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The Indian Finance Minister presented the initial Union Budget 2019 (Budget 2019) of the Modi Government 2.0 on July 5. Budget 2019 provides the blueprint for helping India reach a USD five trillion economy by 2024.

Budget 2019 reflects a vision for the next three to five years to make India an investment-driven economy. The budget encompasses some key focus areas – it aims to strengthen India’s infrastructure, uplift the rural economy (with a focus on agriculture), create a world-class education system, support micro, small, and medium enterprises (MSMEs), foster gender inclusiveness by empowering women, and revive the banking and non-banking financial company (NBFC) sectors. It also emphasizes the importance of partnering with industry, striving for an all-round development.

The Finance Minister has proposed further liberalization of foreign direct investment (FDI) limits in the aviation, media, and insurance sectors and relaxation of ‘sourcing norms’ in the single-brand retail trading sector, with a view of promoting overseas investments into India.

Budget 2019 includes a proposal to extend the reduced corporate tax rate of 25% (excluding applicable surcharge) to certain companies that had a prescribed turnover in tax year 2017-18, but there has been no rationalization of the Dividend Distribution Tax (DDT) and Minimum Alternate Tax (MAT) rates. The budget introduces a new regime for tax on the buyback of listed shares, encourages start-ups, and provides select tax incentives. In addition, the budget proposes certain digitalization measures relating to pre-filled tax return forms and faceless e-audits, steps that taxpayers may find helpful.

This insight highlights key Budget 2019 proposals affecting foreign investors and multinational enterprises doing business in India. Budget 2019 proposals would take effect after the Budget passes both houses of Parliament and obtains Presidential assent.