Finance Minister Piyush Goyal, who stepped in to replace Arun Jaitley as the Finance Minister, presented the interim budget for the financial year 2019-2020 on Friday, 1st February 2019.
The elections are almost here and the focus from the budget, as many expected, was populist. Goyal, who presented the longest interim budget, however, seemed unperturbed as he spoke of reforms implemented by his government in the past few years.
For the record, this was the longest interim-budget speech. Previous ones have been shorter than an hour, Goyal's speech was an hour and forty minutes long. And it contained enough keywords such as Salary, Income-Tax, Farm Incomes, Agriculture to keep masses engrossed.
He also elaborated on the government's mission and vision statements. A brief statement of the government's finances and spendings was also presented.
Here are some of the most important take-aways from the budget:
On Farm Incomes & Farmers Distress:
A scheme called Pradhan Mantri Kisan Samman Nidhi or PM-Kisan scheme was spoken in great detail by the Finance Minister. Here are some of the features of this policy.
- Direct Income Support of Rs 6,000 per annum for farmers, effective from 1st December 2018. The First installment of upto Rs 31st March 2019 will be paid in this financial year itself.
- The scheme will benefit 12 crore small and marginal farmer families havng cultivable land upto 2 hectares.
- Direct transfer into the bank accounts in three equal instalments.
- Rs 75,000 crore in outlay for 2019-20 and Rs 20,000 crore in Revised estimate for 2018-19.
During his speech, the Finance Minister also elaborated about interest subvention schemes and how loans routed via Kisan Credit Cards will get an additional 3% interest subvention. Here is a detailed report on what the Finance Minister spoke.
Goyal announced that the Pension scheme called Shram Yogi Maandhaan could become the World's biggest. The scheme assures a minimum pension of Rs 3,000 per month to workers from the unorganised sectors. The monthly contribution would be Rs 100 for holders in the age-group 28 and above. Holders starting a pension scheme at the age of 18 years can pay a monthly contribution of Rs 55. The government would invest proportionately. More details here.
Railways & Defence Budgets:
Speaking about the budgets of Railways and Defence, Piyush Goyal said the following: On Indian Railways:
Capital support from the budget for railways is proposed at Rs 64,587 crore in 2019-20 (Budgetary Estimates). The Railways' overall capital expenditure programme is of Rs 1,58,658 crore. The Operating Ratio is expected to improve from 98.4% in 2017-18 to 96.2% in 2018-19 (RE- Revised Estimates) and further to 95% in 2019-20 (BE- Budgetary Estimates).
Speaking about One Rank One Pension, Goyal emphasized his government was serious on implementing OROP and had disbursed Rs 35,000 crores since 2014-15. He said this was in stark contrast to Rs 500 crores disbursed by the previous government in its Interim Budget of 2014-15.
"Our Defence Budget will be crossing Rs 3,00,000 crore for the first time in 2019-20. For securing our borders and to maintain preparedness of the highest order, if necessary, additional funds would be provided," added the FM.
The conventions of interim-budget do not allow setting big changes in the taxation policy. However, Goyal proposed a slew of measures. To begin with, he shared the idea of what the department may look like in years to come. The Finance Minister spoke about an anonymized setup.
Goyal said, "The Income Tax Department now functions online. Returns, assessments, refunds and queries are all undertaken online. Last year, 99.54% of the income-tax returns were accepted as they were filed. Our Government has now approved a path breaking, technology intensive project to transform the Income-tax Department into a more assessee-friendly one. All returns will be processed in twenty-four hours and refunds issued simultaneously. Within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers."
To summarize the taxation policies, Goyal said:
* Individual taxpayers with annual income up to Rs 5 lakh will get full tax rebate. Around 3 crore middle class taxpayers will get tax exemption due to this measure.
* Individuals with gross income up to Rs 6.5 lakh will not need to pay any tax if they make investments in provident funds and prescribed equities. Tax base up from 3.79 crore to 6.85 crore
* Standard tax deduction for salaried persons has been raised from Rs 40,000 to Rs 50,000.
* Tax deduction at source (TDS) threshold on interest on bank and post office deposits has been raised from Rs 10,000 to 40,000.
* TDS threshold on rental income raised from 1.8 lakh to 2.4 lakh rupees:
* 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.
* Capital Gains tax: A capital gains exemption would be offered to those selling a house and buying two houses from it. The ceiling has been reserved at Rs 2 crores.
Soon after Goyal concluded his speech, there was confusion on the taxation aspect.
The Finance Bill however clarifies the confusion:
The maximum amount of tax rebate under section 87A of the Income Tax Act has been proposed to increase from Rs 2,500 to Rs 12,500. This proposed tax rebate will be admissble to taxpayers having total income up to Rs 5 lakh instead of current Rs 3.5 lakh.
To summarize, individuals with net taxable income up to Rs 5 lakhs per annum need not pay any taxes. But individuals with taxable income above Rs 5 lakhs will not be able to avail this tax benefit. They will get standard deduction benefit of Rs 50,000 (previously Rs 40,000).
There were two key policies on Tax-Deducted at Source (TDS). There is also a major announcement on capital gains tax from sales of property.