New Delhi, Feb 1: Making a big populist push in its final budget before elections, the Narendra Modi-government Friday exempted people with an earning of up to Rs 5 lakh from payment of income tax, announced an annual cash dole-out of Rs 6,000 to small farmers and provided a monthly pension of Rs 3,000 to workers in the unorganised sector.
Converting what was supposed to be an interim budget or a vote on account into an almost full-fledged budget announcement in the Lok Sabha, Finance Minister Piyush Goyal proposed an array of incentives for both middle-class and farmers, whose disenchantment was said to have cost the BJP dearly in recent assembly elections.
Over 3 crore salaried class, pensioners, self-employed and small businesses with total income of up to Rs 5 lakh will save Rs 10,900 in income tax annually after considering the relief Goyal provided in form of a ‘rebate’. For those making investments of Rs 1.5 lakh in tax saving instruments, the tax-free income would be Rs 6.5 lakh.
The rebate will cost the government Rs 18,500 crore in revenue.
He also raised standard deduction by Rs 10,000 to Rs 50,000 which would translate into a saving of Rs 2,000 to Rs 3,000 in taxes for those with taxable income of Rs 7.5 lakh and Rs 20 lakh in a year.
Also, exemption from deduction of tax at source for interest income earned from deposits in banks and post offices has been increased to Rs 40,000 from current Rs 10,000. This would help all salaried taxpayers who lost out last year due to the removal of medical reimbursement and transport allowance exemptions.
As was widely anticipated, Goyal announced an income support scheme for 12 crore small and marginal farmers by providing Rs 6,000 in their bank accounts in three equal installments in a year, which will cost Rs 75,000 crore a year to the government.
The eligibility for the scheme, called Pradhan Mantri Kisan Samman Nidhi, will be ownership of less than 2 hectares of cultivable land.
Though the finance minister said the scheme will be implemented from the current fiscal year, where it will cost Rs 20,000 crore, it wasn’t clear how the beneficiaries would be identified.
A mega pension scheme was introduced to provide a monthly pension of Rs 3,000 with a contribution of Rs 100 per month for workers in the unorganised sector after 60 years of age.
The farm income support scheme will result in the government breaching its 3.3 per cent fiscal deficit target from the current year and slipping on 3.1 per cent target for the next. Fiscal deficit for both the years has been put at 3.4 per cent of the GDP.
Wooing farmers, an interest subvention of 2 per cent to those pursuing animal husbandry and fisheries and to farmers hit by natural calamities was announced. An additional 3 per cent interest subvention will be given to farmers for timely repayment of loans.
In a boost to housing sector, he announced no notional taxation on second house purchase, raised threshold of TDS on rent from Rs 1.8 lakh to Rs 2.4 lakh and allowed capital gains of up to Rs 2 crore made from sale of immovable property to be invested in two residential houses as against current practice of exempting such income if invested in one house within a year.
While defence allocation has been raised by 7 per cent to over Rs 3 lakh crore, subsidy bill has gone up to Rs 2.97 lakh crore from Rs 2.66 lakh crore. Target for revenue from disinvestment of government stake in PSUs has been raised to Rs 90,000 crore from Rs 80,000 crore and dividend from RBI and other banks has been pegged at Rs 82,900 crore.
The relief in income tax for the middle class came in form of a rebate. A rebate is different from a general exemption which would have meant income up to Rs 5 lakh for all would have been exempt from taxes and taxes would have to be paid only on income in excess of that.
For anyone earning more than Rs 5 lakh annually will continue to pay taxes at the prevailing rates – no tax on first Rs 2.5 lakh, 5 per cent on income between Rs 2.5 and 5 lakh, 20 per cent on income between Rs 5 lakh and Rs 10 lakh and 30 per cent on earnings of over Rs 10 lakh.
Justifying inclusion of tax proposals in an interim budget which normally is only to seek approval of the parliament for spending for an interim period until a new government is sworn in, he said, “Though as per convention, the main tax proposals will be presented in regular budget, small taxpayers especially middle class, salary earners, pensioners and senior citizens need certainty in their minds at the beginning of the year about their taxes.”
“Therefore, proposals, particularly relating to such class of persons should not wait.”
Goyal, who was made the interim finance minister after Arun Jaitley had to rush to New York for medical treatment last month, said what he presented was not merely an interim Budget, but a medium of the country’s development journey.
The NDA government, he said, has laid the foundation for India’s growth and development for times to come. India is poised to become a USD 5 trillion economy in the next five years.