Interim Union Budget 2019 - Synopsis

Interim Union Budget 2019 – Synopsis

As expected the NDA Government delivered a populist budget in the run up to the 2019 General Elections in May later this year.  There were big announcements made yesterday in the budget speech to woo the majority of the Indian voters being farmers and the middle class. An income support scheme for small farmers, pension scheme for labourers in unorganised sector and increase in tax reliefs to the lower middle class were the highlights of this budget to assure it attracts the rural & middle class India sufficiently ahead of the polls.  While we would like to call this budget more inclined towards the social sector priorities & infrastructure, the budget failed to meet the expectations of the Start Ups, as more and more job seekers turn into job creators and India becoming one of the largest hubs for start ups globally.  Start ups expected much needed support by addressing Angel tax removal and more policies for boosting new businesses, but they may need to wait, despite that Make in India, Start Up India were close to heart initiatives of the Prime Minister.

Introduction

Interim Budget 2019-20 was presented in Indian Parliament on 1st Feb 2019 by the Union Minister for Finance, Corporate Affairs, Railways & Coal, Shri Piyush Goyal. Besides having a major

Scheme for the farmers, it provides tax sops and sets the Developmental Agenda for the years to come.

A New Deal for 12 Crore Small and Marginal farmers with direct income support, Pension initiative for 10 Crore unorganized sector workers, Exempting income tax up to Rs 5 lakhs Income, Reforms in Stamp Duty, Highest ever Defence budget of Rs 3 lakh Crore, Fund allocation of Rs 58,166 Crore for North Eastern Areas development, a new AIIMS for Haryana, Single window clearance for Indian film makers, Higher budgetary allocations for Education, Health, Infrastructure and for welfare of Weaker sections including SC/ST, a Separate Department of Fisheries for welfare of 1.5 Crore fishermen are some of the major highlights of this Interim Budget 2019-20.

Major Schemes

New Scheme- namely “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)” to extend direct income support at the rate of Rs. 6,000 per year to farmer families, having cultivable land up to 2 hectares is announced.  An outlay of Rs.75,000 Crore for the FY 2019-20 and Rs.20,000

Crore in the Revised Estimates of FY 2018-19 was projected.  Accordingly, Rs.2,000 each will be transferred to the bank accounts of around 12 Crore Small and Marginal farmer families, in three equal instalments. This is made effective from 1st December 2018 and the first instalment for the period up to 31st March 2019 would be paid during this year itself.

A separate Department of Fisheries is to be set up in order to provide sustained and focused attention towards development of Fisheries.  New department to aim to promote livelihood of about 1.5 Crore citizens dependent on this sector.

Farmers availing loans through Kisan Credit Card and pursuing Animal husbandry and fishery to be provided a 2% Interest subvention.  If the loan is repaid timely, additional 3% Interest subvention would be refunded.

Rs.750 Crore announced for Rashtriya Gokul Mission for the current year itself. Rashtriya Kamdhenu Aayog proposed to be set up to upscale sustainable genetic upgrade of Cow resources and to enhance production and productivity of cows has also been announced. The Aayog will also look after effective implementation of laws and welfare schemes for cow.

Pradhan Mantri Shram-Yogi Maandhan announced to provide Pensioner benefits to at least 10 Crore labourers and workers in the unorganised sector.  Government claims that within next five years it would be one of the largest pension schemes of the world. A sum of Rs.500 Crore has been allocated for the Scheme.

Taxation Benefits

Individual taxpayers having taxable annual income up to Rs.5 lakhs will not be required to pay any income tax. Persons having gross income up to Rs. 6.50 lakhs (i.e. Income up to Rs 5 Lakhs + Rs. 1.5 Lakhs investments under Section 80C of Income Tax Law like PF, Life Insurance, specified savings etc.) are not required to pay any income tax.  Remember this is a Tax rebate and not exemption.  The tax slabs and slab rates remain unchanged!

Additional deductions such as interest on home loan up to Rs. 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance and medical expenditure on senior citizens etc., are also provided for in the Interim Budget 2019-20.

For Salaried persons, Standard Deduction is being raised from the current Rs.40,000 to Rs.50,000.

Thus tax benefit of Rs. 23,200 Crore is proposed to be provided to an estimated 3 Crore middle class and small taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens.

Exemption on levy of income tax on Notional rent on a second self-occupied house is also

proposed. Currently, income tax on notional rent is payable if one has more than one self-occupied house.

TDS deduction threshold on Interest earned on Bank/Post office deposits is being raised from Rs.10,000 to Rs.40,000.

TDS deduction threshold for Rent is proposed to be increased from Rs. 1,80,000 to Rs.2,40,000.

Government wants the GST burden on Home buyers to be reduced and accordingly the GST Council was moved to appoint a Group of Ministers to examine and make recommendations in this regard at the earliest.

Also, Businesses comprising over 90% of GST payers will be allowed to file Quarterly return.  The scope and applicability will be announced soon by GST council.

Inflation

Government claimed reduction in Inflation to 4.6%, lower in their duration than any other previous governments.  The average rate of inflation during previous five years 2009-2014 was a back breaking 10.1%.

Fiscal Deficit

Government claimed the fiscal deficit has reduced to 3.4% in 2018-19, Current Account Deficit (CAD) is likely to be end up only 2.5% of GDP this year.

Growth and FDI

Government claimed path breaking structural reforms over the last five years, including introduction of Goods and Services Tax (GST) and other taxation reforms.  Claimed best phase of macro-economic stability during the last five years. From being the 11th largest economy in the world in 2013-14, we are today the 6th largest in the world.  Due to such a stable and predictable regulatory regime, growing economy and strong fundamentals, India has attracted massive amount of as much as US$ 239 Billion of Foreign Direct Investment (FDI) during the last 5 years, with most of the FDI allowed to come in through the automatic route.

Enhanced allocations for existing Major Schemes

Allocation of Rs.60,000 Crores for MGNREGA for Budget Estimates 2019-20.

Pradhan Mantri Gram Sadak Yojana (PMGSY) is being allocated Rs.19,000 Crore in BE

2019-20 as against Rs.15,500 Crore in RE 2018-19. During the period 2014-18, a total number of 1.53 Crore houses have been built under the Pradhan Mantri Awas Yojana, government claimed.

By March, 2019, all households will be provided with electricity connection. Till now,

143 Crore LED bulbs have been provided in a mission mode which has resulted in saving of

Rs.50,000 Crore for the poor and middle class. 

Government also informed that the world’s largest healthcare programme, Ayushman Bharat, was to provide medical treatment to nearly 50 Crore people in the country and around 10 lakh patients have already benefited through free treatment for various illness which would have otherwise cost them Rs. 3,000 Crore.

Government claimed Lakhs of poor and middle class people are also benefiting from reduction in the prices of essential medicines, cardiac stents and knee implants, and availability of medicines at affordable prices through Pradhan Mantri Jan Aushadhi Kendras.

14 of the 21 AIIMS operating or being established in the country presently have been announced since 2014. He also announced setting up of a new – the 22nd AIIMS in Haryana.

Allocation for Integrated Child Development Scheme (ICDS) is being increased from

Rs.23,357 Crore in RE 2018-19 to Rs.27,584 Crore in BE 2019-20.

A substantial increase is proposed in the allocation for welfare of the Scheduled Castes and Tribes. The allocation of Rs.56,619 Crore made in BE of 2018-19 for Scheduled

Caste, further increased to Rs.62,474 Crore in RE is proposed to be enhanced to Rs.76,801 Crore in BE for 2019-20, an increase of 35.6% over BE of 2018-19.  For the Scheduled Tribes also, proposed allocation in 2019-20 BE is Rs.50,086 Crore as against Rs.39,135 Crore in BE 2018-19, an increase of 28%.

Welfare Development Board to frame special strategies for the benefit of the hard-to-reach De-notified, Nomadic and Semi-Nomadic communities will be set up under the Ministry of Social Justice and Empowerment. A Committee under NITI Aayog will also be set up to complete the task of identifying De-notified, Nomadic and Semi-Nomadic communities not yet formally classified.

Under the Ujjwala Yojana aiming delivery of 8 Crore free LPG connections, more than 6 Crore connections have already been given and the remaining will get free gas connections by next year.

A National Artificial Intelligence Portal will also be developed soon as a part of the National Programme on 'Artificial Intelligence'.

The Department of Industrial Policy and Promotion will now be renamed as the

Department for Promotion of Industries and Internal Trade.

The Government e-Marketplace (GeM), created by the present Government two years ago, resulted in average savings of 25-28% and the platform will now be extended to all CPSEs. Transactions of over Rs. 17,500 Crore have taken place so far.

For the first time, the country’s Defence Budget will be of over Rs.3 lakh Crore.

The number of operational airports has crossed 100 with the commissioning of the Pakyong airport in Sikkim. Arunachal Pradesh came on the air map recently and Meghalaya, Tripura and Mizoram have come on India’s rail map for the first time.

Railway Budget 

Capital support from the budget for Indian Railways is proposed at Rs.64,587 Crore in

2019-20 (BE). The Railways’ overall capital expenditure programme is of Rs. 1,58,658 Crore.

Other Noteworthy proposals

Through this Finance Bill, necessary amendments are proposed to levy Stamp duties on one instrument relating to one transaction and get collected at one place through the Stock Exchanges. The duty so collected will be shared with the State Governments seamlessly on the basis of domicile of buying client.

Conclusion

FM concluded that, in all the total expenditure is to increase from Rs.24,57,235 Crore in 2018-19 RE to Rs.27,84,200 Crore in 2019-20 BE. A rise of Rs.3,26,965 Crore or approximately 13.30%. This reflects a high increase considering low inflation. The fiscal deficit of year 2019-20 is estimated to be 3.4% of GDP.

The FM further pointed out that after completion of the fiscal deficit consolidation programme, the Government would now focus on Debt consolidation. A target of 3% of fiscal deficit is to be achieved by 2020-21.

India’s Debt to GDP ratio was 46.5% in year 2017-18. The FRBM Act prescribes that the Debt to GDP ratio of the Government of India should be brought down to 40% by 2024-25.

For any queries on the Interim budget 2019, feel free to write to us at info@gjmco.in.

Thanks & Best regards,

Knowledge Base Team

GJM & Co.

Chartered Accountants

www.gjmco.in