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Finance ministry working on one more booster dose to give leg-up to economy
Sep-18-2019

In order to give a leg-up to the economy that has hit over six-year low of 5 per cent, the finance ministry is working on one more booster dose. The blue print for the stimulus is ready that would be announced by Finance Minister Nirmala Sitharaman in the next few days. Recently, the government had announced a slew of measures in three dosages which include a special window for real estate, export incentives, bank consolidation and sops for micro, small and medium enterprises (MSMEs) and the automobile sector.

The first set of announcements included rollback of the enhanced surcharge imposed on foreign portfolio and domestic investors in Budget 2019-20. Sitharaman had in her maiden Budget raised the surcharge on income tax paid by super-rich individuals. The surcharge, levied on top of the applicable income tax rate, was hiked from 15 per cent to 25 per cent for those with a taxable income of Rs 2-5 crore, and to 37 per cent for those earning more than Rs 5 crore. This increased the effective tax rate for these two groups by 3.12 per cent and 7 per cent to 39 per cent and 42.74 per cent, respectively.

Some 40 per cent of foreign portfolio investors (FPIs) automatically came under the higher tax rate as they have been investing as a non-corporate entity, such as trust or association of persons (AOPs), which in the income tax law is classified as an individual for the purpose of taxation. It was followed by announcement with regard to consolidation of 10 public sector banks (PSBs) into four. Besides, the government announced a slew of measures to boost exports and the real estate sector.

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