Interim Budget – Parting gift by govt to farmers and middle class

Interim Budget – Parting gift by govt to farmers and middle class

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Interim budget presented by our interim Finance Minister was on expected lines and the FM neither disappointed us nor did he give any shocks to the tax payers. Since elections are few months away, its foolhardy to expect any path breaking  announcements from the government, except on populist front. For tax payers, it was mostly elbow sweetners as they will get the real benefits only if and when the measures announced in the budget are incorporated in the main budget. But there are good reasons to be optimistic on this score. If the present coalition gets re-elected then it will have no option but to carry out whatever promised in the interim budget. On the other hand, if the new party comes into power, they have to either carry out the promises made in the interim budget or have go one step further and should show more populistic instincts than the present government. Any dilution on populism in the full budget may invite the wrath of the public at large. 

Major portion of the budget speech by Piyush Goyal, the Finance Minister, was devoted towards highlighting the achievements of the present government during the last five years. Also, he, time and again, stressed that the present government has laid foundation for the robust growth of the economy in future. Also, he presented 10 point vision for India till 2030. “We are moving towards realising a ‘New India’ by 2022, when we celebrate 75 years of India’s independence: an India which is clean and healthy, where everybody would have a house with universal access to toilets, water and electricity; where farmers’ income would have doubled; youth and women would get ample opportunities to fulfil their dreams; an India free from terrorism, communalism, casteism, corruption and nepotism,” the FM said in his speech. 

There was clear attempt to win over the farming community and also urban middle class. He announced the launch of programme aimed at small and marginal farmers ‘Pradhan Mantri Kisan Samman Nidhi (PM-KISAN).’ Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs 6,000 per year. This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of Rs 2,000 each. This programme will be funded by Government of India. Around 12 crore small and marginal farmer families are expected to benefit from this. An interesting part of this programme is that the programme would be made effective from 1st December 2018 and the first instalment for the period upto 31st March 2019 would be paid during this year itself. This programme will entail an annual expenditure of Rs 75,000 crore.

For the middle class and the salaried people, the Finance Minister announced the full tax rebate upto Rs five lakh income. In fact, if one considers Rs 1.5 lakh 80C benefits, people earning less than Rs 6.5 lakh PA will be out of tax bracket. “This will provide tax benefit of `18,500 crore to an estimated 3 crore middle class taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens,” Goyal said. However, its not clear whether the benefits are available to those whose income is more than Rs five lakh also. In other words, clarity is needed for those who are earning more than Rs five lakhs annually are also eligible for Rs 5 lakhs initial exemption. 

Some other tax proposals are:

For salaried persons, Standard Deduction is being raised from the current Rs 40,000 to Rs 50,000. This will provide additional tax benefit of Rs 4,700 crore to more than 3 crore salary earners and pensioners. 

Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents etc. The FM has proposed to exempt levy of income tax on notional rent on a second self-occupied house.

The TDS threshold for deduction of tax on rent is proposed to be increased from ` 1,80,000 to ` 2,40,000 for providing relief to small taxpayers.

The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to ` 2 crore. This benefit can be availed once in a life time.

For making more homes available under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is being extended for one more year, i.e. to the housing projects approved till 31st March, 2020.

For giving impetus to the real estate sector, the FM has proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed. 

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