The Great Indian Budget Summarised (Modi – Led BJP Government’s Interim Budget 2019)

6th February, 2019 - 1:22 pm Categories: TAX 0 Comments

On the eve of the upcoming elections, India’s Finance Minister Piyush Goyal, under the Modi led BJP Government announced the interim budget which would be in force till the Election on 1^st February, 2019 . In his 2 hour long speech he dealt with a variety of sectors ranging from Agriculture to Tax & Defence to Infrastructure. In this Article I Have tried to summaries his speech into bullet points for your ease of reference.

It is pertinent to mention that the present budget is a Interim Budget and not a Full Budget, for those who are unaware Interim Budget  (also called Vote- on – account budget)  is a budget wherein the government seeks the approval of Parliament for meeting expenditure for the first four months of the fiscal year (April-March); eg:  paying salaries, ongoing programmes in various sectors etc. There is no change in the taxation structure, until a new government takes over and presents a full Budget that is revised for the entire fiscal year.

What is the difference between interim and regular budget

• Full Budget deals with both expenditure and revenue side but Vote-on-account (interim budget) deals only with the expenditure side of the government’s budget.
• The vote-on-account (interim budget) is normally valid for two months but a full budget is valid for 12 months (a financial year).
• A vote-on-account (interim budget) is treated as a formal matter and is passed by Lok Sabha without discussion. A budget can only be passed after discussion and voting on demand for grants.

In his speech the Finance Minister elucidated series of key areas covering almost every spectrum of the economy. The Finance Minister under the Modi led BJP government also claimed a series of achievements, highlights of which are:

• India being 6^th largest economy currently from being 11^th largest economy in 2013-14.
• Average inflation brought down to 4.6% as compared to average rate of inflation[1] during 2009-2014.
• Fiscal deficit has been brought down to 3.4% from high of 6% seven years ago.
• A total of $239 billion of FDI was brought in the country due to rapid liberalization.
• IBC has helped recover an amount of 3 lakh crore in favor of banks and creditors.
• The Real Estate (Regulation and Development) Act, 2016 (RERA) and Benami Transaction (Prohibition) Act, 1988 are helping in bringing transparency in the real estate sector.
• The Fugitive Economic Offenders Act, 2018 will help in confiscating and disposing of the assets of economic offenders who escape the jurisdiction of the laws in India.

First things first, a majority of readers reading this article want to know what tax benefits have been proposed , there are several misconception regarding the same in the public. I have tried to simplify his clever words into day to day language which can be comprehended by a layman.

TAX PROPOSALS

The Hon’ble Finance Minister Mr. Piyush Goyal claimed that the tax collections have increased significantly from INR6.38 Lakh crore in 2013-14 to almost INR 12 lakh crore in financial year 2018-19. The number of returns filed have also increased from 3.79 crore to 6.85 crore showing 80% growth in tax base.

Individual Tax:

• No changes in existing Tax Rate but Rebate on tax upto INR 5 lakh.
• Persons having gross income up to 6.50 lakhs may not be required to pay any income tax, if they make investments in provident funds, specified savings, insurance etc.
• Increase in Standard Deduction from the current INR 40,000 to INR 50,000.
• Exemption on levy on income tax on self-occupied second house.
• Rise in TDS threshold on interest earned on bank/post office deposits from INR 10,000 to INR 40,000.
• Increase in TDS threshold for deduction of tax on rental income INR 1,80,000 to INR 2,40,000.
• Increase in benefit of rollover of capital gains under section 54 of the Income Tax Act, from investment in one residential house to two residential houses for a tax payer having capital gains up to INR 2 crore. (This benefit can be availed once in a life time)
• Extension of benefits under Section 80-IBA of the IT Act for another one year, in order to make homes available under affordable housing.
• Extension of the exemption period from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed.
• Within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers.

Corporate Tax:

• Companies with turnover not exceeding INR 250 crore during financial year 2016-17 will enjoy a reduced tax rate of 25%.
• Small businesses having turnover up to INR 1.5 crore have been given an attractive composition scheme wherein they pay only 1% flat rate and have to file one annual return only.
• Benefit of presumptive taxation is extended to small professionals fixing threshold limit at INR 50 lakh, and can apply for composite scheme and pay GST at 6% instead of 18%.
• For small businessman exemption from GST has been doubled from INR 20lakh to INR 40 lakh.

DEFENCE

The Finance Minister in his budget speech gave special emphasis on strengthening the defence and national security of India and with respect to this commitment, the Modi led BJP Government has claimed that it has dispersed over INR 35,000 crore in pursuance of its One Rank One Pension (OROP) scheme.

• INR 3lakh crore has been set as defence budget for the Financial Year 2019-20 for the first time in History of Republic India.
• Substantial hike in the Military Service Pay (MSP) of all service personnel and special allowances given to Naval and Air Force personnel deployed in high risk duties.

AGRICULTURE

Finance Minister, Mr. Piyush Goyal, putting emphasis on the economic condition of the farmers in his budget speech proposed various reliefs for farmers by way of interest subvention and other measures.

• “Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)”, under this programme farmer having cultivable land upto 2 hectares, will be provided direct income support at the rate of INR 6,000 per year, which shall be transferred in the bank account of farmers in three equal installments of INR 2000/- each.
• An amount of INR 75,000 crore for PM-KISAN for the FY 2019-20 has been proposed by the Finance Minister.
• Kisan Credit Card scheme (KCC):Interest subvention on farm loans has been proposed to be 2% who avail loan through KCC.

Further, in case of timely repayment of loan, they will also get an additional 3% interest subvention.

• National Disaster Relief Fund (NDRF): Farmers affected by natural disaster will get benefit of interest subvention of 2% and prompt repayment incentive of 3% for the entire period of reschedulement of their loans.
• Rashtriya Gokul Mission: INR 750 crore has been proposed under the mission for uplifting the Animal Husbandry and Fisheries sector.
• Rahtriya Kamdhenu Ayog: for upgradation of productivity and production of cow resources.

LABOUR AND EMPLOYMENT

• New Pension Scheme (NPS): The government has increased its share from 10% to 14%, however, the contribution of employee remains same as 10%.
• Maximum ceiling of the bonus given to the labourers has been increased from INR 3,500 pm to INR 7,000 pm.
• Ceiling of payment of gratuity has been increased from INR 10 lakhs to INR 20 lakhs.
• Increase in ESI eligibility from INR 15,000 pm to INR 21,000 pm.
• INR 1,000 p/m has been fixed as minimum pension amount for labourers.
• EPFO amount has been increased from INR 2.5 lakh to INR 6 lakh, in case of death of a labour in the course of employment.
• Pradhan Mantri Shram-Yogi Maandhan: it is a mega pension yojna for the unorganized sector; this scheme is aimed at providing assured monthly pension of INR 3,000 from the age of 60 years.

An unorganised sector worker joining pension yojana at the age of 29 years will have to contribute only INR 100 per month till the age of 60 years. A worker joining the pension yojana at 18 years will have to contribute INR 55 per month only.

A sum of INR 500 crore has been allocated for the Scheme.

WOMEN DEVELOPMENT

• Under Anganwadi and Asha Yojana honorarium has been enhanced by about 50% for all categories of workers.
• Maternity leave has been extended to 26 weeks
• Pradhan Mantri Matru Vandana Yojana: pregnant women have provided financial support to women while empowering them to participate in work.
• Piyush Goyal, in his budget speech stated that the Modi led BJP Government has provided 6 crore LPG connection to women under its UJJAWALA yojna.
• He further claims that the Pradhan Mantri MUDRA Yojana launched by the government has benefited 70% women.

INFRASTRUCTURE

The Finance Minister in his budget speech also claimed that the present Government has provided quality transportation facility to the citizens. He even applauded the UDAAN Scheme which has aided in providing air transport facility to ordinary citizens as well.

He additionally claimed the year 2018 was the safest for Indian Railways and has witnessed elimination of all Unmanned Level Crossings on broad gauge network.

• Capital support from the budget for railways is proposed at INR 64,587 crore in 2019-20.
• The Railway’s overall capital expenditure programme is of INR 1, 58,658 crore.
• The Operating Ratio is expected to improve from 98.4% in 2017-18 to 96.2% in 2018-19 and further to 95% in 2019-20.
• Allocation for the North Eastern Areas has been proposed to increase by 21% to INR 58,166 crore in 2019-20.

DIGITAL INDIA REVOLUTION

• Finance Minister in his Budget speech promised to make 1 lakh villages into Digital Villages over next five years.
• Adding to this he also claimed that the Government has made it possible to open 34 crore Jan Dhan bank accounts.
• The year 2018 been declared as cheapest with regard to mobile data and increase in monthly consumption of mobile data by 50 times.

RURAL DEVELOPMENT

• Pradhan Mantri Gram Sadak Yojana: allocation of INR 19,000 crore in 2019-20 as against INR 15,500 crore in 2018-19.
• Saubhagya Yojna: it has been claimed by the Finance Minister that by 2019 free electricity connection will be provided to almost every willing family.
  

  In this respect 143 crore LED bulbs has already been provided to needy families.

• Pradhan Mantri Niwas Yojna: allocation of 1,53,000 houses under the programme which is five times as compared to 2013-14.

BLACK MONEY AND DEMONETISATION

The Finance Minister, Mr. Piyush Goyal, in his budget speech claimed that the Modi led BJP Government has:

• Detected and deregistered 3, 38,000 shell companies.
• Attachment of Benami assets worth INR 6,900 crore and foreign assets worth INR 1,600 crore.
• On account of demonetisation, growth of 18% in direct tax collection in 2017-18 and increase in tax base by as many as 1.06 crore people filing income tax returns for the first time in FY 2017-18.

OTHER KEY POINTS

• Allocation of INR 60,000 for MGNREGA for the financial year 2019-20.
• Reservation of 10% seats in educational institution for the poor people, in furtherance of which extra 25% seats have been added in every educational institutions.
• Removal of PCA restrictions from Bank of India, Bank of Maharashtra and Oriental Bank of Commerce.
• Abolishing duties on 36 capital goods.
• Introduction of revised system of importing duty free capital goods and inputs from manufacture and export along with introduction of single point of approval under section 65 of the Customs Act.
• Entertainment: Introduction of single window clearance for film makers.
• Youth empowerment: Pradhan Mantri Kaushal Vikas Yojana, aims at training over 1 crore youth to help them earn a livelihood.

Under MUDRA Yojana 15.56 crore loans have been disbursed amounting to INR 7,23,000 crore to aid youth in creating self-employment.

• Health and Medical: Launching of Ayushman Bharat, to provide medical treatment to nearly 50 crore people.
  

  Proposal to set 22^ndAIIMS in Haryana.

• MSMEs and Traders: GST registered SME units will get 2% interest rebate on incremental loan of INR 1 Crore. The requirement of sourcing from SMEs by Government enterprises has been increased to 25%, of this atleast 3% will be sourced from women owned SMEs.

VISION 2030

Finance Minister, Mr. Piyush Goyal, in his budget speech claimed that the Modi led BJP Government aims at India to become a Five Trillion Dollar Economy in the next five years and aspire to become a Ten Trillion Dollar Economy in the next 8 years thereafter.

• Quality and quantitative availability of infrastructure which involves roads, railways, seaports, airports, urban transport, gas, electricity and housing.
• Creation of Digital India in every sector of the economy.
• Making India pollution free.
• Expansion of rural Industrialisation.
• Clean all the rivers of the country.
• Development of inland waterways.
• Creation of self-sufficiency in food needs by using modern agricultural practices and value addition.
• Assuring proper health to all.
• Minimum Government Maximum Governance nation.

End Note

This is just an Interim Budget and is applicable for a very short period, much cannot be said on the changes and modification that would be made to it post elections depending upon who comes into the power.

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development and Anjali Jain– Intern, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

References:

[1] Note: Inflation is the economic phenomena where a currency is devalued because of an increase in the money supply relative to output creating a rapid rise in prices of goods and services.