Making a strong re-election pitch, the BJP-led NDA government Friday announced the biggest income tax sops for middle class, including complete exemption for income up to Rs 5 lakh, and Rs 6,000 annual cash dole to poor farmers in a scheme that will cost Rs 75,000 crore per year.
Converting a vote on account speech into an almost full- fledged budget announcement in Lok Sabha, Finance Minister Piyush Goyal proposed an array of incentives for both middle class and farmers, whose disenchantment was said to have cost the BJP dearly in recent assembly elections.
Over three crore salaried class, pensioners, self- employed and small businesses will save Rs 18,500 crore in income tax annually after the exemption limit was doubled to Rs 5 lakh for the next fiscal from current Rs 2.5 lakh.
Also, standard deduction was raised to Rs 50,000 from current Rs 40,000.
TDS threshold on interest from bank and post office deposits has been raised from Rs 10,000 to Rs 40,000.
Presenting the interim Budget, Goyal said capital gains of up to Rs 2 crore made from sale of immovable property can now be invested in two residential houses as against current practice of exempting such income if invested in one house within a year.
However, it can be exercised once in a lifetime, he said, adding the current tax slabs of 20 per cent tax on income between Rs 5 lakh and Rs 10 lakh and 30 per cent tax on earnings of over Rs 10 lakh would continue in the next fiscal year beginning April 1, 2019.
Also, TDS threshold for deduction of tax on rent has been increased to Rs 2.4 lakh from current Rs 1.8 lakh.
As was widely anticipated, he announced an income support scheme for 12 crore small and marginal farmers by providing Rs 6,000 in their bank accounts in three equal instalments in a year.
The eligibility for the scheme, called Pradhan Mantri Kisan Samman Nidhi, will be ownership of less than 2 hectares of cultivable land.
The scheme will be implemented from the current fiscal year, where it will cost Rs 20,000 crore. For the next fiscal year, the allocation will jump to Rs 75,000 crore.
The farm income support scheme will result in the government breaching its 3.3 per cent fiscal deficit target from the current year.
For next fiscal, he pegged fiscal deficit at 3.4 per cent of the GDP, up from fiscal consolidation roadmap of bringing it down to 3.1 per cent in 2019-20 and 3 per cent in 2020-21.
“We would have maintained fiscal deficit at 3.3 per cent for the year 2018-19 and taken further steps to consolidate fiscal deficit in the year 2019-20.
“However, considering the need for income support to farmers, we have provided Rs 20,000 crore in 2018-19 RE (Revised Estimate) and Rs 75,000 crore in 2019-20. If we exclude this, the fiscal deficit would have been less than 3.3 per cent for 2018-19 and less than 3.1 per cent for the year 2019-20,” he said.
Fiscal deficit for 2018-19 has been pegged at 3.4 per cent and current account deficit at 2.5 per cent.
Justifying inclusion of tax proposals in an interim budget, he said, “Though as per convention, the main tax proposals will be presented in regular budget, small taxpayers especially middle class, salary earners, pensioners and senior citizens need certainty in their minds at the beginning of the year about their taxes.
“Therefore, proposals, particularly relating to such class of persons should not wait.”
Goyal, who was made the interim finance minister after Arun Jaitley had to rush to New York for medical treatment last month, said what he presented was not merely an interim Budget, but a medium of the country’s development journey.
“All the transformation that we are witnessing is because of the passion of the people of our nation. The credit goes to them only. Development has become a mass-movement during the period of our government.
“We will transform India into a leading nation of the world with the help of our people. We along with them have laid the foundation. A grand edifice will be erected with their support. We have given a decisive leadership, whose intent is clear, policy is transparent and integrity is resolute,” he said.
The NDA Government, he said, has laid the foundation for India’s growth and development for times to come.
“We have resolved many problems which were coming in the way of realising our full potential as a society and an economy. We are poised to become a USD 5 trillion economy in the next five years and aspire to become a USD 10 trillion dollar economy in the next eight years thereafter,” he said.
Goyal raised allocation of rural employment guarantee scheme MNREGA to Rs 60,000 crore for 2019-20.
“We have prepared the foundation for sustainable progress and prosperity for our people. We are moving towards realising the dream of New India by 2022,” he said in his 100-minute speech.
The Finance Minister said India has been universally recognised as a bright spot in the world economy. “We are the fastest growing larger economy in the world today”.
Seeking to address concerns over farm distress, the finance minister said the government has taken a “historic” decision to fix the minimum support price (MSP) of 22 notified crops at least 1.5 times of production cost.
Terming inflation as hidden and unfair tax, he said the government has “broken the back of back-breaking inflation”.
Inflation stood at just 2.1 per cent in December 2018 from 10.1 per cent during 2009-14. Fiscal deficit has been brought down to 3.4 per cent in the revised estimate of 2018- 19.
“If we had not controlled inflation our families would have been spending 35-40 per cent more on daily use items,” the finance minister said.
On non-performing loans (NPA), Goyal said Rs 3 lakh crore has been recovered by banks and creditors with implementation of Insolvency and Bankruptcy Code. “Recapitalisation of banks amounting to Rs 2,6 lakh crore has been done”.
Talking about Swachh Bharat mission, the finance minister said that more than 98 per cent rural sanitation coverage has been achieved. More than 5.45 lakh villages declared open defecation free.
Goyal said the pace of construction of rural roads has been tripled in the last five years. During 2014-18, 1.53 crore houses have been constructed under PM Awas Yojana.
He said 10 lakh patients have been treated so far under Ayushman Bharat scheme, the world’s largest health care programme. The scheme was launched to provide medical care to nearly 50 crore people, resulting in savings of Rs 3,000 crore for poor families.
Goyal also announced a new AIIMs, the 22nd in the country, in Haryana. He said currently 21 AIIMs are operating or being established in the country, of which 14 have been announced since 2014.
The government announced setting up of Rashtriya Kamdhenu Aayog to enhance productivity of cows. It provided for 2 per cent interest subvention to farmers involved in animal husbandry and fishery.
Goyal said the government has provided for 10 per cent reservation to the economically weaker section in educational institutions and the government jobs. This has been done without disturbing existing reservation system.
He said India attracted USD 239 bn in FDI in last five years.