On February 1st, 2019, Piyush Goyal presented the interim budget. While this is not the full budget, the interim budget offers valuable insights into how India will plan their finances for the new financial year.
A vote-on-account usually involves only the expenditures that the government needs to cover. The interim budget is a complete overview of all accounts, making it the closest announcement to the actual budget. If we look back in time, many governments have refrained from announcing major changes, but the current central government seems to have taken this opportunity to inform the people of their economic plans and woo the public to vote for them again.
Let’s take a look at the key highlights of the budget put forward by Piyush Goyal.
- Direct Tax Exemptions – Good news for those with bank and post office deposits as the Tax Deducted at Source (TDS) threshold has been raised from Rs. 10,000 per year to Rs. 40,000 per year. So if the interest from your deposits does not cross Rs. 40,000 in one financial year, there will be no TDS. Many had been hoping to see an increase in the income tax limit, which, fortunately for low-income taxpayers, did happen. Full tax rebate for up to Rs. 5 Lakhs of annual income after all deduction. Slabs remained unchanged for others. Standard deduction has also been increased from Rs. 40,000 to Rs. 50,000. House owners with more than one home also received some relief. If you own two homes and are occupying one of them, you will now get an exemption of tax on the notional rent on the second self-occupied house. Even the TDS return on rental income was increased from Rs. 1.8 Lakh to 2.4 Lakh.
- Boost for Real Estate Sector – Under section 54, the Capital gain tax benefit on the sale of the property has been increased to allow taxpayers to invest into two residential houses instead of just one house earlier, for a total capital gain tax of less than Rs. 2 crores. The tax on notional rent was also revised; now payment of tax on notional rent for unsold inventory can now be skipped for 2 years in comparison to 1 year earlier.
- Respite For Farmers – With the announcement of the Pradhan Mantri Kisan Samman Nidhi, the first few seeds of the UBIS (universal basic income scheme) were sown during this interim budget. Under this scheme, farmers will now get INR 6000 per annum (applicable from September 2018) if they own under 2 hectares of land. In addition to this farmers will now get 2% interest subvention for those affected by natural calamities, and an additional 3% subvention on timely payments as well. The government also announced a 2% subvention for those pursuing animal husbandry and has said that they are also going to set up a separate department for fisheries.
- Going Digital – The government has announced a fully electronic income tax platform which will require minimal or no interface with the taxpayer for verification of tax returns. They have also promised that income returns will be processed within 24 hours. Going with the digital transformation wave, Piyush Goyal also announced a five-year plan to have 1 lakh digital villages across the country.
- Silver Lining For MSMEs – MSMEs have been the most affected ever since the rollout of GST and the demonetization exercise. Arun Jaitley has mentioned a few times about the importance of MSMEs to the economy and the government has made certain adjustments to help this sector out. MSMEs and GST registered individuals will now get a 2% interest relief. Over and above that, 25% of sourcing for government projects will now be through MSMEs out of which 3% will be sourced from women entrepreneurs.
- Other Miscellaneous Highlights – An assured monthly pension of Rs. 3,000 (with a contribution of Rs. 100 per month) will be given to workers over 60 years of age in the unorganized sector. The government has also stayed on course with its fiscal consolidation plans. The fiscal deficit for the financial year 2019 was raised marginally from 3.3% to 3.4%. The fiscal deficit for the fiscal year 2010 was set at 3.4%.