01-02-2019

 

With just a couple of months to go for Lok Sabha elections, the interim Budget 2019, presented by Finance Minister Piyush Goyal, was focused on the middle class, farmers and the unorganised sector, whose disenchantment is believed to be behind the BJP’s recent poll drubbing in the three Hindi heartland states. Proposing tax sops for the middle class, Goyal announced income tax exemption limit to Rs 5 lakh and a Rs 6,000 annual direct cash transfer for farmers owning land less than two hectares, a scheme that will cost Rs 75,000 crore per year. The leader of Congress in Lok Sabha, Mallikarjun Kharge termed the Budget BJP’s “election manifesto” and accused the Narendra Modi government of bribing voters ahead of the Lok Sabha polls.The move to double the tax exemption limit to Rs 5 lakh from the next fiscal will allow over three crore salaried class, pensioners, self-employed and small businesses to save Rs 18,500 crore in income tax annually. Besides, those who save more can effectively push this rebate up to an income of Rs 6.5 lakh. “Individual taxpayers having taxable annual income up to Rs 5 lakh will get a full tax rebate and therefore will not be required to pay any income tax. As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc,” Goyal said in his Budget speech, spanning over one-and-a-half hours. Since this is a rebate and not a slab change, it will not impact the tax incidence of those with larger incomes though it will have some impact for those whose salaries are under Rs 10 lakh as they can add home loans and tuition fees to get additional benefits. Also, standard deduction, which was re-introduced by then Finance Minister Arun Jaitley in Budget 2018, was raised to Rs 50,000 from current Rs 40,000.

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