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Budget 2019: Key Highlights of Interim Budget at a Glance

The much-awaited Union Budget 2019 has been presented by the interim finance minister Mr Piyush Goyal on Friday, 01st February 2019, in Lok Sabha. In the union budget 2019, the major announcement was that individuals would get a full income tax rebate on annual income up to Rs. 5 lakhs for the financial year 2019-2020.

What is an Interim Budget?

In parliament, the BJP government announced the interim budget. For your better understanding, we would like to tell you, “what exactly the interim budget is?”

As we know that it is the last year of the current government, and general elections are coming up; therefore, the budget is for a short span of time, not for the entire year. This is the transitory period between the two governments. Unlike other budgets, this interim budget does not have major policy decisions. If the budget has been presented before the declaration of the election date, then any policy decisions can be announced by the ruling government. As per the reports, this budget can affect the expenditure of the next government.

What are the major announcements of Union Budget 2019?

Following are the major announcements of the union budget 2019:

• Rental Income

In respect of rental income, the TDS threshold limit has been raised from Rs.1.8 lakh to Rs.2.4 lakh.

• Standard Deduction

For salaried persons, the standard deduction has been raised from Rs.40,000 to Rs.50000.

• Interest Income

The interest income on bank & post office deposits will be exempt from TDS up to Rs.40000. Currently; the limit is Rs.10,000.

• The benefit of Rollover of Capital Gains

As per Section 54 of the Income Tax Act, the benefit of the rollover of capital gains has been increased. Now, one can invest in two residential houses in order to save capital gain tax for a taxpayer having capital gains up to Rs.2 crore. Currently, it is permitted to make an investment in one house property.

• Gratuity Limit

For the salaried people, the gratuity limit would be raised from Rs. 10 lakhs to Rs 20 lakhs.

• EPF Limit

In case of the demise of the employee, the EPF (Employment Provident Fund) limit has been raised from Rs.2.5 lakh to Rs. 6 lakhs. In this regard, the union minister said: “To ensure safety to the family of a salaried person, if he or she dies prematurely, the government of India proposes to increase EPF limit from Rs.2.5 lakhs to Rs.6 lakhs“.

• ESI Limit

The ESI limit would be raised from Rs. 15,000 to Rs.21,000.

• Pension Scheme for Workers in Unorganized Sector

For the workers in an unorganized sector, the monthly pension scheme has been introduced under which Rs.3000 will be paid monthly after attaining the age of 60.

• For Film Industry

It has been decided that single window clearance for filmmaking will be made available to Indian filmmakers. Besides this, in order to combat film privacy, the anti-camcording provisions will be introduced under the cinematography act.

Key Highlights

For Individuals

• Full tax rebate to individual taxpayers whose annual income is up to Rs. 5 lakhs;
• The benefit of the rollover of capital gains has been increased. Now, one can invest in two residential houses in order to save capital gain tax for a taxpayer having capital gains up to Rs.2 crore. Currently, it is permitted to make an investment in one house property. However, it can be exercised once in a lifetime. Now the exemption under section 54 will be available;
• For the FY 2019-2020 – Income Tax slabs shall remain the same;
• If the individual makes investments in provident funds and prescribed equities, then there is no need to pay tax on gross income up to Rs. 6.5 lakhs;
• For salaried persons, the standard deduction has been raised from Rs. 40,000 to Rs. 50,000;
• This budget is going to benefit around 3 crore middle-class taxpayers as they will get full tax rebates up to the annual income of Rs. 5 lakhs;
• The gratuity limit has been raised from Rs.10 lakhs to Rs. 30 lakhs.

For Business Entities, MSME & Real Estate

• All the housing projects approved until the end of 2019-2020 will get the benefit for one more year under section 80(i)BA. It is good news for home buyers & real estate developers. This will boost affordable housing in India;
• Such business entities whose annual turnover is less than Rs.5 crore, comprising more than 90% GST taxpayers, will be permitted to file quarterly returns;
• For GST-registered MSME units, 2% interest subvention on the loan of RS.1 crore;
• On rental income, the TDS threshold limit has been increased from Rs. 1,80,000 to Rs. 2,40,000;
• The exemption period has been extended from 1 year to 2 years in case of a levy of tax on notional rent and on unsold inventories. Such period starts from the end of the year in which the project is completed;
• Sourcing from SMEs has been increased to 25%, with 3% reserved for women-owned SMEs by Government enterprises;
• A scheme will be very soon implemented concerning ‘Business loans up to Rs. 1 crore in 59 minutes’.

For the Betterment of Society

• Rs. 60, 000 crores have been allocated to MGNREGA;
• 8 crores of free LPG connections have been promised to rural women, out of which 6 crores have already been delivered under Ujjwala Yojana, and the remaining will be delivered in the upcoming year;
• The allocation has been increased to Rs. 750 crores For Rashtriya Gokul Mission;
• There is an urgency of increasing hydrocarbon production to decrease imports;
• To identify and denotify nomadic and semi-nomadic communities, it has been decided to set up a committee under NITI Aayog; For unreachable communities and for tailored strategic interventions, a Welfare Development Board will be set up under the Ministry of Social Justice and Empowerment;
• For the north-eastern region, it has been proposed that this year’s allocation will be increased to Rs. 58,166 cr. Budgetary allocation raised by 21% to north-eastern states;
• In the upcoming two years, without the intervention of income tax officials, almost all the assessment and verification of income tax returns will be done electronically;
• Workers in the unorganized sector will get an assured monthly pension of Rs. 3000 per month on the contribution of 100 Rs. Per Month after attaining the age of 60 years under Mega Pension Yojna. This scheme is going to benefit around 10 crore workers in the unorganized sector, and this may be proved as the world’s biggest pension scheme in five years.

Agriculture Reforms

• For farmers, Rs. 6,000 per year who have less than 2 hectares of land. This is going to give benefit to 12 crore small and marginal farmers at the cost of Rs.75,000 crore;
• There is a 2% interest subvention to the farmers engaged in animal husbandry and fisheries.

Banking Reforms

• Bank of India, Oriental Bank of Commerce and Bank of Maharashtra are out of Prompt Corrective Action (PCA);
• Within the PCA framework remaining 8 public sector banks will be out soon;
• A resolution-friendly mechanism has been instituted by the IBC for the speed-up recovery of NPAs. With its effect, Rs 3 lakh crore has already been recovered;
• For the recapitalization of Public Sector Banks (PSBs), the sum of Rs 2.6 lakh crore has been directed;
• To avail economies of scale, better capital and wider geographical coverage, an amalgamation of banks are taking place.

Is there any change in the Income Tax slab rate?

This budget has announced the rebate and not a slab change, therefore, we can say that there is no impact on the tax incidence of larger incomes. It is mainly for those salaried individuals whose income is under Rs 10 lakh as they can avail additional benefits by adding home loans and tuition fees.

What is the current tax system and what are the changes as per budget 2019?

Current

1. Income: Up to Rs 2.5 Lakh > No Tax
2. Income: Rs 2.5 Lakh to Rs 5 Lakh > 5% Tax
3. Income: Rs 5 Lakh to Rs 10 Lakh > 20% tax
4. Income: Rs 10 Lakh and above > 30% tax

Changes
As we know that in the current system there is no tax up to the income of Rs 2.5 Lakh, while in case of income above Rs.2.5 lakhs but not more than 5 lakhs there is a 5% tax which amounts Rs. 12, 500 which can now be rebated under section 87A of the income tax. Above Rs. 5 lakhs, the same slab rate shall continue.

Hence, this is a rebate on the income up to Rs 5 Lakh and benefiting only those whose income is between Rs 2.5 lakh to Rs 5 Lakh. In case of earnings more than Rs. 5 lakhs and less than Rs. 10 lakhs, the current tax rate of 20% shall continue and in case of earnings more than Rs. 10 lakhs, 30% tax shall be paid. Section 87A provides the benefit of marginally lower payment of taxes to the individuals whose earning is below the specified limit. Earlier there was a rebate of Rs. 2500 which has been increased to Rs. 12,500.

Calculate Income Tax for 2019-2020

The minister announced that “Individual taxpayers having a taxable annual income up to Rs 5 lakh will get a full tax rebate and therefore will not be required to pay any income tax. As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance, etc.” This is the major relief to the middle-class population of the country.

Now we would like to make you understand “How it will work?” So here we are taking assumed figures.

Tax Calculation of Resident Individual
Particulars	Existing	Post Budget
Basic Salary + Dearness Allowance	6,66,000	6,66,000
Other Allowances	1,34,000	1,34,000
Gross Salary	8,00,000	8,00,000
Standard Deduction	(40,000)	(50,000)
Income under the head salary	7,60,000	7,50,000
Income Tax	64,500	50,000
Less: Rebate under section 87A	–	–
Total Tax Payable	64,500	50,000
Education Cess @4%	2580	2000
Total Tax Liability	67080	52000
Difference	(15,080)	–

From when will it be applicable?

This bill will be passed by the new government in July. However, as per the Chairman of Central Board of Direct Taxation (CBDT), Mr. Sushil Chandra, it will be applicable from April 1, 2019.

Source: https://www.indiabudget.gov.in/ub2019-20/fb/bill.pdf

Effect

Mr. Piyush Goyal besides announcing the budget has put light on the achievements of the recent BJP government.

It has been seen that GST has been reduced continuously which resulted in the relief of Rs. 80,000 crore to the consumers. Now basic items for the poor or middle class are covered under the tax bracket of 0 to 5%. GST is the biggest taxation reform in India which has improved ease of doing business like through e-way bills interstate movements became faster.

Moreover, the other major reforms by the government include low-cost of voice calls and data cost, which is almost the lowest in the world. Moreover, outstanding loans of public sector banks have been increased from Rs 18 lakh crore to Rs 52 lakh crore and to ensure clean banking, the 4R approach has been implemented (Recognition, Resolution, Recapitalization, and Reforms). Benefits of maternity leave of 26 weeks have provided to support women. For Defence personnel, under the ‘One Rank One Pension’ scheme over Rs. 35,000 crores have been allocated.

Mr. Goyal also clarified that the inflation rate which was 10.1% in 2009-2014 has been reduced to 2.1% in 2018. In this budget, the finance minister also laid down the most important dimensions like employment creation, physical and social infrastructure building, pollution free nation and clean rivers. After the speech on the budget, our Prime Minister Narendra Modi said: “This is just a trailer of the budget, which after elections will take India on the path to development”.

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