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Interim Union Budget 2019 India Date, Expectations, Analysis, Income Tax & Highlights

Union Budget 2019 India Date, Expectations, Analysis, Income Tax & Highlights: The officials aware of the first budget said that the first budget by the finance minister Nirmala Sitharaman’s will set the stage for reforms over the next five years that could see structural policy changes in areas such as land, labour, capital, and entrepreneurship to attract investment, offer incentives to boost consumption, and spend public money on social infrastructure for equitable growth.

HIGHLIGHTS

  • Government likely to increase personal income tax exemption threshold to Rs 3 lakh
  • Move could reduce tax outgo of millions of Indian taxpayers
  • Additional measures to further increase tax deductions under Section 80C also expected

Interim Budget 2019 India

On February 1, the government presented the interim budget that announced several popular decisions. According to the officials who asked not to be named told that this is being seen as a time for consolidation and to present a five-year policy road map that would boost sagging economic growth and address unemployment, two main concerns for the government.

The officials further added that while the coming budget may incentivise job-oriented private investment and focus on skill-development initiatives, the government is likely to persuade banks, particularly public sector ones, to slash interest rates in order to boost consumption.

Finance minister Nirmala Sitharaman during 35th meeting of GST Council on Friday. (Photo: PTI)

The Finance Minister gets ready for 5 July

They also said that it might be that the Reserve Bank of India could possibly further lower the lending rates to provide more room to commercial banks for cheaper loans. The central bank cut the repo rate to 5.75% on June 6, its third cut this calendar year.

Budget timing

The finance minister is expected to deliver the speech around 11 am in Parliament. Till 1999, the Union Budget was announced at 5 pm on the last working day of February. However, former finance minister Yashwant Sinha changed this ritual by announcing the budget at 11am. The last interim budget was presented around 9:30 am by Piyush Goyal.

Expectations

The Union Budget bears significance not only for people but also the government, as it’ll be an opportunity to revive the economy that slowed down to 5.8 per cent in FY19.

Dr. DK Srivastava, chief policy adviser, EY India, said, “An indirect boost to consumption will also come through interest rate reduction. The policy rate has already been reduced by 75 basis points this calendar year. About 40% of this has been passed on to the lending rates and the RBI may endeavour to increase monetary transmission further. One more reduction of 25 basis points in the repo rate may be considered later during the year. Private sector investment demand may also be stimulated through an interest rate reduction. To ensure that interest rates remain at a lower level, the government may adhere to the interim budget fiscal deficit target of 3.4% of GDP so that some investible resources remain available for the private sector at reasonable costs.”

It was also said that the government will continue its policy focus on rural India and the same is expected to be reflected in the budget as rural development has immense potential to create both demands and jobs.

Dr. Srivastava also said that the government will be focused on the rural economy for boosting consumption. He said, “The main vehicle for this in the short run would be the income transfers under PM-KISAN, which would add to farmers’ disposable income, and in the medium term, the government’s productivity-enhancing efforts to double farmers’ income by 2022.”

According to recently released official data, India’s GDP fell to almost a 20-quarter low of 5.8% in the last quarter of 2018-19, which brought down the full-year growth estimate to 6.8%, lower than the initial estimate of 7%.

The GDP that grew at 8% in the first quarter gradually dropped below 6% in the fourth quarter mainly due to a slump in agricultural and industrial growth.

Budget 2019: Government likely to increase income tax exemption limit to Rs 3 lakh

The government is also concerned about growing unemployment, which was also reflected in an official report released on Friday. According to the Periodic Labour Force Survey (PLFS) report for July 2017 to June 2018, the unemployment rate soared to 6.1%. While the PLFS figures are not strictly comparable with earlier Employment Unemployment Surveys of the National Sample Survey Office, the numbers paint a grim picture on the employment front. What is particularly worrying in the PLFS numbers is the big increase in the unemployment rate among educated workers.

The officials also said that the government’s recent pension offer to the unorganised sector is also expected to boost consumption.

Dr. Sivastava said, “Supplementary support to disposable income would also come through a number of pension schemes covering small traders and retailers as well as farmers above 60 years of age.”

The officials said, “The first budget of the Narendra Modi government’s second tenure is expected to be a precursor of major economic reform with an objective to make India a $5 trillion economy by 2024, about double its current size. The government’s ambition was reflected in its recent interactions with experts.”

Prashant Deshpande, partner, Deloitte India, said, “The budget could bring in reforms aimed at creating a tax- and business-friendly environment. The government could give several tax concessions to exporters, particularly to boost domestic manufacturing.”

According to Surendra Hiranandani, founder, and director, House of Hiranandani, the government’s “housing for all” mission was expected to accelerate the economy, provided the government incentivised the key stakeholders through direct and indirect tax measures.

He further said, “There is a significant expectation to cut GST rates to a single, standard rate, and not have multiple rates or taxes. The abolition of stamp duty or its incorporation under GST will be an added advantage. Relaxation in income tax slabs will also be welcomed as it will allow the salaried class to make further investments in real estate. The government must look at increasing the deduction limit under section 80C from the current ~1.5 lakh.”

Officials said, “The budget might take some key decisions to boost the real estate sector which could have a multiplier effect on the economy as it would spur demand for steel, cement, and labour, particularly in the unorganised sector.”