Union Budget 2019

Budget 2019 - What to Expect From the Upcoming Union Budget?

If you are looking for the latest budget news, you won’t have to wait for long. The Union Budget 2019 date has been set for July 5 by the Central Government. It will be presented by Finance Minister Nirmala Sitharaman, who is set to make history for being the first full-time woman finance minister to present the union budget 2019. In order to get a sense of the broad policy trajectory she may opt for, it is essential to look back at the template set by the stand-in finance minister Piyush Goyal in February's interim budget.

Key Takeaways from the Interim Budget

The Interim Budget 2019, presented by the then Finance Minister Piyush Goyal on 1st Feb 2019, was a combination of some smart political moves and focused economics. The budget was highly focused on the vast urban and semi-urban middle class, the farmer, the newly sprouting MSMEs and the real estate sector at large. It included a major relief for individual taxpayers with the increase in rebate, applicable under Section 87A of the Income Tax Act, as well as the farmers of India in the form of a PM Kisan scheme. Here are the key takeaways from the interim budget:-

Income Tax Slabs and Benefits FY 2019-20

The interim budget 2019 included several benefits for the common man in the urban and semi-urban areas. Effective from April 1, 2019, anyone having a taxable income up to Rs 5 lakh per annum, need not pay any tax. However, this tax benefit will be rolled out in the form of a rebate and not an exemption.

Illustration 1 – If you presently earn an income of Rs 5 Lakh per annum, you will be taxed at 5%, which amounts to Rs 25,000. However, when you file your tax returns, Rs 25,000 will be given back to you entirely as a rebate. In addition, the standard deduction has been increased from Rs 40,000 to Rs 50,000 annually, which reduces the taxable income significantly.

Illustration 2 – If your current income is Rs 10 Lakh per annum, you can still pay zero tax, here’s how:

• Claim Rs 2 Lakh under Section 24 for interest paid on home loan.
• Claim Rs 1.5 Lakh for investments under Section 80C such as ULIPs, EPF and Tax-Saving FDs etc.
• Claim Rs 50,000 as health insurance cover.
• Invest Rs 50,000 in NPS scheme and claim it.
• Claim Rs 50,000 as standard deduction.

Once, your taxable income is down to Rs 5,00,000; you need not pay any tax. It’s also important to note that HRA tax deduction has not been considered in the above illustration. If HRA is considered, the tax benefit can be higher. The whole point of these illustrations is to understand how exemptions can incentivize you as a taxpayer and help you create wealth simultaneously.

Budget 2019 – Education Sector

The interim budget allocated a total of Rs. 93,847.64 Crore to provide qualitative education for all. 25% of additional seats were created in educational institutions to meet the 10% reservation for the poor. Also, the total budget allocation of Rs.37, 461 Crore was proposed for higher education.

Budget 2019 – Infrastructure Sector  

Northeastern states like Mizoram, Meghalaya and Tripura to be included on India’s rail map for the first time. Container cargo movement improved because of navigation channels through the river, Brahmaputra.

Budget 2019 – Medium, Small and Micro Enterprises

The ministry of MSME allocated a budget of Rs. 7,011 Crore for 2019-20. A 2% interest subvention on an incremental loan of Rs 1 Crore for GST registered SMEs was introduced. At least 3% of the 25% sourcing for the Government undertakings will be reserved for SMEs owned by women. Additionally, Rs. 2,327 crore was allocated under the Prime Minister Employment Generation Programme (PMEGP).

Budget 2019 – Women’s Development

The budget for the Integrated Child Development Scheme (ICDS) increased by over 18% to Rs. 27,584 crore. Moreover, Rs. 1,330 Crore was allocated in the Interim Budget 2019-20 for the Mission for Protection and Empowerment of Women.

What to Expect from the Union Budget 2019

There are several expectations from the upcoming union budget regarding income tax relief. Leading financial analysts have predicted that the new financial budget will be pro-growth and tax sops will act as a stimulus to an economy that has slowed sharply this year. Here’s what to expect from the Union Budget this year:-

• Budget 2019 – Higher Income Tax Exemption Limit

The tax exemption limit for individuals may be raised to Rs. 3 Lakh of their annual income, up from the current Rs. 2.5 Lakh. In case the proposed tax move is implemented, it will put at least Rs. 2,500 more in the hands of taxpayers.

• Budget 2019 – Higher tax relief on NPS withdrawal

Last year, the Indian Government had hiked the tax exemption limit for lump sum withdrawal on exit from National Pension Scheme (NPS) to 60%. Currently, 20% of the accumulated corpus withdrawn by NPS subscribers is taxable. With the upcoming budget, the entire corpus is expected to be completely exempt from tax. If this change is implemented, NPS will get the exempt, exempt and exempt or EEE status.

• Budget 2019 – Higher Section 80C and Section 80D Deduction Limit

In order to encourage savings and investments, the finance ministry is expected to raise the tax exemption limit for Section 80C of the Income Tax law. Currently, the limit is set at Rs. 1.5 lakh. Moreover, given the ever-rising inflation levels and steep medical expenses, financial policymakers may consider increasing the deduction under Section 80D to Rs. 35,000 from the current Rs. 25,000. This move will ensure the affordability and accessibility of medical treatment to all class of patients.

• Budget 2019 – Re-Introduction of Tax-Free Bonds

The upcoming budget may bring back tax-free bonds to raise capital by government entities for infrastructure projects. Unlike regular bonds, interest earned on tax-free bonds is exempt from tax and have a long-term maturity of typically ten years or more.

• Budget 2019 – Higher LTCG limit

The government may increase the threshold limit of LTCG (Long-Term Capital Gains) from the current limit of Rs. 1 Lakh per financial year for sale of listed equity shares and units of equity-oriented mutual funds. The Finance Act, 2018 introduced new changes to the capital gains taxation regime wherein tax was levied on long-term capital gains (LTCG) exceeding Rs. 1 lakh, which were full exempted previously. These changes have been effective from 1st February 2019.

The major focus of the union budget 2019 is likely to be on boosting domestic consumption, addressing the rural crisis and supporting the budding micro, small and medium enterprises. Overall, the union budget is expected to bring about some big changes in the national economy. What remains to be seen is whether Finance Minister Sitharaman will be able to deliver on the promises made by the newly formed government.

Post the Modi Government’s re-election, it remains to be seen whether highly publicised campaigns like Start Up India, Make in India, PMJAY, PMAY, Digital India and Swachh Bharat Abhiyan have brought about any real improvement in the day to day lives of Indian citizens. The economy is showing signs of slowing down and wealth creation in the face of inflation remains a big challenge.

How has the Indian economy fared in 2019? What new regulations will be introduced by our Government to encourage economic growth? Will the latest fiscal policy make foreign investment in domestic businesses easy? Will the revised tax rates help the common man to keep most of his income? And most importantly, can India become a $5 trillion economy by 2025? All this and more will be announced by our Finance Minister during Budget 2020, to be held on Saturday, 1st February. 

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