Interim Budget has sops for voters, slips on fiscal deficit target again

Budget 2019 farmer

With just a couple of months before the elections, the government had no choice but to deliver a populist Budget that aims to please the farmers and the middle class, two of its biggest constituencies. By this measure, more than three crore middle class taxpayers stand to benefit. The Mega Pension Yojana, under which Rs 3,000 per month will given to unorganised sector employees, is a mammoth undertaking.

"Our government is committed to reach the most deprived citizens of this country..."

This proposal triggered chants of "Modi Modi Modi" - the first time ever in Parliament - and thumping of desks by charged BJP MPs as it is expected to win over the BJP's traditional vote bank - the middle class. Experts, however, claim that Mr Goyal has broken the convention that a government facing re-election does not make any major taxation and spending proposals in an interim Budget which will tie the hand of the next government. Together, these schemes could act as a social security cover for the most vulnerable sections of India's population.

In the Budget, Piyush Goyal has announced a minimum income scheme for farmers with less 2 hectares of land under which they will be given Rs 6,000 per year. For the current financial year, the income tax slabs will be the same.

The government has also proposed rollover of capital gains up to Rs 2 crore towards buying (investing) two houses compared to only one under the present one unit only. The Union Budget for 2018-19 had set out a disinvestment target of Rs 80,000 crore; while barely half of this has been achieved so far, Goyal said the government was confident of hitting the target.

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"Individual taxpayers having taxable annual income up to Rs 5 lakh will get full tax rebate and, therefore, will not be required to pay any income tax". So, only those whose total income does not exceed Rs 5 lakh will be eligible for the benefit.

The government proposed to provide a full rebate to individuals with an annual income up to Rs 5 lakh.

Under Section 87A of the Income tax Act, 1961, the rebate has been raised to Rs 12,500 and is only applicable for those with net taxable income of up to Rs 5 lakh. The standard deduction limit has also been increased to Rs 50,000. Moreover, interest on bank savings accounts will be tax-free up to Rs 40,000 compared with Rs 10,000 now. The CAG had said the huge off-budget financing lacks transparent disclosures and could pose fiscal risk in the long term in case the entity that raises the funds fails to meet debt servicing.

This underscores the importance of the rural package in the form of the income support scheme for farmers.

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