Timing of Abrogation of 370

India in last 70 years of existence never ever had initiative on Kashmir issue.

In 1947 Pakistan sent the army, hence Maharaja approached to India, only then India sent its military.

In 1965 Pakistan started “Operation Gibraltar” They had natural advantage in Kashmir, so to counter their strong position in Kashmir we crossed international border in Punjab sector.

In 1990, when atrocities were inflicted on Hindu minority by Pakistani backed Muslim separatist groups. It is only recorded event in history when, people became refugee in their own country.

In 1999, Pakistan initiated the Kargil conflict and we end up having to fight for whatever was ours.

But things are drastically different this time. This time India has initiative. And Pakistanis are searching for answers. Everything seems to be stacked against them. Let us start with India and move to the world stage.

On 1^st August, the parliament passed the Triple Talaq bill. BJP led NDA pulled this magnificent victory even after lacking clear majority in Rajyasabha (The Upper House). This gave the ruling party the confidence for taking bolder steps.

Just 7 days after that, India brought the recommendation from President to repeal Article 370 along with 35A. Not only that, but State of Jammu and Kashmir is also broke into 2 Union Territories. But it was well choreographed. First additional forces were sent in. Items like satellite telephones, tear gas canister were stocked to be prepared for every possible situation. Only then the bill was introduced.

Initial reaction of opposition in India as well as across the border was that of disbelief. Pakistani establishment was thoroughly unprepared to face the change in the status quo and that of such magnitude. Everyone knew what stand BJP have on the article 370. PM Modi also made a poll promise about it. But the timing is very important.

Lets us see why this timing is crucial country by country.

Pakistan (Before 370) :- Pakistani PM Imran Khan just completed his visit to United States. Pakistani establishment were on high horse because Trump said he is ready to mediate between India and Pakistan. This was painted as diplomatic victory of Pakistan.

Another issue Pakistan gloating about was that of US withdrawal from Afghanistan. Pakistani establishment used terrorist in Kashmir after withdrawal of USSR in 1990. They were hoping to do the same after withdrawal of US. For them “Kashmir Banyega Pakistan” will be coming true in few years.

So not that Pakistani establishment were sleeping but they were actively ignoring signs leading to abrogation of 370. Journalist could clearly see what renowned ISI couldn’t. If India would have waited for few more weeks, the euphoria would have died down and ISI could have seen the big picture.

China :- Pakistan has all whether friend called China.  But as of this date China itself is handling, and handling it very badly the 9^th week of Hong Kong protest. The Airport was shut down, millions of people protesting every week end. China right now is in no position to lend Pakistan any sort of help. All the resources Chinese have are concentrated on keeping Hong Kong protest out of news and preventing any diplomatic pressure from western countries. So you will not be surprised that the only protest china did was not about Kashmir but about Aksai Chin we showed in our map. They are not interested in Kashmir. Shah Mahmood Qureshi returned empty handed from China. Timing is so important in the case of China. China within few weeks would crush the Hong Kong protest and then it would be in position to pressurised India. But right now China could not do anything.

United Kingdom :- United Kingdom is more or less a spent force in today’s world. And they are neck deep in their own Brexit mess. They had to choose new Prime minster because earlier PM, Theresa May lost the confidence of her own party members. So you can imagine what response such a country could offer. And even if it did, nobody would listen. Only response till now was a tweet from Leader of opposition Jeremy Corbin. And some propaganda work by BBC. But on diplomatic front, Pakistan got ice cold response. Brexit is such a big event that will affect would economy. Right now UK could not afford to divert it’s attention from Brexit which is going on for 2 years. So in this case also timing os in India’s favour.

Russia :- USSR was India’s close ally. It provided India with weapons and other military hardware. Also Russian Submarine in Indian Ocean stopped American 7^th fleet from attacking India in 1971. As India getting closer and closer to USA, Pakistan tried to take India’s place with Russia. But Russia completely ignored Pakistan when it stated that “India has right to amend the constitution”. Russia’s support to India might not be surprised to people who know India is buying S-400 missile defence system, even after formal protest recoded by America. The amount of deal is around 5 Billion USD. This is the same amount Pakistan is begging for bailout from IMF.

France :- Another permanent member of Security Council is France. I didn’t came across any statement by French government till now. The French News channel France 24 has Anti-India propaganda running with tile story like “Modi’s Shock on Kashmir threatens India’s standing at world stage” But French are also in no position to protest. Just like China, France also witnessing Yellow Vest Protest which are going on since last November 2018 and still counting. Also like Russia, France also supplies military hardware to India. Before Rafale Jet India bought Mirage jet. Mirage were used in surgical strike 2.0 Rafael is an advance version of Mirage. Apart from Jets India is also buying Scorpion submarines from France. So French are not interested in losing billion dollar business over Kashmir Issue.

United States of America :- The last permanent member of Security Council on this list is The United States. When Pakistan got hold of the situation, that it has been completely isolated, the only thing it could do was to ask USA to intervene. Pakistan also had leverage over USA. Pakistan agreed to mediate between USA and Taliban to give American honourable exit from Afghanistan. If Americans were not ready to help, Pakistan will not mediate between USA and Taliban. Americans reacted by saying that Pakistan should keep calm and should not encourage rogue elements. This was clear vindication of India’s position.

If you see the response of all UNSC permanent members, there is no diplomatic pressure on India, while Russia and USA stood by India’s side.

But this only gets better from here.

United Arab Emirates :- UAE, a Muslim nation which had lent a helping hand to Pakistan several times, also said Kashmir is internal matter of India. Nothing can be more embarrassing for Pakistani diplomat. They count on support of their Muslims brothers (Umma) in every situation. And by count I mean “assume”. That is why Pakistani dream shattered when they realized that even Muslim countries are on the side of India.

Saudi Arabia :- Unlike UAE, Saudi Arabia has special relationship with Pakistan. It is said that Saudi Arabia funded Pakistani nuclear bomb. Also Pakistani army is deployed in Saudi Arabia. So you can understand how Pakistani would have felt when Saudi Arabia refused to take Pakistan’s side and ask it to maintain peace in Kashmir. Once these most prominent Muslim countries took India’s side it is not of much value what OIC says.

Afghan Taliban :- The most surprising reaction came from Taliban. Currently Taliban are negotiating a deal with Trump’s USA for withdrawal from Afghanistan. It is no surprise that Taliban are trained and funded by Pakistan. India has no mean to meet or influence them. But even Taliban warned Pakistan. After Pakistan threaten to pull out of mediation between Taliban and USA, spokesperson of Taliban said “Linking the issue of Kashmir with that of Afghanistan by some parties will not aid in improving crisis on hand.” All plans of Pakistan to use Taliban in Kashmir after the withdrawal of USA went for the toss after the remark from spoke person of Taliban. Taliban also called for peace between two countries.

Pakistan (Post 370) :- Pakistan called for special joint session of parliament to discuss the issue. Pakistani PM Imran Khan did not attend the session till the meeting of Core Commanders of Pakistani Army gets over. It is clear his position was completely dependent on position taken by military. He made a speech and equated Modi ji with Hitler and RSS with Nazi. But in the same speech he also made a complaint. He said, that members of his parliament criticized him, but did not gave him solution. And clearly Pakistan is in such a fix that it could not have a solution. Pakistan tried everything and got shun by almost all the countries. Now Pakistan’s only hope is uprising in India. But all the terrorist activities in Kashmir were Pakistan funded. And Pakistan is facing serious sanctions from FATF (Financial Action Task Force). Pakistan is currently under grey list review is coming up in next few months. If it is seen that Pakistan funded Kashmiri terrorist it would be end of Pakistan’s economy. So even though Pakistan so desperately wants to fund the terrorist, it’s hands are tied. Till Pakistan get itself out of grey list, India would fix the terror network. Again Timing proved important. Few weeks late or early would be different story.

Looking at this you will not be surprised on the statement given by Pakistani foreign minister Shah Mahmood Qureshi that “P5 are not waiting for you with garlands in their hands.” Certainly no one is waiting for Pakistan. The World has moved on.

Another Pakistani minister Fawad Chaudhary went to tweet in Gurumukhi to call Sikhs not to accept posting in Kashmir. Pakistani establishment is feeling so helpless that it is now seeking help from communities within India.

This is not just good planning and execution on India’s part but also timing. When you see that at this moment every country is battling with their own problems, what India managed to achieve politically, militarily and diplomatically is beyond fabulous.

Budget PART B – Finance Bill 2019

1.   Rate of Tax:-

This year we saw increase in tax on super rich. The surcharge was already there now it has increased to following rates. (Page 4)

  

Now when you put the rate into table you can observe that Companies earning above 1 crore are paying 7% surcharge while Individual earning the same income is paying more than twice the surcharge amount. Now ad into this fact that Nirmala Sitaraman proposed to reduce tax rate of companies having turnover of Rs. 400.00 Crore to 25% from previous 30%.

        So if you are a company having turnover in 2017-18 400.00 Crore and income Rs. 10.00 Crore your Tax liability will be Rs. 2.78 Crore or 27.82% But An Individual earning same amount of Income will be paying Tax at 35.66%.

        Also see the co-operative society stuck on same surcharge as Company? The co-operative societies still has Tax slabs which are more than 15 years old. They are Rs. 10,000 Rs. 20,000 and Above Rs. 20,000. Those tax slabs were never reconciled with inflation.

There is a growing demand of doing away with all the number updation in every budget. The amount of Tax Slabs and penalties should be linked to inflation so no Finance Minister has to spend the valuable time in determining whether to offer increase in slab limit of Rs. 50,000 this year or next year. Also rather than having Surcharge on Tax, it would be much beneficial to introduce them as Tax Slab. This makes taxation process little bit easy without any loss of revenue.

“The entire taxation structure in India, if not law in itself, needs an overhaul!” Said by many for many years.

2.   Apart from that, the FM declared that companies with turnover upto 400 Crore will be taxable at 25% rate. I could not find the said provision in Annexure of Finance Bill 2019. I am little confused.(Page 66)

3.   The another surprising announcement was that off, allowing Rs. 1.50 Lacs as deduction for interest on loan on purchase of Electric Vehicle. India as set forth the “Mission 2030 Electric India” under this mission, India will allow to sell only electric vehicles by 2030. The infrastructure for electric vehicles in missing. It is easier to implement infrastructure for Busses, because they have dedicated parking and repairing space like Depot. But for average individual consumer Rs. 1.50 Lacs deduction of Interest is not attractive right now. There a re practical problems.

What more I learned that this deduction will be available for only 4 years i.e. From 1^st April 2019 to 31st March 2023. (page 21 Sec. 80EEB(3) Finance Bill 2019)This is 7 years before India is planning to go full electric. Even after India goes full electric, the Petrol/Diesel cars will run for few more years. So just 4 years of deduction without available infrastructure in place does not make any sense. I am not seeing any of my clients claiming deduction under Sec. 80EEB any time soon.

4.   There is a constant wording replacing transactions done through “bank account” with “Bank account or through such other electronic mode as may be prescribed” Is Modi planning to introduce an mobile fund transferring app? If true then this app will act like a payment bank. It will enable to move funds from one Bank account/Aadhar No./Mobile number to other without any fee. The App might be based on E-Aadhar verification. Let’s see.

5.   The one thing that wasn’t mentioned in the Budget speech of Nirmala Sitaraman was changes in return filling requirement. Return is normally required to be filled on the basis of income. But few new clauses were inserted which makes following people mandatory to fill return.

a.   Deposited more than 1.00 Crore in a year in current account. If a person holds more than 1 current account in same or different bank then volume of all such cash deposit is to be clubbed. Now Banks are already reporting such things under AIR. And limit there is 10.00 Lacs. So I feel this requirement is pointless.

b.   Person incurred total expenditure during the year of Rs. 2.00 Lacs or more for foreign travel. This includes expenditure incurred for him as well as family members. Now if you consider standard plane ticket of Rs. 30,000 round trip will cost you Rs. 60,000 for family of four it will definitely exceed the said limit. I feel limit is too low here.

c.   Total electricity consumption during the year above Rs. 1.00 Lac. Now here some small shopkeepers, businessmen, consultants might have problem. Because you have to add their shop+house electricity consumption. Consumption of electricity as basis for filling income tax return is really novel proposal. (Page 25)

d.   “Fulfils such condition as may be prescribed” opens the door for many such requirement. I am expecting in near future there will requirement based on daily mobile data usage.

6.   I was little confused hearing of interchangeability of PAN and Aadhar. But plain reading of amendment to Section 139A suggest that PAN is not done away with. Person furnishing Aadhar will be allotted PAN. And person who already holds PAN is not at an option to either quote PAN or Aadhar. Person who already got PAN has to mandatorily quote PAN. They do not have Aadhar option.

I was worried on this point because person might quote PAN till he exhaust limit of Rs. 1.00 Lac under 194C and then go on to quote Aadhar so to avoid TDS. But thankfully this condition is only applicable to a person who does not have PAN yet but he has Aadhar.(Page 26)

7.   TDS on life insurance sum under 194DA is increased from 1% to 5% (Page 27)

8.   New TDS section 194M is introduced for Individual/HUF paying contractor above Rs. 50 Lacs. This section will apply to those contracts which does  not fall under 194C and 194J. The rate of Tax under this section will be 5%. (Page27)

9.   New TDS section 194N is introduced to tax Cash withdrawals. This provision found mention in the budget speech. Banking company/Co-operative banks and post office are liable to deduct TDS. The TDS will be deducted on amount withdrawn, above Rs. 1.00 Crore. Rate of TDS is 2%. Now this provision is introduced to prevent people from going back to cash economy or keeping track of hording of cash. P Chidambaram tried something similar to this called as Banking Cash Transaction Tax or BCTT in short. This tax existed from 2005 to 2009. The limit set by him ludicrously low of Rs. 50,000. Which comes to Rs. 1.19 Lacs after adjustment for inflation in today’s term. Also this was tax, so amount was payable to government. FM Nirmala Sitaraman introduced TDS, which is available for Credit while paying taxes. The limit I feel is too high to provide any significant data on black money.

10. How income tax act is used and misused to purpose other than collection of tax has fascinated me. I was reading Chinese Individual Income Tax act out of curiosity. That was only 7 pages long. Simple and to the point. This new section 269SU requires any business with annual turnover above Rs. 50.00 Crore to provide facility of accepting payment through electronic mode. Failure to comply will attract penalty of Rs. 5,000 per day under section 271DA(Page 29)

For years income Tax Act used a tool to channelize invest by using Section 80C. Now the responsibility of electronic transaction is also put on the tax administrators. But using income tax act to promote electronic transactions is not proper in my opinion. This is the reason why we have world’s biggest income tax act and not because people trying to avoid tax.

This is just quick review of provision relating to Income Tax. Other provision and remaining part will follow soon.
* All the page numbers are of Finance Bill 2019

Budget Part- A 2019-20

This was first budget of Nirmala Sitaraman. She is the finance minister, formerly was defense minister. So she was not coming as someone new but, someone who has proved herself. Finance Minister of all top 4 is very technical ministry. It is unlike any other ministry or depart of the government. So person heading this ministry needs to be qualified. Nirmala Sitaraman was indeed qualified having vast experience and expertise. She has doctorate in Economics and worked with BBC and PwC.

First let me tell you the thing I found striking in this budget. It was one of the best budget speech I have heard in past 10 years. It was informative, explanatory and despite all that she managed to keep it simple.

Finance Minister stated that she has not given numbers for expenditure on schemes. That was hallmark for all the past budgets. But she has put forth proposal. And there is lot to unpack. Every paragraph of her speech can be commented upon. Let’s dive into budget speech Part A:-

Her 6^th Paragraph titled “Vision for the decade”. This shows the mind-set of the government. Budget is not just annual exercise. It is implementing the vision for the year and also keeping the eyes on successive years.

Under this paragraph Nirmala Sitaraman described essential area for making India 5 trillion dollar economy in 5 years. Currently India is around USD 2.7 Trillion. So government is planning to double the size of economy. Shekhar Gupta has made a video stating how that will be possible.

Few very critical points out of 10 points listed are:-

1.    Pollution free Healthy India

2.    Start-up and MSME sector.

3.    Water & River Management.

Connectivity was highly talked about. And massive boost to Road and Waterways network was proposed in the speech. Freight corridor was discussed at par with Industrial corridor was also decent surprise. Finance Minister also highlighted Metro and Aviation schemes and how they are connecting India.

There was mention of One Nation One Grid. This being technical point in Electricity Distribution I am not going to comment on.

Para 27 & 28 Specially important for MSMEs had two major announcements. One being 350 crore allocated for Loan @2% interest subvention and automated payment platform of uploading of bills and payment process for MSMEs. This would further reduce bureaucracy and corruption.

Pradhan Mantri Karma Yogi Mandhan Scheme or PMKYMS Pension scheme launched for Retailers and shopkeepers who can enrol with Aadhar and Bank account is a great step forward.

This budget has surprised me with innovative ideas. One of this was Social Stock Exchange for Social Enterprises and Voluntary Organisations to raise funds under watchdog SEBI.

Cashing on success of ISRO New Space India Limited has incorporated as commercial arm of ISRO to explore opportunities of production of launch vehicles, transfer to technologies and marketing of space products. This is pretty bold move. This shows government is serious about space business and ready to provide it a boost in a global market with very few dependable players. But then again my criticism of this move is, this is taking India back to Nehruvian Socialism which doomed Indian Economy by 1990. Government would be better off by encouraging private players to co-operate with ISRO to take advantage of India’s growing expertise in this space.

An ambitious target was set for Pradhan Mantri Awas Yojana – Gramin (PMAY-G). 1.54 Crore homes were built in 2014-2019. And now additional 1.95 Crore homes are to be built during 2019-2022. These houses must be equipped with Toilets, Electricity and Gas.  This is such a great vision which is part of even more ambitious Housing for all plan.

Pradhan Mantri Gram Sadak Yojana (PMGSY) has also got major boost. Roads built under this scheme has already reached up to 97% of Habitation with all-weather connectivity. road constructed of 130 to 135 km per day in the last 1,000 days using Green Technology, Waste Plastic and Cold Mix Technology. PMGSY-III is envisaged to upgrade 1,25,000 kms of road length over the next five years, with an estimated cost of Rs. 80,250 crore. Now simple calculation will tell you that building road around 135 KM per day will achieve that target by 2.5 years. This I think as PM Narendra Modi promised that he will be giving stock of his work by the end of 2^nd year. The Minister who is tasked to achieve this is Nitin Gadkari known as Road-Kari in Maharashtra for his understanding and execution of road contracts.

The only mention specific to railways came in Para 59 of the speech and finds Mumbai Suburban mentioned before long-distance trains. FM Nirmala Sitaraman went on to say Railways will be encouraged to invest more in suburban railways through Special Purpose Vehicle (SPV) structures like Rapid Regional Transport System (RRTS) proposed on the Delhi-Meerut route. This certainly will be good news for Mumbaikars.

As India hoping to replace China as manufacturing hub, the biggest hurdle in the path are old-archaic labour laws which pertains to era of socialism and trade unions. And reforming them is complicated but some laws are subject matter of the State Government. Government in its first step releasing four model labour laws to stream line all the provisions and reduce confusion. We will have to wait and see how they are received by various stakeholders.

Announcement in Para 69 on TV program of Start-up by Start-ups for Start-ups will be nothing more than "Jumla". There is no standard format for any start-up. It is when they starts growing standardization kicks in. I don’t know why a TV program should find a mention in a budget speech of the nation.

While addressing women under title Nari tu Narayani FM Nirmala Sitaraman proposed Rs. 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to Rs. 1 lakh under the MUDRA Scheme. This will definitely help the Self Help Groups to grow and develop into SMEs.

Tourism is big industry and government developing 17 sites as a model for other tourist sites is another great idea. This will give us valuable data on developing tourist destination. We then can use it to draw solutions which will be uniquely Indian for our problems. I see this a big positive move.

Finally government has found cleaver work around to keep it’s holding in PSUs up to 51% and still go for disinvestment. Government has also decided to modify present policy of  retaining 51% Government stake to retaining 51% stake inclusive of the stake of Government controlled institutions. Which means earlier 51% shareholding was counted only of Government of India. Now 51% will be counted of Government of India + LIC + other government companies. This will give new push for disinvestment.