As per market experts, the primary focus of the budget was on enhancing the disposable income in the hands of the middle class.
Finance Minister Piyush Goyal on Friday, 1st February, 2019, presented the Interim Budget for the fiscal year 2019-20, which begins from the month of April. The NDA-led government unveiled their last budget before the Lok Sabha elections with some major announcements for the middle class, economical weaker section, farmers, and the unorganised sector workers. With the budget speech, the government in power has made an excellent attempt to give back to the middle class of the country. Most of the announcements made during the budget speech revolved around making the economically-weaker sections of the country much stronger and powerful.
What most industry experts believe is that this year’s interim budget was presented keeping in mind the upcoming Lok Sabha polls, as the government made numerous announcements in order to keep everyone happy with tax rebates, especially the middle class, along with providing direct income to the farmers (Rs. 6000/year) through numerous social sector schemes. Moreover, a major part of the budget speech delivered by Piyush Goyal talked about the key achievements of the present government over the last five years and their vision for the growth and development of the nation in the future.
However, it must be learned that the government refrained from announcing any big changes in this budget as the budget mostly aimed at maintaining a balance between populism and fiscal prudence. Consumption sector has surely emerged as the clear winner in this year’s budget as it was gifted with enhanced subsidies and cash benefits. Moreover, new pension schemes were announced for the unorganized workforce and a significant tax rebate has been promised for people who have incomes up to Rs 5 lakh.
As per market experts, the primary focus of the budget was on enhancing the disposable income in the hands of the middle class. The tax rebate given to individuals earning up to Rs 5 lakh is expected to benefit over 3 crore people as per government estimates. The budget announcement will surely reduce the tax burden on small taxpayers by giving full tax rebate to those earning up to Rs 5 lakh a year. Moreover, individuals with higher income can also escape the tax net if they claim tax deductions under various sections specified by the government as the rebate has been enhanced under the existing benefit provided under Section 87A. Prior to this announcement, individuals earning up to Rs 3.5 lakh a year were eligible for a tax rebate of Rs 2,500. However, with this year’s proposal, the amount has been hiked to Rs 12,500 and the eligibility has been raised to Rs 5 lakh.
Though it must be learned that individuals with high income will not be affected by the rebate, as only the taxpayers in the lower income group will save up to Rs 13,000 in tax. At the same time, the budget also focused on enhancing higher standard deduction for salaried class from Rs 40,000 to Rs 50,000, no TDS on interest earned up to Rs 40,000 per annual from savings bank account and post office savings schemes. Yet another great announcement in this year’s interim budget was for individuals having unoccupied second house. From the upcoming financial year, they would not be required to pay tax on such a property. Another major announcement of this year’s budget was the ceiling of payment of gratuity being enhanced from Rs 10 lakh to Rs 20 lakh. Moreover, the ceiling of ESI’s eligibility cover has also been increased from Rs 15,000 pm to Rs 21,000 pm. This amendment once effective will make employees in the private sector as well as public undertakings eligible to receive higher amount of gratuity.
The change apart from providing higher tax benefit for employees who are covered under the Gratuity Act is even expected to bring equality with respect to the maximum limit of gratuity applicable for Central Government employees under the Central Civil Services (Pension) Rules, 1972. For example, an employee who has rendered 20 years of service with a monthly salary of Rs 1.5 lakh (at the time of retirement), with the proposed amendment would now be eligible to receive Rs 17.30 lakh (15/26 x 1,50,000 x 20 years) as gratuity, which would have been otherwise restricted to Rs 10 lakh under the earlier provisions.
(By Manoj Sharma, Director-Finance, Policybazaar.com)