Shishir Asthana Moneycontrol News
The Interim Budget has politics written all over it. The finance minister addressed all the key constituencies in the speech: from farmers to the middle class. By not touching the corporate tax rate and not hiking taxes for the uber-rich, the minister has also not alienated this key group of donors. The big question is how will the largesse be financed.
Here are the 10 key takeaways from the budget:
- Farmers: First off is the benefit to the farmers. Farmers with less than two hectares to be offered Rs 6,000 per year as a direct transfer under PM Kisan Samman Nidhi. The benefit will be transferred directly into the bank account of beneficiary farmers in three installments of Rs 2,000 each. Around 12 crore farmers to benefit from the scheme. This scheme will cost the government around Rs 75,000 crore. But will this prevent political parties from announcing loan waivers in their poll promises is an open question?
- Workers: In a move to bring the unorganized workers in the mainstream government has started a monthly pension of Rs 3,000 for workers in the unorganised sector. Though the move is expected to benefit 10 crore workers the bill is not clear if it is compulsory or optional. If optional it will not be serving much purpose as few entrepreneurs and workers alike would be keen on joining it.
- Salaried Class: The finance minister increased the minimum income tax limit from Rs 2.5 lakh to Rs 5 lakh per annum. Doubling the limit would result in Rs 12,500 saving per annum for the salaried class. But this limit is applicable only for those who have a salary of Rs 5 lakh or below as the exemption is in the form of a rebate. This rebate used to be Rs 2,500 for salary up to Rs 3.5 lakh per annum, which has now been increased to Rs 12,500 for a salary of up to Rs 5 lakh. However, standard deduction has been increased from Rs 40,000 to Rs 50,000 which is a small relief across all salaried class.
- Interest rate exemption: Tax Deducted at source (TDS) has been increased from Rs 10,000 to Rs 40,000
- Defense: Marginal increase in budgetary support towards Defence expenditure from Rs 2.95 lakh crore to Rs 3 lakh crore.
- MGNREGA allocations: Marginal increase in support to the MNREGA scheme too which has been increased from Rs 55,000 crore to Rs 60,000 crore.
- Government Borrowing: Huge increase in government borrowing program from an expectation of Rs 6.50 lakh crore to Rs 7.60 lakh crore. The revised estimate for 2018-19 was Rs 6.34 lakh crore. Bond yields slippage by 12 basis points to 7.6 percent reflect the disappointment in the bond market.
- Budget Deficit: The victim of the government’s populist budget is the deficit which has slipped out of the glide path. At 3.4 percent to the GDP, fiscal deficit has missed the target for this year and its guidance for the next year is also higher than earlier estimates.
- Real Estate: A number of measures have been announced to help the real estate sector both directly and indirectly. Notional rent on the second self-occupied house has been done away with while the TDS threshold of rent has been increased from Rs 1.8 lakh to Rs 2.4 lakh. Rollover of capital gains for section 54 to be increased from 1 residential house to 2 residential houses (for capital gains up to Rs 2 Crore). Also, for affordable Housing - Deduction under 80IB(8) has been extended by one more year. Finally, the builders have been given some relief by extending their exemption (notional income) on unsold inventory from 1 year to 2 years.
- Divestment: The government increased the disinvestment target to Rs 90,000 crore for the financial year 2019-20, up by 12.5 percent year-on-year from the current year's target. The finance minister said that against a target of Rs 80,000 crore the government is confident of receiving Rs 100,000 crore.
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