New Delhi: Making a big populist push in its final budget before elections, the Narendra Modi-government on Friday exempted people with income up to Rs 5 lakh from payment of income tax. It also announced an annual cash transfer, in three instalments of Rs 2,000 each, of Rs 6,000 to small farmers. A monthly pension of Rs 3,000 was announced for workers in the unorganised sector.
More than 3 crore people belonging to salaried class, pensioners, self-employed and small businesses with total income of up to Rs 5 lakh will not have to pay any tax now, as against their earlier liability of Rs 13,000 (including health and education cess) in view of the relief provided in form of a “rebate”. Individuals with gross income up to Rs 6.5 lakh will also not need to pay any tax if they make tax-saving investments of Rs 1.5 lakh under Section 80C of the Income Tax Act.
Very senior citizens (aged 80 years and above) are not impacted by this change as their total income up to Rs 5 lakh was anyway not subject to tax.
The rebate will cost the government Rs 18,500 crore in revenue.
At a post-budget press conference, Goyal promised to look into giving relief to taxpayers with income of over Rs 5 lakh in the main budget to be presented in July.
In the Budget for 2019-20, he also raised standard deduction by Rs 10,000 to Rs 50,000 which will provide benefit ranging from Rs 2,080 to Rs 3,588 depending on income levels.
Other proposals include increase in TDS exemption limit from Rs 10,000 to Rs 40,000 for bank interest, on rental income from Rs 1.8 lakh to Rs 2.4 lakh, extending housing income exemption from one to two self-occupied houses, capital gains from sale of house property being allowed to be invested in two properties instead of one, and a 10-year window for registration of affordable housing projects for getting tax relief.
As was widely anticipated, Goyal announced an income support scheme for 12 crore small and marginal farmers by providing Rs 6,000 in their bank accounts in three equal installments in a year, which will cost Rs 75,000 crore a year to the government.
Eligibility for the scheme, called Pradhan Mantri Kisan Samman Nidhi, will be ownership of less than two hectares of cultivable land.
Though the finance minister said the scheme will be implemented from the current fiscal year, where it will cost Rs 20,000 crore, it wasn’t clear how the beneficiaries would be identified.
A mega pension scheme was introduced to provide a monthly pension of Rs 3,000 with a contribution of Rs 100 per month for workers in the unorganised sector after 60 years of age.
While Prime Minister Narendra Modi said the interim budget was merely a “trailer” of what will guide India towards prosperity after the Lok Sabha polls, Congress president Rahul Gandhi said that the government was giving Rs 17 a day to farmers after “destroying” their lives in the past five years.
The farm income support scheme will result in the government breaching its 3.3 percent fiscal deficit target from the current year and slipping on 3.1 percent target for the next. Fiscal deficit for both the years has been put at 3.4 per cent of the GDP.
An interest subvention of 2 percent to those pursuing animal husbandry and fisheries and to farmers hit by natural calamities was announced in the Budget. An additional 3 percent interest subvention will be given to farmers for timely repayment of loans.
Defence allocation has been raised by 7 percent to over Rs 3 lakh crore. Target for revenue from disinvestment of government stake in PSUs has been raised to Rs 90,000 crore from Rs 80,000 crore. Dividend from the RBI and other banks has been pegged at Rs 82,900 crore.
The relief in income tax for the middle class came in form of a rebate. A rebate is different from a general exemption which would have meant income up to Rs 5 lakh for all would have been exempt from taxes and taxes would have to be paid only on income in excess of that.
For anyone earning more than Rs 5 lakh annually will continue to pay taxes at the prevailing rates – no tax on first Rs 2.5 lakh, 5 percent on income between Rs 2.5 and 5 lakh, 20 percent on income between Rs 5 lakh and Rs 10 lakh, and 30 percent on earnings of over Rs 10 lakh. (PTI)
