“Every line in the government’s budget has its own constituency”
After a pre-election, populist Budget in February, the re-elected Modi government presented the Union Budget on 5th of July. Finance Minister Nirmala Sitharaman unveiled a budget aimed at boosting infrastructure and foreign investment at a time when the economy is showing signs of a slowdown. The total amount government proposes to spend as per the budget 2019-20 is estimated to be Rs 27,86,349 crore, this is 13 percent more than the budget presented last year. Here is a list of the major highlights of the union budget.
Sector-wise allocation: 75% increase in agriculture
Among the key sectors, the defense sector has been allocated Rs 3,05,296 crore which is the maximum of all the sectors and constitutes about 9% of the total budget. Health and education sectors have been allocated just 2.3 percent and 3.4 percent of the budget respectively.
Agriculture, however, has seen the biggest increase in sector-wise budget allocation over last year’s budget. Building on its pre-poll promises made to the farmers, the Modi government has increased allocation for agriculture and allied activities by 75 percent.
No Change in the personal income tax rates
The budget indicated no increase in the personal income tax slabs. The tax rates applicable remain.
Increase in the surcharge for the rich
As anticipated, the tax on jewelry, property, shares, fixed deposits (FDs), cash in bank inherited has been removed in the Union Budget 2019. While this tax has been shunned, the super-rich will have to contribute more towards tax collection. Surcharge which is charged over and above the tax amount has been increased for the rich. People earning between 2 crore INR and 5 crore INR will have to incur a 25% surcharge on the tax amount, whereas those earning over 5 crore INR will have to incur 37% as a surcharge on the tax amount. Earlier they were paying 15% surcharge on the tax amount.
Green Budget: Support for electric vehicles
In order to boost the environment conscious alternate, Finance Minister Nirmala Sitharaman announced that there will be an additional tax benefit of Rs 1.5 lakh on the interest paid on the loans taken for the purchase of the electric vehicles. Apart from the tax benefit, the government has also moved the GST council to decrease the GST rate from 12% to 5% on electric vehicles.
These changes will push India towards becoming an EV manufacturing base. The tax benefit will help in the creation of a local manufacturing base and encourage component manufacturers to invest in this sector.
Petrol and Diesel prices increases
The government raised the road infrastructure cess and excise duty on the automobile fuels by Rs 2 per litre to raise over Rs 28,000 crore. Post considering Value Added Tax (VAT), the increase in petrol price is approximately coming around to be Rs 2.5 per litre and Rs 2.3 on diesel.
The government levied Re 1 per tonne customs or import duty on crude oil, which will also enable the government to raise additional funds.
PAN card and Aadhaar card made interchangeable
Taxpayers can now file Income Tax returns using Aadhaar Card also. The Finance Minister has made PAN card (Permanent Account Number) and Aadhaar card interchangeable for filing tax returns. This move is aimed at improving tax compliance and also improve the process of tax payment for taxpayers.
Once this proposal will get passed in the Parliament, individuals will be able to use Aadhaar cards instead of PAN cards to process financial transactions, for instance, mutual fund investments, buying gold, etc.
To boost affordable housing, an additional deduction up to Rs. 1.5 lakh will be provided on interest paid on loans borrowed up to 31st March 2020. This incentive is valid for the purchase of the house valued up to Rs. 45 lakh. Apart from this, the government will also introduce a new model tenancy law to boost the fragmented rental housing market and has proposed further tax incentives in line with its continued effort to achieve the ‘Housing for All’ target by 2022.
The phased reduction in corporate tax
In accordance with the phased reduction in the corporate tax, companies with annual turnover up to Rs 400 crore will now be taxed at a lower rate of 25 percent. This change will cover 99.3 percent of all the companies.
Make in India gets a boost
In order to provide the domestic industries a level playing field customs duty has been increased on various items such as gold, automobile parts, digital cameras. By increasing the customs duty the government aims to give “Make In India” a significant push. Import duty hike on gold is peculiar as this is the first time in 6 years import tariffs have been increased on this precious metal.
Tariff on import of gold has been increased from 10 percent to 12.5 percent. Soon after the announcement was made, gold prices shot up in the capital by Rs 590 per 10 gram. Also because of the hike in tariff, shares of jewelry giants such as Titan and PC Jewellers fell by approximately five percent.
In order to design a roadmap for women empowerment and increase the participation of women in the economy, the government is opting for gender budgeting. The government has supported and encouraged women entrepreneurship through various schemes such as MUDRA, Stand up India and the Self Help Groups programs. In order to further encourage women participation, the budget has a proposal to expand the Women SHG interest subvention program to all districts.
The budget has evoked various reactions from various sectors, however this first maiden budget of Finance Minister Nirmala Sitharaman comes out to be an ambitious one, it aims to fulfill the dreams of re-elected Modi Government to take India’s economy to 5 trillion USD by 2024.
Categories: Story Of The Week