The Interim Budget was presented on 1st of February 2019 by an interim Union Finance Minister Piyush Goyal .The budget is a political correction to appease the middle class and low income constituency of the nation. But economically speaking this budget has been presented when the Indian economy is not in its pink health.
The fiscal deficit target was missed for fiscal year 2018-19 and now it stand at 3.4 per cent. Despite the move towards a simpler tax structure through the Good and Services tax (GST), certain far-reaching reforms on the financial front through the introduction of new laws and decreased international crude oil prices for most of its tenure, the government has been spending more than what it has earned last fiscal year. Employment remains a bigger concern for the growing economy to sustain what it desires of becoming a $10 trillion economy by 2028.
- The budget has brought a glimpse of tax haven seeked by taxpayers with a taxable income up to Rs 5 lakh. Taxpayers will enjoy Tax Rebate on income of up to Rs 5 lakh with addition to this there is an increase in standard deduction from Rs 40,000 to Rs 50,000. Tax exemptions for individuals investing in provident funds, specified savings, insurance and prescribed equities will increase this tax slab to a minimum of Rs 6.5 Lakh to a maximum of Rs 9.85 Lakh (including home loan*) .
Salary
Pre Budget Tax Post Budget Tax Saving Assumption Impacts
Individual- Rs 6.5 lakhs
Rs 10,920 0
Rs 10,920 Investment Under Section 80C:Rs 1,50,000
Less Tax: 100% Retired Army Officer- Rs 15 Lakhs Rs 2,16,840
Rs 2,13,720
Rs 3,120
Investment Under Section 80C:Rs 50,000 -Interest income Rs 60,000
Less Tax: 1.44%
Radiologist- Rs.1.2 Crore Rs 41,06,466
Rs 40,41,882
RS 64,584
Rs1.5 Lakh -Interest income:Rs50.000
-LTCG on sale of residential property:Rs1.5 crore
-Deemed rent on housing property: Rs 15000 per month=Rs 1,80,000
Less Tax: 1.57%
- Pension for organised Sector was introduced under ‘Pradhan Mantri Shram Yogi Mandhan’ which will provide monthly pension of Rs 3000. Pension for unorganised Sector can avail the same by investing Rs 100 per month during their working age. This is a mega scheme affecting 10 crore workers in organised and unorganised sector.
- Direct Income Support for Small and Marginal Farmers with ‘Pradhan Mantri Kisan Samman Nidhi’ specifies an Rs 6000 annual direct support for farmers owning a land less than 2 hectares. An additional 2% interest and additional 3% interest of subvention upon timely repayment. This will add to income support run by state governments and thus improve upon the MSP (minimum support price) which stands at 50% of the invested fund.
- Gratuity Limit has been increased from Rs 10 Lakh to Rs 20 Lakh thus making it a prospect for increased savings by an individual.
- Income Tax Returnsto be processed within 24 hours and returns will be paid immediately. Income Tax Returns are getting digital and all refunds are to be issued simultaneously with introduction of Electronic I-T return which will assess and verify to make an assessed friendly process.
- The Defense budget has been the highest till now with Rs 3 lakh crore, and this was achieved with a hike in military service pay .Also introduction of OROP introduced a Rs 35000 crore revenue deployment in defense sector.
- Lastly, TDS threshold has been increased on house rent up to Rs 2,40,000 with tax exemption on notional rent of second house. Thus prior investments in reality projects will earn profits from savings.
- TDS on interest earned from Bank or Post office deposits has been raised form Rs 10,000 to Rs 40,000.This will increase the liquidity in banks as savings increase making banks more efficient.
- This free hand in the proposed budget was possible because of increase in tax base to 85 Crore contributing to Rs 12 Lakh Crore showing an increase of 80% in last 5 years.
Concluding we await the final budget coming in July which will revise the budget keeping in mind the to be disclosed important statistics on farm suicide, labour data and NSSO survey on employment.
Rajas Muley
MMS A 2018-2020
N.L. Dalmia Institute of Management Studies and Research