Interim Budget 2019 - Will it vanquish taxpayers' anguish?

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Propriety demands that not too many changes on the tax front are made in a vote on account or interim budget, protocol being that the Government only presents expenditure bills for the financial year. However, with General Elections just around the corner and Govt.’s endeavor to appease the common man, whether the Govt. will break tradition to offer direct tax relief in a poll year remains to be seen. With the interim budget also preceding the unveiling of the Direct Tax Code report on February 28, 2019, it is sure going to be a tightrope walk for interim Finance Minister Mr. Piyush Goyal who will take the hot seat to present the vote on account budget on behalf of Mr. Arun Jaitley on February 1, 2019.

What are your expectations from the interim budget? Are we in for some surprises?

Mukesh Butani
Founder, BMR Legal

Union, General, Interim, Vote on account whatever label one wishes to attribute, it would become clear in the next 48 hours what do we have in store for the annual spectacle. 

Leaving aside the debate on what the Constitution permits or has been the convention or practice, my feeling is that there would be greater focus and space devoted to Part A of the budget speech than Part B. Part A lays down a scorecard on analysis of largely social schemes and allocations, besides of course accomplishments in the current Fiscal year - also expect a trend of past 5 budgets. The social schemes would clearly lay emphasis on welfare and focused on greater allocation for farm sector, employment generation, health scheme and rural development, all circling around pet schemes of the Government. All on expected lines given the stress points in key segments of the economy. What would be observed by the Markets and Overseas investors would be the magical fiscal deficit figure, particularly since the budget wont be preceded by the usual Economic Survey which throw up interesting statistics on health of the economy. With direct tax collections showing a healthy trend and greater rigour...

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Ketan Dalal
Managing Partner, Katalyst Advisors LLP

One often confused expectations with hope ! The expectation is announcements keeping an eye on the elections, but the hope is that populism and pragmatism can co-exist!

One must also remember that the new tax code is being drafted, although its fate will depend, inter alia, upon the outcome of the elections.

With this thought in mind, the following is hoped for :

• Increase in base limit from 2,50,000 to say, 3,50,000

•  Sops for housing sector visa vis encouraging at least first time house buyers ; these could be increase in interest deduction from 2 L to 4 or 5L, separately carving out loan repayment deduction in section 80C and making it possible for interest claims set off against non property income.

•  Deductions for medical need enhancement including for medical insurance; costs have gone up significantly, and this also aligns with govt’s thrust on healthcare

•  Education costs are high, and education is anyway critical for skill building, and jobs … the latter being a serious impediment to India’s growth, and has the potential for social unrest also.

•  Corporate tax rates for ALL companies needs to be...

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TP Ostwal
Partner, T.P. Ostwal and Associates LLP

As per the convention, it will be an interim budget i.e. Vote on Account,  to meet the requirement of the expenditure of the coming year. However, there is no hard & fast rule, that interim measures in direct & indirect taxes which are of significant nature and relevant in the election year cannot be taken. There are past precedence where the finance ministers have used this as an opportunity for making changes in the direct & indirect tax proposals. Pranab Mukherji as FM in 2009, and Chidambaram as FM has used this opportunity to the best of my knowledge. These are recent examples and in the past also similar things have happened.

Coming to the changes which people expect, due to stress in the economy in the farming sector substantial relief to the farmers could be expected. Salaried class taxpayers requires some relief that also can be announced because such fixed income earners expect their monthly budget should not go haywire and therefore some relief may be announced for them.

Rest of the important proposals are already in the new direct tax code which will be made public on 28th February and therefore if it contains...

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K.R. Sekar
Partner, Deloitte Haskins and Sells LLP

Expectations galore but timing is inappropriate.

There could not have been a less appropriate time to have significant expectations from the impending budget – not only does the budget precede the general elections, but the Finance Ministry is also under the temporary charge of the railways minister.

Nevertheless, taking cue from past Governments that have announced sops in such budgets, the taxpayers continue to hope for relief from certain key and pressing issues that have topped their demands for some time.

Since the Parliament has now passed the 124th Constitutional Amendment Bill, the salaried class appears fair to demand that income taxes should not be levied on individual taxpayers belonging to the economically weaker section of society. We must note that the family income of INR 8 lakhs referred to for the purpose of definition of an economically weaker sections would not strictly be comparable to the current individual exemption limit of INR 5 lakhs. In any case, it appear reasonable to expect that the minimum threshold for taxation of income would be increased from INR 5 lakhs towards the limit of INR 8 - 10 lakhs.

Rationalisation of corporate tax rates is another...

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Girish Vanvari
Founder, Transaction Square

The upcoming Budget may probably be a mixed bag with the government looking to introduce measures to ensure more disposable income for the common man and focusing on addressing the immediate tax issues faced by the industry.

The following could be some of the key watchpoints for the upcoming Budget:

1. Rural Focus:

The upcoming budget is expected to have a high focus on the rural economy. Providing rural stimulus through farm loan waiver, tweaks to the minimum support price (MSP), increased allocation towards developing the rural infrastructure may be on the cards. It would be interesting to watch out for if the government utilizes the Budget as a platform to roll out the Universal Basic Income (‘UBI’)

2. Personal Income Tax:

The government may offer some tax incentives for individuals to increase their disposable income.  One could expect the rise in the basic exemption limit from present 2.5 Lakhs to 3 Lakhs or increase in the Standard deduction for Salaried people from 40,000 to 60,000 could be on the cards. However, individuals (especially salaried individuals) being the major contributors to the direct tax revenue, the government may not bring any drastic change...

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Rajendra Nayak
Partner , International Tax Services, Ernst & Young LLP

While the Finance Minister is unlikely to propose any fundamental tax reforms, there is still some unfinished agenda arising from recent legislative changes which may need to be addressed in the 2019 Interim Budget.

In the 2015 Union Budget the Finance Minister had announced a phased reduction in Indian’s corporate tax rate from 30% to 25%. This was followed up with a 25% tax rate for newly formed manufacturing companies and for small and medium enterprises in subsequent Budgets. The business community now eagerly awaits an across the board rate reduction in the final Budget of this Government.

The 2016 Union Budget introduced a special provision in the tax law under which income earned by an Indian resident developer of a patent would qualify for a preferential tax rate of 10%. With this, India joined the group of many countries who have enacted the so called “patent or innovation box” regime in order to spur innovation. The regime, however, currently applies to only income from patents registered under the Patents Act, 1970. The Government may consider extending the scope to IP assets that are functionally equivalent to patents such as formulas, processes, designs, patterns, know-how, inventions...

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Uday Ved
Partner, KNAV & Co, Chartered Accountants

The interim Finance Minister Mr Piyush Goyal will present the last Fiscal Budget of Modi Goverment on February 1, 2019 before the next general elections. In that sense, this interim Budget cannot be a full fledged Budget but a ‘Vote on Account’ ie the Government in the interim is like a ‘trustee’ for the next Government to be formed after the elections. The Government at this time gets an approval for the expenditure budget for next 4-5 months till the new Government comes to power. No major policy changes may be permitted in the Vote on Account/interim budget. 

Considering the nature of Vote on Account, the general expectations from the Budget should be naturally low but last few days and weeks have seen hectic discussions and whispers on whether the Government will go beyond it’s normal mandate and roll out some tax sops for the common man and corporates at large.

Some key expectations or the wish-list of the interim Budget are summarised below.

1. Individual taxation 

- There is a long standing demand of a common man to increase the basic tax exemption limit from Rs.2.5 lacs to Rs.5 lacs. Considering the objective...

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K R Girish
KR Girish & Associates

Given that the Government is in desperate need of an emphatic win we could expect some surprises in the interim budget , some populist schemes and doll outs can be expected.

Broad announcements ;

1. An universal income distribution scheme to address people below poverty line and rural distress. Expectation is that same would be a direct credit in the Jandhan account of at least Rs 10,000/ per house hold and to fund this there could be some reduction in direct food subsidy.

2. Bring in measurers to augment employment generation by giving concessional long term finance to corporates with good credit standing.

3. Bring in credit availability to the SME sector which is starving for funds and this would generate employment.

4. Focus on rural infrastructure to improve rural living conditions.

Tax front;

1. The foremost is to bring some cheer with the middle class, so one can expect increase in basic limit to Rs 3 lacs.

2. To encourage savings one could expect an increase in section 80C limit by at least Rs 50,000.

3. To be liberal with interest deduction under section 24  and restore the earlier...

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