The interim budget proposed this year is aimed at achieving inclusive growth considering that farmers, workers in the unorganized sector, marginal taxpayers and the salaried class have received special attention. A look at some of these provisions….
The interim budget was presented on 1st of February 2019, which is the new fixed date for the Union Budget. The current year being the election year, a full-scale budget could not be presented. The new government after the elections will present the full budget.
The government could have resorted to Vote- On-Account to meet the expenditure until the new government is formed, but it chose the other permissible alternative of the interim budget for FY2019-20. The handful of measures of the interim budget are of far reaching importance and of a high resonance value in the election year. Steps have been taken to help the middle class by bringing about some amendments in the Income Tax Act while measures have also been taken to help farmers and workers in the neglected unorganized sector.
There will be no tax liability up to the threshold limit of five lakhs taxable income. For this, the tax rebate limit under section 87A has been increased from Rs.3.5 lakh to Rs.5 lakh. The Finance Minister explained that this single measure will roughly help three crore tax payers. However, there is no proposal to change the slabs or the existing tax rates in the Interim budget.
At present, only one house property which is self-occupied by the owner is exempt from tax. A house owner was required to pay tax on other house properties, even if not physically occupied by him. The tax is calculated based on ‘fair rental value’, which is the rent which the property can fetch in the open market. It is a common experience that in many cases, a second house of the owner is kept vacant due to practical constraints and not rented out. The interim budget has proposed that there will be no incidence of tax liability on the second house. This will be a great relief to many taxpayers. More than two self-occupied properties will be subject to tax as against one self-occupied house prior to this amendment.
The law prior to the proposed amendment brought in the interim budget was to grant exemption u/s 54 of the Act on long term capital gains, if the sale proceeds are invested in a new property within the stipulated time. The proposed amendment widens the width of the section 54 while keeping the conditions of time frame of fresh investment. Now, in place of one house ceiling for fresh investment, the new ceiling is up to Rs.2 crore. This benefit will be once in a lifetime of the person seeking relief u/s 54 of The Act. The Finance Minister explained in the Lok Sabha that in many cases people want to buy more than one house after the sale of their old house as per the requirements of enlarging families but due to the technical stipulation of only one house in the provision, they faced hardship. The new provision of the permissible two houses for investment will be of great help to taxpayers.
The interim budget measures are the first step in the right direction, but we have a long way to go. Good measures are dependent on better income. Our nation’s income comes mainly from taxes. This year some more measures could be taken as our direct tax collection improved and it may touch Rs.12 lakh crores
Last year’s Budget incorporated a provision for granting standard deduction of Rs.40,000 against the salary or pension income of a taxpayer. To give more benefit, this year in the interim budget, the quantum of standard deduction has been increased to Rs.50,000. This will help many salaried taxpayers and pensioners.
Tax was deducted at source (TDS) if the interest income exceeded Rs.10,000. This threshold limit has been increased to Rs.40,000 for interest earned on deposits in banks and post-offices. Earlier, people used to file 15G/15H forms to save TDS if their total income was not taxable or used to file tax returns only to claim refund against TDS. Many senior citizens and people with income from deposits used to face practical difficulties. The Finance Minister explained that this step will help many taxpayers.
The total increase for the agriculture sector has been 73% over the revised estimate of the year 2018-19. One path-breaking scheme for small and marginal farmers in the name of Pradhan Mantri Kisan Samman Nidhi (PMKISAN) was announced. As per this scheme there will be a direct cash transfer of Rs.6000 into the bank accounts of small and marginal farmers having land holding up to five acres every year in three equal instalments of Rs.2000 each. The entire burden under this scheme will be Rs.75,000 crores in the FY 2019-20 and Rs.20,000 crores in the current year. The scheme has been started with effect from December 2018 and Rs.2000 will get transferred to eligible farmers before 31st March 2019 and so a part of the burden will be there in the current fiscal year.
Interest subvention of 2% was announced for farmers affected by natural calamities. An additional 3% relaxation will be given for timely repayment of loans. This scheme has also been extended to farmers engaged in animal husbandry and fishery-related activities, and availing loans through Kisan Credit Cards.
A new pension scheme for workers in the unorganized sector has been announced which has been named Pradhan Mantri Shram Yogi Maandhan (PMSYM). The Finance Minister explained that this scheme will be beneficial to around 42 crore workers. The new scheme promises pension of Rs.3000 per month for workers after the age of 60 years. The government will also be a contributor in this scheme. A worker joining this scheme at the age of 29 years will have to contribute Rs.100 per month, while a worker joining the scheme at the age of 18 years will have to contribute Rs.55 per month. The government expects that at least 10 crore laborers and workers in the unorganized sector will avail the benefit of the scheme within the next five years, thus making it one of the largest pension schemes of the world.
The Budget is a financial statement for the year. The interim budget presented is a balanced budget and efforts were made that there is no undue escalation of fiscal deficit despite being an election year. The fiscal deficit has been kept at 3.4% of the GDP as against the targeted 3.3%. The fiscal deficit last year was 3.5%. It is believed that the outlay of Rs.20,000 crores this year for farmers led to some slippage.
The government has taken measures for inclusive growth and that is the reason that farmers, workers in the unorganized sector, marginal taxpayers and salaried class have received special attention. We are the fastest growing major economy in the world but that will not be enough if living conditions of our poor and lower middle class do not improve.
The interim budget measures are the first step in the right direction, but we have a long way to go. Good measures are dependent on better income. Our nation’s income comes mainly from taxes. This year some more measures could be taken as our direct tax collection improved and it may touch Rs.12 lakh crores. GST collection is less than targeted though it is picking up now. Finance Ministers always find problems, as for a country of over 130 crore people our tax base is very small. Our direct tax base has improved to Rs.6.85 crore as against Rs.3.5 crore in the last four years, but still it is not enough. There is a tendency in our country to evade taxes. Search and surveys keep taking place but that will not be enough to bring out all the tax evaded.
If we want to see our country as a super power, we must start paying taxes honestly. As per the statistics of the year 2015-2016, only 1.72 lakh people showed income exceeding Rs.50 lakh in our big country. We have 14 lakh registered companies but only 5.97 lakh filed returns and out of them 2.76 lakh companies showed losses or zero taxable income. The number of companies showing income between one crore to ten crores was 28,667 while only 7781 companies showed income of more than ten crores. Our taxes are used for welfare measures and for capital expenditure in all sectors to make our country strong.
The Finance Minister in his budget speech this year made a welcome departure by thanking the taxpayers as it is their money which is helping the country.
by S K Jha
