Here’re the critical hits and misses from the interim budget 2019

The BJP led National Democratic Alliance Government recently presented their interim budget, which happens to be the party’s last one before this year’s general elections.

The interim budget aims at setting approvals in place to withdraw funds from the Consolidated Fund of India for meeting the government’s day-to-day functioning until the new government formed after the election presents the full budget.

Due to the high unemployment, agrarian distress, and issues faced by small businesses, expectations were high. However, this was the interim budget, and there’s decidedly less that the government can offer when it comes to indirect taxes due to the enforcement of the GST. But the promises made during the budget did manage to bring a smile on some faces.

The income tax rebate proposal 

The common man was expecting the government would announce a change in the tax exemption limit. People were speculating the Modi Government will raise the exemption limit to Rs 5 lakh. But instead, the government has proposed that it would offer a rebate of Rs 12,500 per year for individuals who earn up to Rs 5 lakh per annum. If approved by the next government, the proposal can be implemented from April 2020 as per the finance minister’s website.

What’s in store for the property owners?

Perhaps, the enhancement in the standard deduction amount, from Rs. 40,000 to Rs.50,000 may prove to be helpful for the salaried class. It is the amount that is subtracted from the individual's annual income before calculating the taxable income. With this, taxpayers can gain maximum tax benefit up to Rs 3,588.

The Modi Government has also proposed to increase the threshold limit for the TDS applicable on ‘specific’ bank or post office deposit schemes. If the proposed decision is approved in the next budget, such FD holders won’t have to pay TDS if the interest earned on the fixed deposit is up to Rs. 40,000 or lesser. The decision is expected to benefit non-working spouses and small depositors.

The second crucial proposal is that of offering notional rent exemption to the second house or property owned by Indian citizens. The owner needs to declare it as self-occupied, and should not rent out the same. Currently, the person owning second property requires to add its notional rent value in his/her taxable income. 

The limit for TDS deduction on the rent income has also been increased from the current Rs 1.80 lakhs to Rs 2.40 lakhs. Simply put, the lessee needs to deduct tax from the rent amount before paying the same to the property owner only if the amount per annum exceeds Rs 2.40 lakhs.

The third important proposal for the property owners is about tax benefits on long-term capital gains on a residential property sale. The plan is to offer the exemption (as per section 54) on long-term capital gains of up to Rs two crores if the same is spent on construction or purchase of second residential property.

What’s missing?

There were several announcements like the plan for the formation of a new pension scheme for unorganized workers, the farmers’ income support scheme, and the creation of the fisheries department. But there was no proposal to offer an income support scheme for the urban poor.  Taxpayers’ were also expecting a proposal regarding the government’s promise to make 60 percent of the amount withdrawn from the National Pension Scheme (NPS) as tax-free instead of the current 40 percent.  The 80c deduction remains the same, and so do the existing tax rates.

Was anything proposed to help small businesses?

The Federation of Indian Micro Small & Medium Enterprises General Secretary Anil Bhardwaj interacted with journalists and said they were disappointed. The organization believes nothing much was proposed to ease the credit woes or to help proprietor and partnership firms.

Willing to learn more about Budget 2019 and other Accounting and Taxation concepts, Munimji is here to help you.

Here’re the critical hits and misses from the interim budget 2019