The year 2019 remains a crucial year for the global economy and particularly the Indian economy which is marching towards becoming on the top three economies of the world over time.
The year 2019 witnessed its first crucial event, i.e., the interim budget with the second being general elections due in May 2019.
In this blog, we seek to discuss the key highlights of the interim budget 2019 and what it means for you.
Prime Minister Modi has been a great strategist and orator and ever since he assumed power in 2014, his strategy has only received a thumbs up from the audience.
While the critics are always there, one cannot question PM’s popularity not only in India but the world over. Once again the PM and his team have done a commendable job ensuring the vote share receives enough while keeping the development and growth agenda intact.
If we were to describe the budget in one line, it could be –
Sabka Vikas remained the bottom line for Modi’s last budget.
The budget primarily focused on the welfare of the middle class, farmers and socially backward classes. Let us see the announcements made in the budget category wise.
Significant Tax Reforms Announced for the Middle Class
Some significant announcement in direct tax include –
- A full tax rebate for individuals with taxable income of less than Rs 5 Lakhs.
- Higher provision of Tax Deducted at Source (TDS) threshold for investment instrument such as fixed deposits.
- An increased standard deduction of up to Rs 50,000 from existing Rs 40,000
- Hike in the gratuity limit from Rs. 10 lakh to Rs. 20 lakh from the next financial year.
- No tax on notional rent to be paid on a second house
Real Estate Sector
The budget also took care of the real estate sector with a tax exemption on unsold inventory for two years. Also, the finance minister announced of constituting a GST council to reduce the burden on home buyers.
Lastly, the benefit rollover of capital tax gains is to be increased from investment in one residential house to that in two residential houses (For a taxpayer who has capital gain up to Rs 5 crore).
Next Comes, the Farmer’s Community
The PM and his team ensured that the acting Finance Minister brings enough cheer for the rural economy as well.
Pradhan Mantri Kisan Samman Nidhi scheme, one of the most crucial reforms for the budget, seeks to provide a guaranteed income of Rs.6000 annually to small farmers (with less than 2 hectares landholding). This initiative is likely to benefit 12 crore small and marginal farmers.
The interest subvention of up to 5% is likely to provide a significant boost to the agrarian economy, animal husbandry, and fisheries industries.
What About the Socially Backward Classes?
The Finance Minister announced a substantial increase of 35.6% and 28% in the budgetary allocation for the welfare of SCs and STs respectively.
In addition to the above, major thrust was also seen when the Finance Minister announced provisions to increase compliance.
The FM announced that arrangements are in place which shall bring down Income tax returns processing to less than 24 hours with facilities of instant refund, un-manned & anonymous IT scrutiny.
Also, he announced reducing the number of GST returns for small business owners.
Further, the government announced unveiling of a mega pension plan that would provide Rs. 3,000 per month for unorganized workers.
The move shall bring in a large population under the ambit of social security with minimal to limited contribution. This will benefit ten crore workers in the unorganized sector, may become the world’s biggest pension scheme for the unorganized sector in five years.
Lastly, the defense sector received its highest ever allocation of Rs. 3 lakh crores.
What Happens to Fiscal Deficit?
The government has undoubtedly taken a bold move of accepting deviation from the original target as a far as the fiscal deficit is concerned about projecting deficit at 3.4% for fiscal 2020, but the same is mainly on account of the assured income allocation for farmers.
Taking the example of the blockbuster Uri – The Attack, the finance minister announced single window clearance for filmmaking to be made available to Indian filmmakers, anti-camcording provision to be introduced to Cinematography Act to combat film privacy.
To conclude, we can say that the budget of Rs 27.84 lakh crores is aimed at benefitting the masses (primarily the three crore salaried individuals, ten crore workers and twelve crore small and marginal farmers).
Stay tuned with us as we follow up with our take on the impact of the budget on Indian economy.
Disclaimer: The views expressed in this post are that of the author and not those of Groww