No tax for annual income upto Rs 5 lakh, says Piyush Goyal

Saul Bowman
February 3, 2019

"This will provide tax benefit of Rs 18,500 crore to 3 crore people", he added.

"The interim finance minister's budget doesn't seem to be interim", said Abheek Barua, chief economist, HDFC Bank.

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. This was introduced a year ago after being abolished in the Finance Act 2005.

The standard deduction was also raised from Rs 40,000 to Rs 50,000.

The tax deducted at source or TDS threshold for deduction of tax on rent has been proposed to increase from Rs 1,80,000 to Rs 2,40,000 for providing relief to small taxpayers.

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 government has set a disinvestment target of ₹90,000 crore in 2019-20, despite having realized only ₹35,533 crore so far, against the budget target of ₹80,000 crore in 2018-19.

Archit Gupta, founder and CEO of ClearTax, said that those with income exceeding Rs 5 lakh will pay tax on income between Rs 2.5 lakh and Rs 5 lakh at the rate of 5% as before. The eligibility of the total income to avail the benefit has now been increased Rs 5 lakh from the earlier from Rs 3.5 lakh.

With lack of fresh revenue generating measures in the interim budget, much of the funding is likely to arise from higher markets-based borrowings, she said. In spite of the hard of making the current year's target, the Budget Estimates for 2019-20 lay out a Rs 90,000 crore target for disinvestment receipts. On the other hand, budget documents show the government has reduced its estimates for gross tax revenue to Rs 22.48 trillion for 2018-19 from Rs 22.71 trillion announced in February past year. "The slippage is more notable for FY20, to -3.4 per cent vs -3.1 per cent laid out in the roadmap, built on a 11.5 per cent nominal GDP growth projection", said Rao. Gross market borrowing in 2019-20 is budgeted to grow 33.1%, which could result in higher bond yield, and make a policy rate cut by the central bank hard.

Rastogi said that, as expected and considering the prominence of the GST Council, no major announcements were made regarding the GST. "This will give a major fillip to the Make-in-India vision of the government", he said. Here is our analysis on what promises the budget have for the masses and what would be their implication? Now it remains to be seen if India's almost 700 million voters will buy into his dream and vote his government back to power in three months' time.

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