of goodies for the organized
and unorganized labours in India
-Nitin Bohara and Swapnill Sharma

Introduction
The Investment in Human Capital is a pre-requisite for a
productive population for nation building. The government
has taken critical steps to develop social infrastructure of the
country like health and education sector of India. The
government has initiated certain Labor reforms to enhance
the social security and welfare aspects of the workman which
are leading to provide sustainable livelihoods for the
population who are largely engaged in the informal economy.
The Ministry has taken steps for formulating four labour
codes on wages; industrial relations; social security and
welfare; and occupational safety, health and working
conditions by amalgamating, simplifying, and rationalising
the relevant provisions of the existing central labour laws.
During the Financial Year 2018-19 the Ministry has also
signed a Memorandum of Understanding with Italy for
training and education in the fields of labour and
employment. It has also approved a Memorandum of
Understanding with Brazil, the Russian Federation, and South
Africa, regarding Cooperation in the Social and Labour
Sphere17. The five countries are members of the BRICS
association of major emerging national economies. The
memorandum would facilitate member countries to share
knowledge and also implement joint programmes on matters
of labour and employment, social security and social
dialogue. The interim budget presented mainly focuses on
bridging the gender gaps in education, skill development of
Indian Workforce.

The following are the highlights of the Interim Budget

2019-2018
 Liberalization of New Pension Scheme
o The employee contribution have been kept intact and the
government contribution has been increased from INR
3,500 per month to INR 7,000 per month and the maximum
ceiling of the pay has been increased from INR 10,000 per
month to INR 21, 000 per month

17
https://labour.gov.in/sites/default/files/BRICS%20MoU%20South%20Africa%202018.pdf
18
https://www.indiabudget.gov.in/ub2019-20/bs/bs.pdf
 o Minimum pension for every labourer has been fixed at INR
1,000 per month.
o In the event of death of a labourer during service, the
amount to be paid by EPFO has been enhanced from INR
2,50,000 lakh to INR 6,00,000 lakh.

 Increase in ceiling of payment of gratuity

o The ceiling of payment of gratuity has been enhanced from
INR 10,00,000 to INR 20,00,000

 Increase in ceiling of Employee State Insurance Scheme

o The ceiling of ESI's eligibility cover has been increased from
INR 15,000 pm to INR 21,000 pm.

 Pradhan Mantri Shram-Yogi Maandhan

o The unorganized sector of the country contributes to nearly
around half of India’s GDP. Though the government has
continued its mission towards bringing down
unemployment in unorganised sector but steps taken are
not bearing fruits.

o The Interim Budget has provisioned for a monthly pension

of INR 3,000, with a contribution of INR only 100 per month,
for workers in the unorganized sector to those 60 years of
age and having monthly income upto INR 15,000.

o The Government will deposit equal matching share in the

pension account of the worker every month. It is expected
that at least 10 crore labourers and workers in the
unorganised sector will avail the benefit of 'Pradhan Mantri
Shram-Yogi Maandhan' within next five years making it one
of the largest pension schemes of the world.

 Youth Empowerment
o Youth is the most valuable segment of the population. Under
government ‘Pradhan Mantri Kaushal Vikas Yojana’ over 1
crore youth are being trained to help them earn a
livelihood.The potential of youth has been harnessed through
self-employment schemes including MUDRA, Start-up India
and Stand-up India.
o Under Mudra Yojana over 15.56 crore loans have been
disbursed amounting to INR 7,23,000 Crores.
o The interim budget provides for establishment of National
Programme on ‘Artificial Intelligence’ in order to take the
benefits of Artificial Intelligence and related technologies to
the people. The government has identified nine priorities
areas for the same. A national Artificial Intelligence Portal will
be developed soon. The government will start a national
centre for artificial intelligence (AI) and turn one lakh villages
into ‘digital villages’ in a bid to harness ‘new age-technologies
for citizens’.
Adding flexibility in PMLA proceedings
-Vallari Dubey

Introduction
Money laundering is a felony, which, per se, is not new to the
world. Given its nature, it is essential to have written law in
place, which should be amended, time and again, to
adequately deal with the on-going changes in the economic
environment. In India, the enactment of Prevention of
Money Laundering Act, 2002 (‘PMLA’) was a remarkable and
important step towards ensuring the same. Since its initial
introduction, the law has undergone various amendments
over the years. The Interim Budget for 2019-2020 has made
several changes in enactments, which also include changes
in PMLA. The amendment is part of the Finance Bill, 201919,
and is yet to be notified.

PMLA is a comprehensive law which deals with all the major

aspects of money laundering, which includes defining what
constitutes as money laundering, the process of attachment
and adjudication, management of confiscated properties,
obligations on reporting entities like banks and financial
institutions, etc.

Background to the amendment

Chapter III of the PMLA deals with “Attachment, Adjudication
and Confiscation”. Section 5 under the Chapter, gives powers
to the Director or Deputy Director (appointed authority
under PMLA by the Central Government) to provisionally
attach the property in case he has reason to believe that the
property is involved in money laundering. This is an interim
action which prevents any likelihood of further transfer of/
or launder of property or money. The initial attachment is
merely allowed for a period of 90 days.

The aforesaid complaint is transferred to the Adjudicating

Authority (AA), which further investigates the matter in
accordance with the provisions of section 8 of PMLA. At this
stage, it is pertinent to understand the definitions of
‘attachment’ and ‘investigation’; both the expressions are
defined as under:

"attachment" means prohibition of transfer,

conversion, disposition or movement of property by
an order issued under Chapter III.

19
https://www.indiabudget.gov.in/ub2019-20/fb/bill.pdf
 "investigation" includes all the proceedings under
this Act conducted by the Director or by an authority
authorised by the Central Government under this Act
for the collection of evidence.

While attachment is an act to stop any movement of the

property, investigation is a lawful process, which allows
collection of evidence of money laundering, leading to
punishment and confiscation. If on investigation, the AA
concludes that the property is involved in money laundering,
it shall confirm the continuation of the provisional
attachment, which becomes final after the final order of
confiscation is passed by the court.

Text prior to amendment

Section 8(3)(a)

(3) Where the Adjudicating Authority decides under

sub-section (2) that any property is involved in
money-laundering, he shall, by an order in writing,
confirm the attachment of the property made under
sub-section (1) of section 5 or retention of property
or [record seized or frozen under section 17 or
section 18 and record a finding to that effect,
whereupon such attachment or retention or freezing
of the seized or frozen property] or record shall—

(a) continue during investigation for a period

not exceeding ninety days or the pendency of
the proceedings relating to any offence
under this Act before a court or under the
corresponding law of any other country,
before the competent court of criminal
jurisdiction outside India, as the case may
be; and

(b) become final after an order of

confiscation is passed under sub-section (5)
or sub-section (7) of section 8 or section 58B
or sub-section (2A) of section 60 by the
Special Court.

Post amendment
The amendment has substituted the words ‘ninety days’ with
‘three hundred and sixty five days’. While the amendment
seems minor, it actually extends the time period of
attachment by a total of 275 days. Resultantly, the
attachment shall continue for one year during pendency of
proceedings before a criminal court, under PMLA or a
corresponding foreign law.

While the provisional attachment period remains

unchanged, extending the attachment period before final
confiscation, gives the authorities increased time in hand to
deal with a given case. With the increased number of cases
of money laundering, this is a relief for the authorities
investigating matters under PMLA.

Additionally, the amendment inserts explanation to sub-

section (3) above; accordingly, the aforesaid period of 365
days shall exclude any period for which the respective
investigation is stayed by any court of law. Since investigation
is construed to be ineffective while it is stayed, and the
number of attachment days is calculated in reference to the
investigation, the period of stay should be excluded.

Conclusion
In essence, the amendment adds flexibility to the
proceedings under PMLA and gives more time to the
authorities, which can be invested into finding relevant
evidence and records.
Direct Tax amendments proposed by
Finance Bill, 2019
-Yutika Lohia

Simplification of Direct Tax System to

benefit tax-payers
India is moving towards digitalization. The Government has
also been taking measure to make the Income tax
department digitalised. Returns, tax payments, assessment
procedures etc are all being done electronically. The
Government aims to process all returns in twenty-four hours
and issue refunds immediately. Within the next two years,
almost all verification and assessment of returns selected
for scrutiny will be done electronically through
anonymised back office, manned by tax experts and
officials, without any personal interface between taxpayers
and tax officers.

The Finance Bill, 2019 has a series of reforms in the direct tax
regime. The summary of the amendments is provided below:

Rates of Income tax

For individuals/HUFs
Income slab Tax rate
0 – 2,50,000 Nil
2,50,000-5,00,000 5%
500000-100000 20%
Above 10,00,000 30%

Surcharge
If income Less than More than More
50 lakhs 50 lakhs than 1
crore
Rate 0 10% 15%

For companies
Turnover less Turnover
than 250 cr more than 250
cr
Rate 25% 30%
Cess:
Health & Education cess (4%) over tax payable

Amendment in Section 16
An increase in deduction of Rs 50,000 from Rs 40,000 or
salary whichever is less is allowed as deduction under section
16, the same has been amended to further reward the
salaried class.

The purpose of this deduction is to provide relief to the

salaried tax payers.

This amendment will take effect from AY 2020-21 onwards.

Amendment in Section 23
Before the announcement of budget 2019, income tax on
notional rent is payable if one has more than one
self-occupied house. The same has been amended and
benefit can be availed if one has more than two self-occupied
house. Extract of section 23(4) with the proposed changes
has been given below:

(4) Where the property referred to in sub-section (2)

consists of more than one house two houses—
(a) the provisions of that sub-section shall apply only in
respect of one two of such houses, which the assessee
may, at his option, specify in this behalf;
(b) the annual value of the house or houses, other than
the house other than the house or houses in respect of
which the assessee has exercised an option under
clause (a), shall be determined under sub-section (1) as
if such house or houses had been let.

Further any land or building held as stock in trade and is not

let during the whole or part of the year, the annual value of
such property or part of the property for a period of two years
from the end of the financial year in which the certificate of
completion of construction of the property is obtained from
the competent authority, shall be taken to be nil.
Earlier this benefit was given for one year, the same has been
extended for two years.
These amendments will take effect from AY 2020-21
onwards.
Amendment in Section 24
Exemption on levy of income tax on notional rent on a self-
occupied house

There has been a proposed amendment in section 24 of

Income-tax Act. Currently income tax on notional rent is
payable if one has more than one self-occupied house. The
FM mentioned the difficulty of the middle class having to
maintain families at two locations on account of their job,
children’s education, care of parents etc.

The following amendments have been proposed in section 24

of Income-tax Act, with effect from the 1st day of April, 2020-

(a) In the first proviso, after the words “the amount

of deduction”, the words “or, as the case may be, the
aggregate of the amounts of deduction” shall be
inserted;

(b) In the second proviso, after the words “the

amount of deduction”, the words “or, as the case
may be, the aggregate of the amounts of deduction”
shall be inserted;

(c )after the Explanation to the third proviso, the

following proviso shall be inserted, namely:––

“Provided also that the aggregate of the amounts of

deduction under the first and second provisos shall
not exceed two lakh rupees.”.
The above amendments are proposed to deal with the
deduction on the interest on House loans on more than one
property include the words “aggregate” in order to specify
the inclusion of two residential house in the purview of
deduction.

However, the deduction limits remain the same of Rs.

2,00,000, which means, in aggregate, if a person has two-self
occupied house, the interest deduction shall be in aggregate
Rs. 2,00,000.

These amendments will take effect from AY 2020-21

onwards.

Amendment of Section 54
The budget proposes an insertion of a proviso in section 54
in sub section (1), after clause (ii) which states as
follows:
Provided that where the amount of the capital gain does not
exceed two crore rupees, the assessee, may at his option,
purchase or construct two residential houses in India, and
where such an option has been exercised,––

(a) the provisions of this sub-section shall have effect

as if for the words “one residential house in India”,
the words “two residential houses in India” had been
substituted;

(b) any reference in this sub-section and sub-section

(2) to “new asset” shall be construed as a reference
to the two residential houses in India: Provided
further that where during any assessment year, the
assessee has exercised the option referred to in the
first proviso, he shall not be subsequently entitled to
exercise the option for the same or any other
assessment year.’

The benefit of rollover of capital gains under section 54 of

the Income Tax Act will be increased from investment in one
residential house to two residential houses for a tax payer
having capital gains up to Rs 2 crore. This benefit can be
availed once in a life time.

Amendment in Section 80- IBA

The budget proposed to extend the affordable housing
scheme by one more year i.e. the housing projects
approved till 31st March, 2020. Deduction of 100% of the
profit and gains derived from such business shall be available
to those housing projects approved on or after 1st June,
2016 to 31st March, 2020 subject to fulfilment of specified
conditions.

This amendment will take effect from AY 2020-21 onwards.

Amendment in Section 87A

The show stopper title of the Interim Budget 2019 was taken
by section 87A. Section 87A provides relief to the small tax
payers. The interim budget has proposed to amend the
section by allowing a full tax rebate to individual
taxpayers having taxable annual income upto Rs 5 lakhs
which was earlier restricted to Rs 3.5 lakhs. A deduction of
100% of income tax on the total income or Rs 12,500
whichever is less is allowed under this section.

Though the income tax slab rate remains unchanged, under

this rebate scheme huge amount of individuals will be
benefited. Also the relief of Rs 12,500 has been extended
which was earlier restricted to Rs. 2,500.
These amendments will take effect from AY 2020-21
onwards

Amendment in Section 194A

Section 194A relates to TDS on interest other than interest
on securities. The proviso clause i.e subsection (3) of the
subsection (1) had been proposed to be amended. No tax
shall be deducted at source for interest income earned upto
Rs 40,000 from the following:

 Banking Companies
 Co-operative society (carrying on business of
banking)
 Deposits with post office
Limit for no TDS on interest income of Rs 10000 has been
replaced by Rs 40,000. With respect to any other
interest earned apart from the above mentioned list, no TDS
shall be deducted up to Rs 5000.

These amendments will take effect from AY 2020-21

onwards.

Amendment in Section 194 – I

TDS on rent has to be deducted at source under section 194-
I The first proviso clause of the section has been proposed to
amend the threshold limit for tax deduction at source on rent
from Rs 1,80,000 to Rs 2,40,000.

The amendment will take effect from AY 2020-21 onwards

 Status Quo of Indirect Taxes- post
Budget
To reduce the tax burden on home
buyers- GST Council shall form a
group of ministers who would work
together to bring relief.
-Beni Agarwal
Introduction
The Interim Budget of 2019 began from a “what we have
done budget” transcending into a “dreams and wishes
budget” and finally led to a joyful “thank you Mr. FM
budget”. However, when it came to indirect taxes, it was
a mere session of storytelling encompassing reiteration
of already known facts, thereby bashing up the hopes of
several companies and sectors.
Retelling the tale of GST
The Finance Minister sang praises for the present
government by applauding its ability and efforts to bring
in the biggest taxation reform which was not made
possible by the erstwhile government. The nation was
reminded of the benefits showered by implementation
of GST, like- elimination of cascading effects of previous
indirect taxes, digitized billing and return filing system,
easy interface, etc. He also zeroed in on several reforms
introduced under GST that have reduced the hassles
faced by taxpayers.
He reiterated the fact that GST on most of the daily use
items for poor and middle income group have bracketed
between 0 and 5 %, which is much lower than the pre-
GST tax rates. Reduced tax burden on cinema goers was
also highlighted.
The budget provided a puny ray of hope to the
homebuyers by expressing its intention of providing
relief to them. GST Council have been entrusted with the
task of forming a group of ministers who will work on
alleviating GST burden on homebuyers. “What”, “How”
and “How much” are the questions that are left
unanswered.
Campaigning for the upcoming poll, the government
blew its own trumpet saying that post implementation,
in order to ease the GST burden, exemptions from GST
for small businesses has been doubled from Rs. 20 lakh
to Rs. 40 lakh. The budget further bragged about the
recently amended composition scheme, wherein small
businesses with a turnover of Rs. 1.5 crore shall pay only
 1 % tax, and small service providers with a turnover of up
to Rs. 50 lakhs shall pay tax of 6 % instead of 18 %. Relief
measure of filing one quarterly return only would benefit
more than 90 % of GST taxpayers.

The Budget nipped in the bud a potential question that

could arise in the minds of the people. To demonstrate
the effect on tax revenues post GST, it was shown in
positive light that there is an approximate increase of 8.3
% in the revenue in comparison to July 2017. Further, as
we talk about “claims and promises”, a 14 % increase in
revenue for next 5 years is promised.

However, players like Hero MotoCorp, Bajaj Auto and

TVS Motors were left despondent as their pleas went
unheeded. These auto companies had placed a plea to
reduce the rate of GST on two wheelers from 28 % to
18% as these are basic modes of mobility and being a
mass usage product, tax rate of 28% was too high. A
reduction of 10 % would significantly accelerate the auto
sector growth along with a push to the entire value chain
associated with it. Apparently, it did not ring a bell with
the GST Council.20

Thus, the budget on GST front was dead with no

amendments. So, if one compares the pre-budget and
post budget GST scenario, one would not notice any
significant addition or deletion. The budget retold what
has already been done so far with no new takeaways.

Customizing Customs Duty

Customs duty abolished Customizations of Customs Duty revolved around the
on 36 capital goods. concept of “Make in India” brought in by the present
government to bolster the Indian economy. The
following are the amendments brought in:

 To rationalize customs duties and procedures,

government has abolished duties on 36 capital
goods.
 Indian Customs is in the process of exhaustive
digitalization of export/import transactions. It is
also leveraging RFID technology for improving
export logistics.
 Introduction of a revised system of importing
duty free capital goods and inputs for
manufacture and export.

20
https://www.financialexpress.com/auto/bike-news/hero-motocorp-calls-for-gst-to-be-reduced-to-
18-on-two-wheelers/1431233/
Conclusion
In view of the above amendments, one can safely
conclude that with regards to GST, there is nothing much
that has been brought to the table by the government.
Speaking of Customs Duty, scrapping off of 36 capital
goods from the purview of taxation has been a major
step.
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Vineet Ojha Nitin Bohara Simran Jalan

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