Budget 2019-20: Govt Doubles Tax Exemption Limit To Rs 5 Lakh

NEW DELHI — In a major relief to the middle-class, Finance Minister Piyush Goyal Friday proposed to double the threshold tax exemption limit to Rs 5 lakh and increased the standard deduction to Rs 50,000 from Rs 40,000.

The proposal will benefit 3 crore middle-class tax payers, Goyal said while unveiling the Budget proposals for 2019-20.

Doubling the threshold exemption limit will increase the burden on the exchequer by Rs 18,500 crore.

If an individual invests in the specified tax saving schemes of the government, the effective tax-free income limit will be Rs 6.5 lakh a year, while it may go further up with additional avenues like NPS, medical insurance and home loan interest payment.

GST exemption doubled from Rs 20 to 40 lakhs for small traders

The Goods and Services Tax (GST) has turned out to be a game changer for the country’s economy with average tax collection in the current financial year being pegged at Rs 97,100 crore per month as compared to Rs 89,700 crore per month in the first year when the GST was introduced in July 2017.

 “The average monthly tax collection in the current year is Rs 97,100 crore per month as compared to Rs 89,700 crore per month in the first year,” said Union Minister for Finance, Corporate Affairs, Railways, and Coal Goyal, while presenting the interim Budget for 2019-20 in the Lok Sabha on Friday.       

“The State revenues are improving with guaranteed 14 per cent annual revenue increase for the first five years,” he added. “The GST Council would appoint a Group of Ministers (GoM) to examine and make recommendations to reduce GST burden on the home buyers,” said the Finance Minister.

Biggest Taxation Reform

“GST, the biggest taxation reform, led to increase in tax base, higher collections and ease of trade,” said Union Minister for Finance, Corporate Affairs, Railways, and Coal Goyal, while presenting the interim Budget for 2019-20 in the Lok Sabha on Friday.       

“Rates continuously reduced providing relief of about Rs 80,000 crore annually to consumers, while most items of daily use of poor and middle class now in the zero per cent or 5 per cent tax slab,” he said.

 “The Goods and Services Tax (GST) reforms lingered on during the previous government for almost a decade. Our government implemented the GST, which is undoubtedly the biggest taxation reform undertaken since Independence,” he said.

“Seventeen different taxes levied by the Central and State/UT governments with cascading effect of the tax on tax were consolidated into one GST. India became a common market. GST has resulted in the increased tax base, higher collections, and ease of doing business,” he said.

“This will reduce the interface between the taxpayers and the Government for day-to-day operations and assessments. Now returns are fully online and e-way bill system is in place. Inter-state movements have become faster, more efficient, and hassle-free with no entry tax, check posts, and truck queues among others,” he said.

The Finance Minister said: “The high taxation levied on multiple commodities in the pre-GST regime has been rationalised and the burden on the consumer, especially the poor and the middle class, has been significantly reduced.”

GST relief to small businesses

“GST aims at benefiting small traders, manufacturers and service providers. Exemptions from GST for small businesses have been doubled from Rs 20 lakh to Rs 40 lakh,” said Finance Minister Goyal.

“Further, small businesses having turnover up to Rs 1.5 crore have been given an attractive composition scheme wherein they pay only one per cent flat rate and have to file one annual return only,” he said.

“Similarly, small service providers with turnover up to Rs 50 lakhs can now opt for composition scheme and pay GST at 6 per cent instead of 18 per cent,” said the minister.

“More than 35 lakh small traders, manufacturers, and service providers will benefit from these trader friendly measures. Soon, businesses comprising over 90 per cent of GST payers will be allowed to file a quarterly return,” the minister added.

The Finance Minister asserted that in spite of such major rate reductions and relaxations, revenue trends are encouraging.

“The average monthly tax collection in the current year is Rs 97,100 crore per month as compared to Rs 89,700 crore per month in the first year. The State revenues are improving with a guaranteed 14 per cent annual revenue increase for the first five years.”

MSMEs find mention, no cheer for startups

Interim Finance Minister Piyush Goyal on Friday announced 2 per cent interest subvention for micro, small and medium enterprises (MSMEs) for loans up to Rs 1 crore.”All MSME units registered with the Goods and Services Tax (GST) will now have 2 per cent interest subvention for loans up to Rs 1 crore,” Goyal said as during the presentation of the interim budget 2019 in Parliament. 

Goyal said the government had also increased the share of government procurements from MSMEs through the Government eMarketplace (GeM) to 25 per cent, including 3 per cent from MSMEs run by women.

While most of the announcements in budget 2019 were made on expected lines, startups had little to cheer this time. Exemption from angel tax was one of the major demands by startups in India. The MSME sector has also sought tax incentives, by way of reduced dividend tax and reduction in income tax as well as government support for transformation to digital platforms along with resources to train them, as well as funds to drive project and product innovation. Some groups—of craftsmen and artisans—have also sought a review and downward revision of GST rates.

Last year’s budget

Arun Jaitley had described the MSME sector as a “major engine of growth and employment generation” last year, and announced an allocation of Rs 37,794 crore for credit support and interest subsidy on innovation, as well as towards capital support, in budget 2018. The MSMEs however, had less than 18 per cent of the credit outlay, with the large enterprises—which have run up the NPAs—hogging the rest. In addition, Mudra scheme lending target set at Rs 3 lakh crore for FY19. 

Last year, it was decided to contribute 12 per cent of wages of new Employees’ Provident Fund subscribers for three years.

Your maid will now be eligible for pension

 The NDA government has taken the populist route to woo the masses in the crucial interim budget 2019. Presenting the budget 2019, stand-in Finance Minister Piyush Goyal has proposed a slew of announcements to appease the poor in the country.

Goyal increased the allocation for India’s flagship rural employment scheme, Mahatma Gandhi National Rural Employment Guarantee (MGNREGA) scheme—it will get Rs 60,000 crore as against Rs 55,000 crore promised in the last budget.

A pension scheme called the Pradhan Mantri Shram Yogi Mandhan is being launched to provide assured monthly pension of Rs 3,000 per month, with the contribution of Rs 100 per month, for workers in unorganised sector after 60 years of age. These workers will have to contribute only Re 1 per month from age 29 towards this scheme. The government will contribute the rest. The scheme will begin from this year.

More than 42 crore in the unorganised sector, including domestic helps, will be covered under the scheme. 

In addition, Goyal also announced the PM Kisan Yojana with farmers getting Rs 6,000 per year through direct bank transfer in three instalments. The scheme will be fully financed by the Union government. The scheme has a budget outlay of Rs 75,000 crore for financial year 2019-20. 

Reacting to the farmer package, Congress leader Sanjay Jha tweeted, “After brutalising the farmers for 5 years, a cosmetic support of just Rs 75,000 crores allocation for farmers. This is peanuts. The Congress party will cover farmers and all poor people at a much higher level.”

It was expected that, under pressure from a resurgent Congress which is going all out to lure voters with the promise of debt waiver for farmers and a minimum income for the poor if voted to power, Goyal may announce some form of a direct transfer of cash to farmers and sops for the poor.

 Moody’s says budget credit negative as it has only give-aways

Terming the inability to meet fiscal deficit target for four consecutive years as a big “credit negative” for the sovereign, global rating agency Moody’s on Friday doubted if the country will meet even the 3.4 per cent fiscal gap target for FY20.

The agency said in the interim budget there is an absence of new policies to boost revenues but has many measures leading to higher expenditure which though will increase consumption will also increase the fiscal burden.

The budget pegs fiscal deficit slipping by 10 bps to 3.4 percent for the current year, courtesy an income support scheme for farmers and expects it to stay at the same level in FY20 as well.

“Ongoing slippage from the budgeted fiscal deficit targets over the past two years, and our expectation that government will face challenges meeting its target again in the year to March 2020 does not bode well for medium-term fiscal consolidation.

“We view this continued slippage as credit negative for the sovereign,” the agency said in its quick note on the interim budget.

The debt burden is the “biggest credit challenge” and is not expected to diminish rapidly, it said, adding the low income levels lead to significant development spending needs and constrain the scope of tax base broadening.

Moody’s — the only one among the global agencies to upgrade the outlook on the sovereign rating — however, said fiscal deficit numbers are as per its expectations.

Welcoming policies aimed at promoting expenditure efficiency through rationalisation of government schemes and better-targeted delivery, including through direct income transfer schemes, as “credit positive”, it said it takes time to bear fruit.

The moves on basic income for farmers — Rs 6000 per person in three installments per annum — and subsidized agricultural loans are likely to boost the rural economy through consumption in the near-term, but will have a fiscal cost, it noted.

 Following are the key highlights of the interim Budget 2019-20 presented by Finance Minister Piyush Goyal in the Lok Sabha Friday:

– Income up to Rs 5 lakh exempted from income tax – Standard Deduction raised to Rs 50,000 from Rs 40,000 – Direct tax proposals to provide Rs 23,000 cr relief to 3 cr taxpayers – Persons with gross income up to Rs 6.50 lakh not required to pay any income tax if they make investments in provident funds, specified savings and insurance.

– 12 crore small, marginal farmers to be provided assured yearly income of Rs 6,000 under PM-KISAN scheme 

– TDS threshold raised to Rs 40,000 from Rs 10,000 on interest earned on bank/post office deposits – Tax exempted on notional rent on a second self-occupied house – TDS threshold for deduction of tax on rent to be increased to Rs 2.40 lakh from Rs 1.80 lakh – Tax benefits for affordable housing extended till March 31, 2020 – Tax exemption period on notional rent on unsold inventories extended to two years from one year – Allocated Rs 20,000 crore in 2018-19, Rs 75,000 crore for FY2019-20 for PM-KISAN scheme – Interest subvention of 2 pc during disaster to be provided to farmers for the entire period of reschedulement of loan – 2 pc interest subvention to farmers for animal husbandry and fisheries activities; additional 3 pc in case of timely repayment – Rs 3,000/month pension for 10 cr unorganised sector workers with contribution of Rs 100/55 per month under PM Shram Yogi Maandhan scheme – Fiscal deficit pegged at 3.4 pc of GDP for 2019-20; target of 3 pc of fiscal deficit to be achieved by 2020-21 – Current Account Deficit pegged at 2.5 pc of GDP for FY20 – Total expenditure to rise by 13 pc to Rs 27.84 lakh cr in FY20 – National Education Mission allocation increased by about 20 pc to Rs 38,572 cr – Allocation for Integrated Child Development Scheme increased by over 18 pc to Rs 27,584 cr – Disinvestment target of Rs 80,000 cr in 2018-19 likely to be met; Target for FY20 set at Rs 90,000 cr 

– 25 pc additional seats in educational institutions to meet the 10 per cent reservation for the poor – Defence budget to cross Rs 3,00,000 cr for the first time – Allocation for North East increased by 21 pc to Rs 58,166 cr in FY20 – Railways to get capital support of Rs 64,587 cr in FY20 

– Indian filmmakers to get access to single window clearance for ease of shooting films; regulatory norms to rely more on self-declaration – 2 interest subsidy for MSMEs on an incremental loan of Rs 1 crore for GST-registered entities – At least 3 pc of the 25 pc sourcing for the government undertakings to be from women-owned SMEs – One lakh villages to be transformed into digital ones in 5 years – New portal to support national programme on Artificial Intelligence – Reforms in stamp duty; amendments to ensure streamlined system for levy of stamp duties to be imposed and collected at one place – A separate Department of Fisheries to be created for welfare of 1.5 crore fisherman – 22nd AIIMS to be setup in Haryana – Rs 60,000 crore allocation for MGNREGA in 2019-20 – India poised to become USD 5 trillion economy in next 5 years; aspires to become USD 10 trillion in the subsequent 8 years.
 

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