Before the General Elections in April-May 2019, Interim Finance Minister, Piyush Goyal, presented an interim budget, more precisely a vote-on-account before the Parliament, which seemed more like a report card of the Govt.’s performance over the last 5 years than the projections for the next years. It was widely expected to be a populist budget, and the budget speech managed to fulfill many such expectations.
The Govt. had limited fiscal space and limited scope to make major announcements. However, it still took some major steps in the right direction, addressing the concerns of the rural economy and providing relief to middle-class taxpayers.
Here are some of the key highlights of the Interim Budget 2019:
1. Macroeconomic Situation
Fiscal deficit for FY 2018-19 has been projected to be 3.4% of GDP, which is 10 bps higher than the earlier budget estimates. The Govt. has committed the target for the next year 2019-20 for FY20 at 3.4%. While this may seem like a positive measure, it would be a key challenge for the coming Govt. to maintain this target, as the revenue projections have been set at very optimistic levels.
2. Agriculture and Rural Economy
Farmers are the backbone of the Indian economy, especially the rural sectors and this was no surprise that many budget proposals were focused solely on farmers’ welfare. Govt. announced a farmer income support package, “Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)” programme for direct income support of Rs. 6,000 per year to farmer families, having cultivable land up to 2 hectares. This scheme is expected to benefit around 12 crore small and marginal farmer families. An interest subvention scheme has also been announced along with an incentive for timely repayment of loans to the farmers pursuing activities of animal husbandry and fisheries. In the nation where farm loan waivers have been the talk of the town, such an incentive will be beneficial for improvement of credit habits within the farmer community. The interest subvention and timely repayment incentive benefit have also been extended to the farmers affected by severe natural calamities, where assistance is provided from National Disaster Relief Fund (NDRF).
3. Personal Taxation
Being a vote-on-account, no significant changes were being expected from the Govt. on this front. However, Govt. has brought relief to the taxpayers with taxable income up to Rs. 5 lakhs, as it provided complete tax rebate to all such taxpayers equal to the 5% tax payable by them. With Rs. 1.50 lakh deduction available under Section 80C and Rs. 50,000 available under Section 80 CCD (1B), it effectively means that someone with Rs. 7 lakh income and making the aforementioned tax-saving payments/ investments can still file an ITR with zero taxes. However, for taxpayers with higher incomes, there was no tax relief, except a small increase in the Standard Deduction available to salaried taxpayers from Rs. 40,000 to Rs. 50,000. Both these proposals will cost Rs. 23,200 crores to the exchequer.
4. Disinvestments and Capital Markets
The target of disinvestment receipts during the next year has been set at Rs. 90,000 crores, as compared to the current year’s target of Rs. 80,000 crores. Budget speech also acknowledged the importance of listing CPSEs (Central Public Sector Enterprises) to make them more accountable. Presently, 57 CPSEs are listed with total market capitalisation of over Rs. 13 lakh crore, and with an ambitious disinvestment target next year as well, many unlisted CPSEs can be expected to be listed soon including few CPSEs in railways, defence and insurance sector.
5. Real Estate Sector
As against many small announcements for several sectors, the real estate sector was certainly in the limelight. Some of the noteworthy proposals impacting the real estate and housing sector are the extension of capital gains exemption to two houses and relief to real estate developers from taxation of notional rent on the unsold inventory.
The benefit of capital gains exemption under section 54 of the Income Tax Act has been extended to the investment in two residential houses, as against one house presently for a taxpayer having capital gains of up to Rs. 2 crores. Further, the real estate companies had to pay tax earlier on the notional rent on their unsold inventory after one year, and this period has been proposed to be increased to two years, giving relief to such companies.
6. Other Noteworthy Highlights
Certain other noteworthy mentions in the Interim Budget 2019 are:
- This was the first ever budget speech made by a Chartered Accountant in the Parliament.
- Income Tax Dept. is moving towards an online interface for processing of returns and assessment cases. Last year, 99.54% of the income-tax returns were accepted as they were filed.
- Defence Budget has been the highest so far, crossing Rs. 3 lakh crores for the first time.
- A Single window clearance is okayed for ease of shooting films for Indian and foreign filmmakers to promote entertainment industry, also helping it generate employment.
- Tax deduction limit for interest on bank and post office deposits has been increased from Rs. 10,000 to Rs. 40,000 per year.
This Budget is seen as a pro-rural economy and pro-middle class Budget, but there is a lot more to look forward to in the Main Budget 2019 by the elected Govt.