On Friday, the 1st of February, Finance Minister Piyush Goyal presented the Interim Budget in the Lok Sabha. This is the sixth and final budget under the Narendra Modi government.
We all know what the budget is and what it signifies. However not a lot of people are aware of what THIS budget in particular means.
That is where I come in, dear friends.
I will take this opportunity to talk about the salient features of the Interim Budget and what it signifies.
Let’s get started then, shall we?
According to the dictionary, the word “interim” means meanwhile. Simply put, the Interim Budget is more of a short term proposal created by the outgoing government which is later finalised after the new government is formed.
In this case, the general elections in India are scheduled to be held between April and May, 2019. The Interim Budget will therefore stay in effect until then. After the elections, when the House reassembles, a newer full-fledged Budget will be presented.
Interim Budgets generally do not contain any new schemes or political measures. They are somewhat softer in approach as compared to a full-fledged Budget. This particular Interim Budget has been designed to appease the middle-class voters, and lay the groundwork for the Bharatiya Janata Party for the upcoming general elections.
Sounds interesting, doesn’t it?
Now let’s get into the nitty-gritty of the Interim Budget.
The first feature that caught my eye is that all individuals whose annual income is Rs. 5 lakhs or lesser than that are exempted from income tax. This is a huge improvement from the earlier income limit of Rs. 2.5 lakh and rings in good news for a lot of salaried individuals across the country.
I mean, we all know why we have to pay income tax, but that doesn’t mean we have to like it, does it?
According to Finance Minister Piyush Goyal, in the recent past, there has been a significant improvement in tax collection. “We have moved to a moderate tax regime, with a high collection,” he said.
Smart move, isn’t it?
Almost 3 crore salaried individuals will get exemption due to this measure. Further, if you invest in some specific tax saving schemes of the government like provident funds and certain equities, the effective tax exemption income limit is Rs. 6.5 lakhs.
The Standard Tax Deduction for salaried individuals has been raised from Rs. 40,000 to Rs. 50,000 and the limit for Tax Deduction at Source (TDS) for interest income has been increased from Rs. 10,000 to Rs. 40,000. The TDS threshold on rental income, on the other hand, has been raised from Rs. 1.8 lakh to Rs. 2.4 lakh.
This is not all. With additional deductions and exemptions, even people with higher income will not have to pay tax. With all the intended schemes and exemptions, Goyal says the proposal is expected to provide a total tax benefit of Rs. 18,500 crore.
Impressive, isn’t it?
According to Goyal, “We are poised to become a $5 trillion economy in the next five years, and we aspire to become a $10 trillion economy in the next eight years.”
Among other notable features of the Interim Budget, the Goods and Service Tax (GST) has been reduced significantly, such that most daily use necessities are in the 0% to 5% tax bracket.
A number of other myriad reforms have been talked about for the next few years. Among them, all verification and assessment of income tax returns are expected to be carried out electronically through an anonymous system, thus eliminating any role of tax officials in the process.
Apart from these, Goyal also talked about a number of development measures.
The allocation of funds for aiding economic development in the North Eastern region of India is expected to increase by about 21%. This measure, if successful, would go a long way in increasing infrastructure in the area and helping eradicate the inequality in development that we see in certain regions in the country.
Goyal talked about the launch of a major pension scheme, the Pradhan Mantri Shram Yogi Man Dhan Yojana. This scheme requires a contribution of Rs. 100 per month and will provide an assured pension of Rs. 3,000 per month to individuals above the age of 60. This is expected to benefit almost 10 crore workers in the unorganised sector. Goyal is optimistic that this scheme will become the biggest pension scheme the world has seen, in the next five years.
Admirable, isn’t it?
This is not all, dear friends.
Goyal also talked about the Pradhan Mantri Kisan Samman Nidhi, for small farmers who have less than two hectares of land. This scheme, if successful, will provide financial aid to such farmers in the form of Rs. 6,000 per year, so that they may improve the quality of agriculture and their own lives. Although this is expected to cost close to Rs. 75,000 crore, it will benefit almost 12 crore farmers and make their lives easier.
The Finance Minister stressed on the importance of clean banking, maintaining a single digit rate of inflation, and fiscal and current account deficit. Inflation is currently at 2.1%, while fiscal deficit and current account deficit are at 3.4% and 2.5% respectively.
“We have broken the back of back-breaking inflation,” he said.
According to Prime Minister Narendra Modi, “This is just a trailer of the Budget, which after elections, will take India on the path of development.”
What are your thoughts?
This Budget takes a softer approach, rather than the radical tone of the previous few Budgets. Then again, we had all expected it.
On the eve of the General Elections, the present government under PM Narendra Modi has taken this opportunity to appease the voters, particularly the middle class. Whether it works or not remains to be seen.
Having said that, the Interim Budget brings nothing but good news for salaried individuals throughout the country. With tons of tax deductions and exemption schemes, there is little to not love about it.
Of course, this is a much summarised version of the Finance Minister’s speech. Feel free to read up on the parts that you find interesting.