Budget offers tax cuts, handouts

Setting aside all conventions with an eye on the coming elections, Finance Minister Piyush Goyal yesterday showered tax sops for the middle class and salaried tax payers including zero tax liability for those with income up to Rs500,000 and announced an annual income support of Rs6,000 for small farmers and contributory pension for labourers in the demonetisation-hit unorganised sector.Taking the place of an ailing Arun Jaitley, in his 100-minute speech, Goyal also announced raising the standard deduction for the salaried class and pensioners from Rs40,000 to Rs50,000 and proposed exemption from tax on notional rent on second self-occupied home. This would help families maintaining homes at two locations due to their jobs.In a big relief for the middle income group, he increased the rebate under Section 87A of the Income Tax Act from Rs2,500 to Rs12,500 – the equivalent of 5% tax on the Rs250,000 to Rs500,000 slab – and also raised the eligibility criterion for claiming the rebate to Rs500,000 from Rs350,000 earlier. This effectively reduces the tax liability of those with net taxable income up to Rs500,000 to nil.However, tax liability for those with net income above Rs500,000 would still start from Rs250,000 as earlier. The Interim Budget neither changed the existing tax rates nor the slabs.The tax giveaways involve a revenue sacrifice of Rs231bn a year to benefit more than 30mn salary earners and pensioners – Rs184bn on account of the Rs12,500 tax rebate and other changes and Rs47bn on account of raising the standard deduction.In the wake of the BJP’s defeat in the Hindi heartland states in December on perceived stress in agriculture and informal sectors, the Budget came out with a direct income support of Rs6,000 per annum for small farmers with land-holding size up to two hectares which would be transferred directly into their bank accounts.The scheme would be funded completely by the central government and would directly benefit 120mn farmer families, he said to the cheers of the ruling benches.Acknowledging reduced returns for farmers due to falling food prices in the international market and declining inflation, Goyal said the scheme would be implemented from December 1 last year for which Rs200bn has been allocated in the revised estimates for the current fiscal and Rs750bn in the Interim Budget for the whole of next fiscal.For the demonitisation-hit unorganised sector, Goyal announced a contributory pension scheme providing a worker Rs3,000 per month on attaining 60 years. The scheme will benefit 100mn workers in the unorganised sector.Those who enter the scheme at 18 years will have to pay a monthly premium of Rs55 while those who enter at 29 years will have to pay Rs100 per month till they reach 60. The government will contribute a matching share in the pension account of workers.This scheme, he said, will be implemented from the current year and a sum of Rs5bn has been allocated and more will be given if needed.In a big relief to pensioners and senior citizens, he also raised the threshold for tax deduction at source (TDS) on interest received on bank deposits from Rs10,000 to Rs40,000, and TDS on rent from Rs180,000 to Rs240,000.“Once you account deductions under Section 80(C), the middle class tax payers with gross income up to Rs650,000 will have no need to pay income tax,” he said amidst prolonged thumping of desks by the ruling NDA members who kept shouting “Modi, Modi, Modi”. The prime minister was himself seen thumping the desks every time Goyal made fresh announcements.Taken along with standard deduction and other sops like interest paid on home loans, education loans, contribution to National Pension Scheme, medical insurance premium and medical expenses on senior citizens, the effective exemption would go up further.He said while the changes in the tax structure would be made in the regular Budget, people needed a certainty in their minds in the beginning of the year about what taxes they would have to pay and went on to announce the tax sops in the Part B of his speech.The budget also stepped up defence allocation which he said will be crossing Rs300bn for the first time in 2019-20. “If necessary, additional funds would be provided for securing our borders and to maintain preparedness of the highest order.”* Within two years, tax assessment will be done electronically* IT returns processing in just 24 hours* Minimum 14% revenue of GST to states by central government* Custom duty abolished from 36 capital goods* Recommendations to GST Council for reducing GST rates for home buyers* Full rebate up to Rs500,000 annual income after all deductions* Standard deduction increased from Rs40,000 to Rs50,000* Exemption on tax on second self-occupied house* Ceiling limit of TDS u/s 194A increased from Rs10,000 to Rs40,000 for women* Ceiling limit of TDS u/s 194I increased from Rs180,000 to Rs240,000* Capital tax Benefit u/s 54 increased from investment in one residential house to two residential houses.* Benefit u/s 80IB increased to one more year i.e. 2020* Benefit given to unsold inventory increased from one year to two years* State share increased to 42%* PCA restriction abolished from three major banks* 200,000 seats will increase for the reservation of 10%* Rs600bn for MGNREGA* Rs1.7tn to ensure food for all* Twenty-second AIIMS to open in Haryana* Approval has to be given to PM Kisan Yojana* Rs 6,000 per annum to be given to every farmer having up to two hectare land. Applicable from September 2018. Amount will be transferred in three instalments* National ‘kamdhenu ayog’ for cows. Rs7.5bn for National Gokul Mission* Two percent interest subvention for farmers pursuing animal husbandry. Creation of separate department for fisheries.* Two percent interest subvention for farmers affected by natural calamities and additional 3% interest subvention for timely payment.* Free gratuity limit increased to Rs2mn from Rs1mn* Bonus will be applicable for workers earning Rs21,000 monthly* Pradhan Mantri Shram Yogi Mandhan will provide assured monthly pension of Rs3,000 with contribution of Rs100 per month for workers in unorganised sector after 60 years of age.Budget will create ‘New India’: Modi Prime Minister Narendra Modi yesterday said the Interim Budget will empower the poor, the middle class, farmers, labourers, and traders besides imparting speed to economy and infrastructure for creation of ‘New India’.In his reaction to the Budget presented earlier in the day by Finance Minister Piyush Goyal, Modi said it will provide direct benefit to 120mn farmers, 30mn middle class tax payers and about 400mn workers in the informal sector.“It will give power to the poor, empower the farmers and traders, increase dignity of labourers, fulfil dreams of the middle class, celebrate the honest tax payer, accelerate infrastructure development and give new strength to economy. It will increase the confidence of the country. It will give new hope to 1.3bn people of the country to achieve goals of New India,” Modi said.He said the Budget is “all-encompassing and all-inclusive” and is “dedicated to welfare of all.” The prime minister said the Budget covers all sectors.“The Budget has taken care of all. Our policies have made a positive change in the lives of everyone,” he said.Modi said the efforts of government have led to a “record” in the speed of poverty reduction. More and more people were getting out of poverty and entering the middle and the neo-middle class, he said. “This big section is making their dreams come true and is accelerating development of the country. In this scenario the aspirations of middle class get a boost, get support - the government has shown its commitment for that,” he said.The prime minister said the Ayushman Bharat (a national health protection scheme) has benefited 50mn people, the Pradhan Mantri Jeevan Jyoti Yojana and the Pradhan Mantri Suraksha Bima Yojana – two insurance schemes - have benefited 210mn poor, Swachh Bharat mission (Clean India initiative) has benefited 90mn  families, Ujjawala scheme has given free gas connection to 15mn families and another 15mn families have got permanent houses under the Pradhan Mantri Awas Yojana.