While the global economy is battling with strong headwinds, India's economy is seeing a robust growth and is on the path to emerge out as one of the fastest growing economies in the world. The Finance minister Mr. Piyush Goyal has presented the Interim Budget 2019-20.
This write-up provides an overview of key announcements and proposals made in the Interim Budget.
While there are no changes proposed in personal Income Tax rates and slabs, the Government has made certain key proposals to provide relief to small taxpayers, especially to middle class and salaried earners in the form of:
• Rebate on tax for total income of up to INR 5,00,000 for individuals
• Increase in standard deduction from INR 40,000 to INR 50,000 for salaried employees
• Relief for owners of more than one house; second self-occupied house not to be subject to tax on deeming/notional basis; aggregate deduction of interest on home loan for self-occupied properties retained at INR 2,00,000
• Prescribed monetary threshold for deduction of tax on interest from bank or Post Office deposits increased from INR 10,000 to INR 40,000
• Proportionate exemption on long-term capital gains arising from proceeds of sale of residential house extended to purchase of two residential houses from one house, subject to:
- Amount of capital gain not exceeding INR 2 crore [no monetary threshold continues for investment in one residential house]
- One-time opportunity to claim such exemption
Domestic companies with a turnover not exceeding INR 250 crore during FY 2016- 17 continue to enjoy a reduced tax rate of 25% (increased by applicable surcharge and cess). The base year for this reduced tax rate is proposed to be extended to domestic companies with turnover not exceeding INR 250 crore for FY 2017-18.
The provisions relating to TDS on rental payments provide for a monetary threshold of INR 1.8 lakh. This threshold has been enhanced to INR 2.4 lakh.
Certain key amendments have been proposed in the Interim Budget to provide relief and give an impetus to the Real Estate sector, including the affordable housing market:
• The provisions were introduced vide Finance Act 2017 to tax notional income on rentals from property held as stock-in-trade for a period beyond one year from the end of the financial year in which the certificate of completion of property was obtained. This period of holding is proposed to be increased to two years.
• Under the present provisions, deduction on profits is available to developers who are engaged in developing and building affordable housing projects. One of the conditions, i.e. the time taken to seek approval for a project from the competent authority, is proposed to be extended to 31 March 2020(Section 80-IBA of the Income Tax Act).
• The Government envisages a push towards technology-intensive tax assessments and return processing within the next two years. This is directed towards eliminating personal interface and bringing transparency.
The Government has estimated the CGST collection for FY 2019-20 at INR 6.10 lakh crore. This assumes a growth of around 20% over the revised estimate FY 2018-19 at INR 5.04 lakh crore.
Given that overall growth in GST collection in the current year over last year is only 8% (INR 97,100 crore vs. INR 89,700 crore on a month-on-month basis), it will be interesting to see how this ambitious target is achieved by the Government. It will need substantial expansion in the tax base and stringent control over revenue leakages.
GST collections in January 2019 has crossed Rs. 1 lakh Crore.
The proposed amendments in stamp duty provisions are largely aimed at rationalizing the various stamp duty provisions as well as streamlining the stamp duty collection mechanism. It is intended to designate stock exchanges and depositories to collect stamp duty on sale or transfer of securities. Such collection will be transferred to the respective state government within the prescribed time.
The amendments also propose changes to the rates of duties. It also appears that exemption of stamp duty on transfer of dematerialized shares is proposed to be done away with.
• To provide an assured income support to the small and marginal farmers, our Government is launching a historic programme namely "Pradhan Mantri Kissan Samman Nidhi (PM-KISAN)". Under this programme, small farmers who have less than two hectares will get a support of INR 6,000 per year. About 12 crore farmer families will benefit from the programme.
• Benefit of 2% interest subvention to the farmers pursuing the activities of animal husbandry and fisheries. 2% Interest subvention overall on KCC and 3% extra if pay on time.
• Integration of 63,000 credit societies with the core banking system.
• Gokul Mission allocation increased to Rs. 750 Crore immediately from current year.
Social security for workers in the unorganized sector
• Rs 3,000 per year pension for unorganized sector workers.
• New Pradhan Mantri Shram Yogi Maandhan Yojana for unorganized sector workers with income up to Rs 15,000 per month. Beneficiaries will get Rs 3,000 per month pension with a contribution of Rs 100 per month after the retirement. Govt allocates Rs 500 crore for the scheme.
• Gratuity limit increased for workers to Rs 20 Lacs from10 Lacs.
• Announcing an allocation of Rs.60,000 crores for MGNREGA for Budget Estimates 2019-20, the Finance Minister said that additional allocations will be made, if required.
• Pradhan Mantri Gram Sadak Yojana (PMGSY) is being allocated Rs.19,000 crore in BE 2019-20 as against Rs.15,500 crore in RE 2018-19. During the period 2014-18, a total number of 1.53 crore houses have been built under the Pradhan Mantri Awas Yojana, he announced.
• By March, 2019, all households will be provided with electricity connection. Till now, 143 crore LED bulbs have been provided in a mission mode which has resulted in saving of Rs.50,000 crore for the poor and middle class.
• Govt increases defence budget to over Rs 3 lakh crore.
• Govt will provide additional funds for Defence, if needed.
• We have disbursed 35,000 crore rupees under #OROP scheme in the last few years
• Railway's operating ratio seen 96.2% in FY19 Vs 95% FY20.
• Railway capex for FY20 set at record Rs 1.6 lakh crore
• Today there is not a single unmanned railway crossing on the broad gauge in India.
• For FY19, government has revised the fiscal deficit target to 3.4 percent in FY 19. Fiscal deficit for 2019/20 estimated at 3.4 percent of GDP.
• Government's stated commitment earlier was to bring down the fiscal deficit to 3.1 percent of GDP by the end of March 2020, and to 3 percent by March 2021.
• Current account deficit at 2.5% of the GDP
The thrust of this Budget was on social infrastructure, ease of living and technology led governance aimed at inclusive and equitable growth. The salaried class with taxable income of up to INR 5 lakh will have higher disposable incomes. Direct Benefit Transfer to farmers will support rural demand. The Pradhan Mantri Shram -Yogi Maandhan Yojana will provide social security to a large number of marginal wage earners in the country. The Real Estate sector will see more activity and the allied sectors of steel and cement will get a boost. With enhanced spending and direct benefit transfers, there is an obvious concern about inflationary pressures.
The Government's vision to create a tech-enabled tax system is a welcome initiative. In all, this Budget has set the tone for considerable future discourse.
DISCLAIMER: This write up is based on the understanding and interpretation of author and the same is not intended to be a professional advice.