Budget is promised on three prominent themes of aspirational India, economic development, and caring society. With the fears permeating regarding prospects of Indian economy, it was essential for the government to focus on reviving consumer demand; encourage manufacturing; promoting industrial and enthuse animal spirits in the business outlook. The government has gone beyond by taking the lead through its massive commitment in infrastructure spending on each of these pillars and much beyond.

There is great boldness in introducing of both fiscal and non-fiscal policy measures and incentives to the cumulative benefit of priority sectors. Clearly, a strong focus is upon improving the ease and quality of life which without doubt has a direct correlation with achieving a consumption-led growth in the economy. This Budget, when viewed holistically, will reveal that it takes into consideration the needs of various cross-sections of the society. Though replete with selectively targeted measures, poised with the potential to lead the country as a $5 trillion economy, the budget seems to carry something for everyone.

Interestingly, several measures are focused on attracting further FDI in the country and spurring job opportunities on a large scale. The 100% exemption proposed on the returns for sovereign funds’ investments on infrastructure is a bold and encouraging move, clearly revealing that the government prioritised institutional FDI. We will now see quality investors flowing in into numerous infra projects resulting in a positive impact on the overall investment cycle. The Government’s bet on emerging technology is refreshing while emphasising on the importance of leveraging artificial intelligence, data analytics, and the Internet of things for digital governance. The policy for setting up ‘data center parks’ is welcoming as it gives a formal space for the budding and talented generation Y & Z, which is looking to push digitization across all sectors. This will not only supplement the cravings for India to be at the epicenter of the digital revolution.

It is good acknowledgement on the part of the government that startups and MSMEs have emerged as engines of growth for the Indian economy. Rightly so as these small yet significant torchbearers form the core of India’s economic activity. The five-year tax deferment on employee stock option plan (ESOP) acquiesce to the startup ecosystem’s claims to permit incentives for attracting top talents where capital is unavailable and ESOPs as a long-term talent retention measure. During their formative years, ESOP is a significant component of compensation for startup employees. Currently, ESOPs are taxed both at the time of exercising the option as well as selling the same which usually resulted in a cash-flow problem for those who choose to hold shares for a longer period. The reduction of the tax burden on startups by way of 100% deduction of profits for three consecutive assessment years out of seven for eligible startups having turnover of up to ₹25 crore is an added boost. Further the move to increase the turnover limit for tax exemption for startups from ₹25 crore to ₹100 crore is laudable and a befitting acknowledgement of the contribution of this sector.

Equally benefitted would be the MSME sector which was marred with the slowdown across sectors. One of the highlights in the Budget proposal was the proposal to raise by five times the turnover threshold for audit from the existing ₹1 crore to ₹5 crore. While doing so, FM has cleverly reiterated a less-cash economy, with the caveat that the increased limit shall apply only to those businesses which carry out less than 5% of their business transactions in cash. The proposal to launch an app-based invoice financing would obviate the long-suffered problem of delayed payments and cashflow mismatches for MSMEs viewed in light of technology-driven changes occasioned by GST, this move is a significant step towards formalizing the economic actors operating in India.

The idea of a National Logistics Policy would create a single-window e-logistics market as an impetus to creating competitive MSMEs. This needs to be viewed along with Kisan Rail and other logistic facilitation measures for agriculture output expansion and reach, which itself is a thrust to the rural economy.

The holistic budget takes into consideration the needs of various sectors while maintaining a careful balance between strengthening infrastructure, modernization and key factors for driving growth. What needs to be now stressed upon is the effective and quality implementation of the schemes and incentives to maximize benefits for inclusive development. Overall, it is a liberal budget from a tax perspective, with few misses and an impressive inclusive mandate benefiting most deserving sectors. One would expect that this does not close the to-do list for the financial year and is only the first step towards further economic revival.

The author is managing partner, BMR Legal Advocates and was assisted by Adv. Joseph K. Antony, Senior Associate.

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