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In order to increase the attractiveness of the Indian Equity Market, to provide relief to a large class of investors and to make India an attractive destination for investment, the Union Budget proposed to remove the Dividend Distribution Tax. While presenting the Union Budget 2020-21 in Parliament today, the Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman said, “The dividend shall be taxed only in the hands of the recipients at their applicable rates.”

Further, in order to remove the cascading effect, the Finance Minister has proposed to allow deduction for the dividend received by holding company from its subsidiary. The removal of DDT will lead to estimated annual revenue forgone of Rs. 25,000 crore.

Currently, companies are required to pay DDT on the dividend paid to its shareholders at the rate of 15% plus applicable surcharge and cess in addition to the tax payable by the company on its profits, the Minister said. It has been argued, she added, that the system of levying DDT results in increase in tax burden for investors and specially those who are liable to pay tax less than the rate of DDT, if the dividend income is included in their income. Further, non-availability of credit of DDT to most of the foreign investors in their home country results in reduction of rate of return on equity capital for them.

Concessional tax rate for Electricity generation companies

In order to attract investment in power sector, the Union Budget proposes to extend the concessional corporate tax rate of 15% to new domestic companies engaged in the generation of electricity.

To give boost to manufacturing sector, a concessional corporate tax rate of 15% was introduced in September 2019 to the newly incorporated domestic manufacturing sector which start manufacturing by 31st March, 2023.

Tax concession for foreign investments

In order to incentivize the investment by the Sovereign Wealth Fund of foreign Governments in the priority sectors, the Union Budget proposed to grant 100% tax exemption to the interest, dividend and capital gains income in respect of investment made in infrastructure  and other notified sectors  before 31st March, 2024 and with a minimum lock-in period of 3 years.

In order to make available foreign funds at a lower cost, it has been proposed to extend the period of concessional withholding rate of 5% under section 194LC for interest payment to non-residents in respect of moneys borrowed and bonds issued up to 30th June, 2023. The union Budget also proposed to extend the period up to 30th June, 2023 for lower rate of withholding of 5% under section 194LD for interest payment to Foreign Portfolio Investors (FPIs) and  Qualified Foreign Investors (QFIs) in respect of bonds issued by Indian companies and government securities.

The Union Budget further proposed to extend the concessional rate of withholding of 5% under section 194LD to the interest payment made on the Municipal Bonds. The Finance Minister also  proposed to further reduce the withholding rate from 5% to 4% on interest payment on the bonds listed on its exchange to incentivize listing of bonds at IFSC exchange.

Concessional tax rate for Cooperatives

As a major concession and in order to bring parity between the cooperative societies and corporates,  the Union Budget proposed to provide an option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions. These cooperatives are currently taxed at a rate of 30% with surcharge and cess.

The Finance Minister also proposed to exempt these cooperative societies from Alternate Minimum Tax (AMT) just like Companies which under the new tax regime are exempted from the Minimum Alternate Tax (MAT).

Affordable housing

For realisation of the goal of ‘Housing for All’ and affordable housing, an additional deduction of up to one lakh fifty thousand rupees for interest paid on loans taken for purchase of an affordable house was announced in last year's budget. The deduction was allowed on housing loans sanctioned on or before 31st March, 2020.

In order to ensure that more persons avail this benefit and to further incentivise the affordable housing, the Finance Minister proposed to extend the date of loan sanction, for availing this additional deduction by one more year. 

Referring to the tax holiday provided on profits earned by developers of Affordable Housing projects approved by 31st March, 2020, Smt Sitharaman proposed to extend the date of approval of affordable housing projects for availing this tax holiday by one more year.  

Concession to real estate transactions

In order to minimize hardship in real estate transaction and provide relief to the sector, the Union Budget proposed to increase the circle rate limit of 5% to 10%.  Currently, while taxing income from Capital gains, business profits and other sources in respect of transactions in real estate, if the consideration value is less than circle rate by more than 5 percent, the difference is counted as income both in the hands of the purchaser and seller, while taxing income from capital gains, business profits and other sources in respect of transactions in real estate.

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It is time to convert fintech initiatives into a fintech revolution: PM Modi
December 03, 2021
പങ്കിടുക
 
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“last year, in India, mobile payments exceeded ATM cash withdrawals for the first time”
“Transformational initiatives under Digital India have opened doors for innovative Fintech solutions to be applied in governance”
“Now it is time to convert these fintech initiatives into a fintech revolution. A revolution that helps to achieve financial empowerment of every single citizen of the country”
“Trust means that you need to ensure that the interests of people are secured. Fintech innovation will be incomplete without fintech security innovation”
“Our Digital Public Infrastructure solutions can improve the lives of citizens around the world”
“GIFT City is not merely a premise, it represents India. It represents India’s democratic values, demand, demography & diversity. It represents India’s openness to ideas, innovation & investment”
“Finance is the life blood of an economy and technology is its carrier . Both are equally important for achieving Antyodaya

Excellencies,

Distinguished colleagues,

My fellow citizens from the Tech and Finance world, Tens of thousands of Participants from over 70 countries,

Namaskar!

Friends,

I am delighted to inaugurate the first 'Infinity Forum' and welcome you all. 'Infinity Forum' represents the immense possibilities that Fintech has in India. It also shows the huge potential for India's Fintech to provide benefits to the entire world.

Friends,

The history of currency shows tremendous evolution. As humans evolved, so did the form of our transactions. From barter system to metals, from coins to notes, from cheques to cards, today we have reached here. Earlier developments used to take decades to spread across the world but not any more in this era of globalisation .Technology is bringing a big shift in the world of finance. Last year, in India, mobile payments exceeded ATM cash withdrawals for the first time. Fully digital banks, without any physical branch offices, are already a reality and may become common-place in less than a decade.

Friends,

India has proved to the world that it is second to none when it comes to adopting technology or innovating around it. Transformational initiatives under Digital India have opened doors for Fintech innovations to be applied in governance. Technology has also catalyzed financial inclusion. From less than 50% Indians having bank accounts in 2014, we have almost universalized it with 430 million Jan Dhan accounts in the last 7 years. So far, 690 million RuPay cards have been issued. RuPay cards clocked 1.3 billion transactions last year. UPI processed around 4.2 billion transactions in just last month.

Almost 300 million invoices are uploaded on the GST portal every month. More than 12 billion US dollars worth payment is done through the GST portal alone every month. Despite the pandemic, about 1.5 million railway tickets get booked online everyday. Last year, FASTag processed 1.3 billion seamless transactions. PM Svanidhi is enabling access to credit for small vendors across the country. e-RUPI has enabled targeted delivery of specified services without leakages; I can go on and on, but these are just a few examples of the scale & scope of Fintech in India.

Friends,

Financial inclusion is the driver of Fintech Revolution. Fintech is resting on 4 pillars; income, investments, insurance, and institutional credit. When income grows, investment becomes possible. Insurance coverage enables greater risk taking ability and investments. Institutional credit gives wings for expansion. And we have worked on each of these pillars. When all these factors come together, you suddenly find so many more people participating in the financial sector. The large base becomes the perfect springboard for Fintech innovations. Fintech industry in India is innovating to enhance access to finance and the formal credit system to every person in the country. Now it is time to convert these fintech initiatives into a fintech revolution. A revolution that helps to achieve financial empowerment of every single citizen of the country.

Friends,

As we see the widening reach of fintech, there are considerations that need attention. Fintech industry has achieved huge scale, and scale means people from all walks of life as customers. This fintech acceptability among the masses has a unique feature. That feature is trust. The common Indian has shown immense trust in our Fintech ecosystem by embracing digital payments and such technologies! This trust is a responsibility. Trust means that you need to ensure that the interests of people are secured. Fintech innovation will be incomplete without fintech security innovation.

Friends,

We believe in sharing our experiences and expertise with the world and learning from them as well. Our Digital Public Infrastructure solutions can improve the lives of people around the world. Tools like UPI and RuPay provide an unparalleled opportunity for every country. An opportunity to provide a low cost and reliable 'real time payment system' as well as a 'domestic card scheme' and 'fund remittance system'.

Friends,

GIFT City is not merely a premise, It represents the promise of India. It represents India's democratic values, demand, demography & diversity. It represents India's openness to ideas, innovation & investment. GIFT City is a gateway to the global fintech world. (IFSC) at GIFT City was born out of the vision that finance combined with technology would be an important part of India's future development. Our aim is to provide the best International Financial Services not just for India but for the World.

Friends,

Finance is the life blood of an economy and technology is its carrier. Both are equally important for achieving ''Antyodaya and Sarvodaya''. Our flagship Infinity Forum is part of our endeavor to bring together all key stakeholders of the global Fintech Industry to explore the limitless future of the industry. I remember the conversation I had with Mr Mike Bloomberg on this subject when we last met. And I thank the Bloomberg group for their support. Infinity forum is a forum of belief, belief in the spirit of innovation and the power of imagination. Belief in the energy of youth and their passion for change. Belief in making the world a better place. Let us together, explore and advance innovative ideas in Fintech to solve the most pressing issues emerging globally.

Thank You!