The budget speech made a conscious attempt to even underline the achievements of the Modi-led-NDA government before the electorates define its fate. Hence, in a way, it was also an Election Budget.

Has the Interim Budget pleased the aam aadmi?

Let’s see the impact of certain proposals on your personal finances:

• For individual taxpayers having taxable annual income up to Rs 5 lakh, a full tax rebate is proposed. Therefore, if your income is below this limit, you will not have to pay any income-tax. Further, if we account for the deduction limit of Rs 1.50 lakh under Section 80C of the Income Tax Act, 1961; for gross income up to Rs 6.50 lakh you may not be required to pay any income-tax if tax-saving investments are done.

  Also, with the deduction for interest on home loans up to Rs 2 lakh under Section 24(b), interest on education loan (eligible for deduction under Section 80E), National Pension System, medical insurance premium paid (eligible for deduction under Section 80D), and so on; even if you’re earning a higher income, you may not have to pay much tax.
  
  According to the interim budget speech, this provides a tax benefit of Rs 18,500 crore to an estimated 3 crore middle class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens. 

• If you are a salaried person, the standard deduction limit is being raised from the current Rs 40,000 to Rs 50,000 in a financial year. This according to the finance minister will provide an additional tax benefit of Rs 4,700 crore to more than 3 crore salary earners and pensioners.

• For the interest earned on bank/post office deposits, it is proposed that ceiling limit for Tax Deduction at Source (TDS) under Section 194A will be raised from the current Rs 10,000 to Rs 40,000 in a financial year.

• It is also proposed that the TDS threshold under Section 194I for deduction of tax on rent be increased from current Rs 1.80 lakh p.a. to Rs 2.40 lakh in a financial year, whereby it would be a relief for small taxpayers.

• At present, income-tax on notional rent is payable if you have more than one Self-Occupied house Property (SOP). Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents etc.; it wisely proposed to exempt levy of income-tax on notional rent on a second SOP. Effectively, this means there will be no income-tax on your second house property.

•  When you sell a residential property, to avoid Long Term Capital Gain Tax (where the holding period is more than 24 months), currently you have the option to save tax by re-investing the sale proceeds into another property within a specified time period (i.e. either 1 year before the date of sale/transfer or 2 years after the date of sale/transfer, and in case you’re constructing the property, within 3 years) as per Section 54 of the Income Tax Act, 1961.

  It is proposed that this benefit of the roller of capital gains under Section 54 be increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs 2 crore. Further, this benefit can be availed once in a lifetime.

• For making more homes available under affordable housing, the benefits under Section 80-IBA (a deduction of an amount equal to 100% of the profits and gains derived from such business of developing and building housing projects) of the Income Tax Act, the budget has proposed to ease one of the condition by extending one more year, i.e. to the housing projects approved till 31st March, 2020.

• To provide a social security cover to the workers in the unorganised sector, viz. street vendors, rickshaw pullers, construction workers, rag pickers, agricultural workers, beedi workers, handloom, leather and so on, in addition to health coverage provided under ‘Ayushman Bharat’ and life & disability coverage provided under ‘Pradhan Mantri Jeevan Jyoti Bima Yojana’ and ‘Pradhan Mantri Suraksha Bima Yojana’, the government has proposed to launch a mega pension yojana namely,  ‘Pradhan Mantri Shram-Yogi Maandhan’ for the unorganised sector workers with monthly income up to Rs 15,000.

  This pension yojana shall provide them with an assured monthly pension of Rs 3,000 from the age of 60 years on a monthly contribution of a small affordable amount during their working age. An unorganised sector worker joining pension yojana at the age of 29 years will have to contribute only Rs 100 per month till the age of 60 years, and if the worker joins the pension yojana at 18 years, his/her monthly contribution will be as little as Rs 55.

  In addition, the government will deposit equal matching share in the pension account of the worker every month. It is expected that at least 10 crore labourers and workers in the unorganised sector will avail the benefit of ‘Pradhan Mantri Shram-Yogi Maandhan’ within next five years making it one of the largest pension schemes of the world. A sum of Rs 500 crore has been allocated for the Scheme.

• An attempt is also made to woo farmers amid a scenario of farm distress ahead of Lok Sabha polls. To provide assured income support to the small and marginal farmers, the government is launching a historic programme namely “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)”. Under this programme, vulnerable landholding farmer families, having cultivable land up to 2 hectares, will be provided direct income support at the rate of Rs 6,000 per year.

  What’s interesting is that the aforesaid income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of Rs 2,000 each, which wasn’t happening.

  According to the budget speech, around 12 crore small and marginal farmer families are expected to benefit, and the programme would be made effective from 1st December 2018. Moreover, the first instalment for the period up to 31st March 2019 would be paid during this year itself. For PM-KISAN a sum of Rs 75,000 crore has been allocated.

• It is also proposed to have a 2% interest subvention for farmers affected by natural calamities and additional 3% interest subvention for timely payment. Likewise, allow 2% interest subvention for farmers pursuing animal husbandry and also create a separate department for fisheries. Further, in case of timely repayment of loan, an additional 3% interest subvention is proposed.

How has the stock market reacted to the budget?

The S&P Sensex ended the day’s trade up 212.74 points at 36,469.43 points. The market sentiment seems positive abetted by an attempt to leave a higher disposal income (which is expected to drive the consumption theme, rural economy, housing sector, among many others) and encourage savings.

Further, the budget speech has nattily highlighted the achievements of the government in the last four-and-a-half years, plus provided a vision for the next decade. This, in my view, would be well weighed by the market before it paves its path.
  
Currently, India, among the other markets, is in a superior position. This, therefore, would attract foreign investors. The Government now has to implement reforms efficiently by creating enough jobs.

To sum-up…

In the run-up to 2019 Lok Sabha elections, the government has tried to showcase “acche din”—the better days in comparison to the previous governments. A clear attempt is made to strike a chord and appease the electorates––particularly farmers, the unorganised sector workers, and the middle class—ahead of polls. This will leave the weaker section of the society and middle-class smiling and hopeful, while of course compromising the path to fiscal consolidation.

Nothing definitively can be said who will win 2019 Lok Sabha elections. The outcome of the recently held state assembly elections indicate that the wind is changing course, but it would be too early to say that anti-incumbency is setting in.

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Kuray prakash@gmail.com Feb 03, 2019 Very simply explained the highlights of Budget to the middle class n common man

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