Even though it was an Interim Budget, the vision laid out by the government is aspirational
The Interim Budget of 2019-20, the last one of the government before the Lok Sabha polls, was always headed towards being populist in nature. The interim finance minister, Piyush Goyal, started off on a very positive note, and proudly stated that the current government has prepared the foundation for sustainable growth, progress and better quality of life for all the Indians.
In his Budget speech, he also highlighted some of the key measures taken by the government over the past five years and the progress made, which ranged from steps taken against corruption, cleanliness, banking reforms and the Insolvency and Bankruptcy Code, demonetisation and the drive to eliminate black money, and farmers’ progress, to name a few.
From a tax perspective, finance minister Goyal highlighted a few important measures undertaken over the past five years, which included reduced tax rates (for the common man), reduction in tax burden on the middle class, interface with the tax department being made simpler and largely faceless (returns, assessments, refunds and queries are all handled online), special benefits and incentives provided to small businesses and start-ups, the overall compliance process being simplified, the benefit of presumptive taxation extended to small professionals, and the implementation of GST.
The direct benefits resulting from the above have been increased tax collections from Rs 6.38 lakh crore in 2013-14 to Rs 12 lakh crore this year, and increased number of returns being filed with an 80% growth in the tax base. The implementation of GST has also resulted in an increased tax base, higher collections and ease of trade.
Goyal also mentioned that the government has approved a path-breaking, technology-intensive project to transform the tax department to be more assessee-friendly. The objective is to ensure all returns are processed within 24 hours and refunds issued simultaneously.
The Budget proposals focus on the middle-class taxpayer. Currently, a tax rebate of up to Rs 2,500 is provided for individuals having taxable income up to Rs 3,50,000. This threshold limit is now being proposed to be increased up to Rs 12,500 for individuals having taxable income up to Rs 5,00,000. Accordingly, an individual having taxable income up to Rs 5,00,000 will not have to pay any tax. Further, the existing standard deduction for salary income has increased from Rs 40,000 to Rs 50,000.
From a house property perspective, currently, the annual value (on a notional basis) of a second self-occupied house property is taxable in the hands of the owner. It is now proposed to provide relaxation on the second self-occupied property to owners. In other words, the notional rent on the second self-occupied property would not be chargeable to tax. However, the aggregate amount of deduction under house property on account of interest on borrowed capital, for both the houses, in aggregate shall not exceed Rs 2,00,000.
In the past, capital gains arising from transfer of long-term capital asset, being a residential house, shall be exempt if the assessee has purchased one residential house 1 year before or 2 years after the date of transfer or constructed one residential house within 3 years after the date of transfer. It is now proposed that, if the amount of capital gains does not exceed Rs 2 crore, the assessee is given an option to purchase two residential houses or construct two residential houses (as compared to one house earlier). However, this option is available only once to the assessee.
With respect to claiming deduction in respect of profits and gains from affordable housing projects, the time limit for getting an approval from the competent authority has been extended to March 31, 2020.
To give impetus to the real estate sector, the annual value of the property that is held as stock in trade and is not let out shall be nil, for a period of 2 years from the end of the financial year in which the certificate of completion of construction of property is obtained (as against 1 year earlier).
From a withholding tax perspective, threshold limits for applicability of tax deduction at source have been enhanced from `10,000 to Rs 40,000 for interest on bank and post office deposits (the existing limit of Rs 50,000 for senior citizens shall continue to apply). Further, from a withholding tax perspective for payment of rent, the limit has been enhanced from Rs 1,80,000 to Rs 2,40,000.
From a corporate tax perspective, the corporate base tax rate remains unchanged at 30%. For domestic companies with turnover in financial year 2017-18 not exceeding Rs 250 crore, the tax rate remains unchanged at 25%. The rates of surcharge and cess shall also remain unchanged for financial year 2019-20.
All in all, while Budget proposals were far and few given the fact that this was an Interim Budget, the overall progress achieved, and the vision laid out by the government, is aspirational.
The author is CEO, Dhruva Advisors LLP