With only a few months remaining of Bhartiya Janta Party (BJP) led NDA in the rule, before the general assembly elections in April-May this year, interim finance minister Mr. Piyush Goyal is all set to present an interim budget of the Modi government. The incumbent government will present only an interim budget, leaving the responsibility of the full-fledged budget 2019-20 to the next elected party.
This is the sixth budget presented by Mr. Modi-led NDA government in the lower house of the parliament. The budget session is scheduled to commence from January 31 and will end on February 13. Union budget along with the Railway Budget 2019 will be presented on February 1.
According to the provisions of the constitution, money can not be used from the Consolidated Fund of India without getting such expenditure approved by the parliament. Interim budget, thus, ascertains that present government’s functioning doesn’t come to a halt, in the absence of required funds from the end of the current fiscal year(March 31, 2019) till the formation of a new government in May-June of the present year.
There are no explicit restrictions on the outgoing government on introducing any major reforms and policies, before the date of elections is declared
This is the sixth budget presented by Mr. Modi-led NDA government in the lower house of the parliament. The budget session is scheduled to commence from January 31 and will end on February 13. Union budget along with the Railway Budget 2019 will be presented on February 1.
According to the provisions of the constitution, money can not be used from the Consolidated Fund of India without getting such expenditure approved by the parliament. Interim budget, thus, ascertains that present government’s functioning doesn’t come to a halt, in the absence of required funds from the end of the current fiscal year(March 31, 2019) till the formation of a new government in May-June of the present year.
There are no explicit restrictions on the outgoing government on introducing any major reforms and policies, before the date of elections is declared and the moral code of conduct applies. However, there has been a trend of not framing any big-ticket reforms in the interim budget, by the previous governments. With expectations of the public tied to the budget, it will be interesting to watch if the Modi-led NDA government will unfollow this trend to introduce new reforms.
WHY IS INTERIM BUDGET IMPORTANT?
So does the limitation of the outgoing government on introducing new reforms and policies make, the interim budget, less irrelevant? The answer is no.
The incumbent government takes this opportunity to showcase the report card of their accomplishments and draw a rosy picture of the future. The promises made and fulfilled are flaunted and policies indicating towards a better tomorrow is hinted at. In short, the interim budget is treated as an unofficial manifesto for the elections, to attract the voters.
Interim budget, not only serves as the election manifesto in disguise but also tell a lot about the outgoing government’s ability at fiscal management. This data has the power to bend opinion, in favor of or against the ruling government, before it appears for the trust examination in the upcoming elections.
Only time will tell what Mr. Finance Minister has in store for the public. The question now arises is what the general public expects from the popular Modi-led government in the upcoming budget? Following are the key expectations from the budget 2019.
Keep Reading to find out…
WHAT SALARIED PROFESSIONALS MAY EXPECT?
Income Tax Exemption Limit May Increase To 5 Lac
The highest expectations of the public from the budget is that of increased I-T exemption limit to 5 Lac from the existing 2.5 Lac.
In its pre-Budget recommendations, the CII (Confederation of Indian Industry) has raised a demand to double the I-T exemption limit to Rs 5 Lac. Also, the CII has asked for an increase in the deduction under 80C to Rs 2.5 Lac in order to boost savings.
At present, individuals with an income up to Rs 2.5 Lac is exempt from income tax. Income between 2.5 lac to 5 Lac is taxed at 5%. Income between 5-10 Lacs is levied with 20% while that above 10 Lac is taxed at 30%.
The CII has suggested that income below 5 Lac should be exempt. While income between 5Lac to 10Lac should be taxed at 10%(instead of 20% earlier), Income between 10-20 Lac should be taxed at 20%. The earnings above Rs 20 Lac should be taxed at 25%.
Tax-Free Allowances Limit May Increase
A tax-free medical expense up to Rs 15,000 and travel allowance up to Rs 19,200 phase is expected to be replaced with a standard deduction of Rs 40,000 for those whose income is above Rs 5 lakh last year.
Section 80C Limit May Increase
The CII has also suggested increasing the limit under section 80C to be raised from Rs 1.5 Lac to Rs 2.5 Lacs. The measure is urged upon in order to incentivize the savings.
If the mistrust shown by the voters in the state assembly elections 2018, is to be taken as a parameter to judge the popularity of the Modi government, a slight disappointment can be noticed. The problem was aggravated by a shortcoming in the job promises made. The middle class and the rural population is not very convinced to blindly believe the policies change by the government.
The above-mentioned tax reforms, if approved, could directly benefit the great Indian middle class and may turn their views in favor of the incumbent government in keeping a tight grip on the throne in the upcoming polls.
WHAT FARMERS MAY EXPECT?
The budget 2019 could be seen as a manifesto to woo the rural population of the country, considering the farm distress mounting up. Pleasing measures for the farmers is another much-anticipated card to be played by the Modi-led NDA government, especially after the disappointing performance of the party in the state assembly elections 2018 and loan waiver announcements made by the Congress party after assuming controls in the important states like Madhya Pradesh, Chhattisgarh, and Rajasthan.
An announcement related to farm loan waiver may be an unlikely event but the government may give the farmers the gift of quick loans at a lower interest rate
.Then Finance minister Mr. Arun Jaitley, in a video conference at the CNBC-TV18 India Business Leader Award, has recently acknowledged that the real rate of interest is higher than other countries and that efforts must be made to bring it at par. Therefore a possibility of relief to the distressed farmers cannot be eliminated. Also, the Government is expected to announce a direct transfer benefit scheme for the farmers that have been in the pipeline for some time now.
Announcements may be made for farm credits so that farmers do not have to look towards the unorganized money lenders for loans at a high rate.
WHAT CAPITAL MARKET MAY EXPECT?
The Indian Capital markets may not expect any reforms from the interim Budget 2019. There is a thin or no chance of any relaxation on the Securities Transaction Tax (STT) or the Long Term Capital gain(LTCG) Tax. However, if the above-mentioned taxes get any attention in the budget, it will be a reason to celebrate for the Indian investors.
Though the masses and economists will get enough to brainstorm upon, the market will be driven by the macro factors such as international trade tension, uncertainty caused by Brexit, quarter results of the corporates and international crude prices, etc.
