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Interim Budget 2019

Subject Matter Experts' Perspectives

Glimpses of the Interim Budget 2019

Catch up on important updates and highlights from the India Interim Budget 2019 presented by the government on 1 February 2019. The government has set out a comprehensive ten-dimensional vision to create a modern, technology driven, high growth, equitable and transparent India by 2030. The proposed amendments have been positively received by the industry and the common man. Enhancement of standard deduction for the salaried class and tax exemption for all taxpayers deriving income upto INR 5 lakhs a year will provide some relief to the middle class. The budget also has a range of provisions that factor economic support for the small farmers/marginalised sections. The budget proposal is touted to boost economic growth and demand buoyancy in the economy.

Views on Direct Tax

 

  • Interim Budget will stimulate growth, as expenditure of government increased for the current year by more than 24000 crores and more money is available at disposal of the poor.

Bahroze Kamdin, Subject Matter Expert, Deloitte India

  • The Finance Minister highlighted the major and substantial achievements of the Government over the past 4- 4.5 years. India is the fastest economy in the world with a GDP growth of 7.2% as compared to China at 6.5%. Fiscal deficit has been contained at 3.3% and inflation also has been contained. All sectors including manufacturing, agriculture and not only service sector has grown over the five year period. The capital markets has grown 63% over the past five years. Major reforms like basic universal income implemented in India differently by giving cash to the small farmers owning farms less than 2 hectares. Major reforms for various sectors and sections of society. The unorganized sector to be given social security for old age by giving a fixed monthly pension. There is a big boost to farmers, Defence, Infrastructure, Education, Digital movement, labour class, nomadic tribes. Major impetus to Women-led industries and women empowerment, simplification of direct tax administration , electronic scrutiny proceedings and tax proposals benefiting the middle class, pensioners and senior citizens; thus furthering the manifesto of “Growth”, “Governance”, and “Transparency”.

Bahroze Kamdin, Subject Matter Expert, Deloitte India

Views on Indirect Tax

 

  • The reiteration that the GOM on real estate is considering a reduction in the GST rates on real estate would reassure the real estate sector that their issues are being sorted out - it is hoped that the changes would happen without disturbing the input tax credits ".

~ MS Mani, Subject Matter Expert, Deloitte India

  • The steps reiterated for addressing the difficulties of the SME sector by reducing the compliance burden on the back of the rate reductions that have already taken place indicates the importance of this segment both from a GDP and an employment generation perspective.

~ MS Mani, Subject Matter Expert, Deloitte India

  • From an indirect tax perspective, the budget speech has touched upon the indirect tax reforms in the last four years, GST implementation in particular. This budget has however put more money in the hands of the citizens through increase in the income tax exemption limit to 5 lacs, INR 6000 p.a. direct credit to farmers, interest subvention, etc. This could lead to increased spending resulting in demand generation and in the process lead to increase in GST revenues as well.

~ R Muralidharan, Subject Matter Expert, Deloitte India

  • The budget announcements were along expected lines but the pleasant surprise was in the fiscal deficit number which is only marginally higher than planned. The details on revenue generation measures have not been shared but considering that the FM did mention that the GST collections have crossed the magical, 1 lakh crore mark in January it does seem that buoyancy from GST revenue has been factored into budget math. This assumption will be tested in the next fiscal year and more so as the slew of GST benefits announced in the January GST Council meeting will impact the GST collections in the coming months.

~ Bela Sheth Mao, Partner, Deloitte India

  • In a nut-shell, it was a balanced budget, partially populist but phenomenally pragmatic as it did not significantly disturb the FRBM mandated fiscal deficit targets. The interim budget did engender a good feel factor for the urban small taxpayer and the distressed small farmer, which were impacted by the demonetisation and the teething troubles in the wake of GST. The increase of income in the hands of this large segment of the populace is aimed at putting extra disposable income in their hands which should result in increased consumption. Increased levels of consumption would provide a fillip to the domestic manufacturing sector. Growth in production should substantially augment GST revenue, in the near future. Also, the 2030 vision shared by the Government shows their firm intent to transform the country into a modern, clean and prosperous India.

~ Atul Gupta, Subject Matter Expert, Deloitte India

  • Though there were mixed expectations from interim budget 2019 from an indirect tax perspective, it was bewildering that no indirect tax changes have been proposed. There was an expectation that there could be changes to incentivise domestic manufacturing in industries like electronics, pharma, paper etc., but no change being proposed from indirect tax is a complete surprise and quite unexpected. Considerable modifications to promote manufacturing electric vehicles and batteries for electric vehicle / mobile phones were introduced couple of days ago which also raised questions as to why they were timed so close to the Budget but not during the budget itself. In terms of the Finance Minister’s budget speech today where he mentioned ten visions including digital India and make in India, one could expect rationalisation of indirect taxes towards attaining and accomplishing these goals.

~ Saloni Roy, Subject Matter Expert, Deloitte India

 

 

Views on Personal Tax

 

  • In the interim budget FM has given relief to small income earners including salaried, pensioners and senior citizens by introducing a tax rebate for resident individuals having taxable income of upto INR 5 lakhs. Currently taxable income of INR 5 lacs attracts tax of INR 13,000 (including health and education cess) which will become nil now. Resident individuals with gross income up to INR 6.5 lacs will not need to pay any tax now, if they make tax saving investments of INR 1.5 lac under Section 80C of the Act. However, very senior citizens (aged 80 years and above) are not impacted by this change as their total income upto INR 5 lac was anyway not subject to tax.

~ Divya Baweja, Subject Matter Expert, Deloitte India

  • A welcome change introduced by the FM in his Budget speech for individuals owning more than one house property by exempting notional rent of second property from tax. Currently notional rent is taxable in case the property owner has more than one house. However, the aggregate amount deduction towards interest paid on capital borrowed will be restricted to INR 2 lac for both the properties.

~ Divya Baweja, Subject Matter Expert, Deloitte India

  • Currently long-term capital gain on sale of a residential house is exempt from tax if such gain is invested to purchase / construct one house property, within the prescribed time frame. The FM has proposed to extend the above benefit for purchase/ construction of upto two house properties, provided the amount of gain does not exceed INR 2 crore. This benefit can be claimed only once in a lifetime.

~ Divya Baweja, Subject Matter Expert, Deloitte India

  • Individual tax payers with taxable income of upto 5 lakhs will get full tax rebate. Tax withholding limits enhanced. Interest from bank accounts will be subject to TDS only beyond INR 40000 as against current 10000. House rentals being subject to TDS beyond 180000 now will be subject to TDS beyond 240000.

~ Saraswathi Kasturirangan, Subject Matter Expert, Deloitte India

  • Further the standard deduction increase from 40k to 50k will help all salaried taxpayers who lost over 34k last year due to removal of medical reimbursement and transport allowance exemptions.

~ Alok Agrawal, Subject Matter Expert, Deloitte India

  • The tax breaks for the salaried, middle class, pensioners is being welcomed and is far more than expectations. This is definitely a budget for the middle class. With the additional tax rebate, an individual with total income up to Rs. 5 lakhs will have no tax to be paid. This results in an assured tax benefit including up to Rs 13,000 at this level. Increase in standard deduction by Rs 10,000 for salaried taxpayers would ensure additional tax saving of Rs 2,080 to 3,120 for tax payers not paying surcharge. In a further boost to individuals having more than one house, deemed income from another self-occupied house will not be subject to tax in lines of long standing demand.

~ Tapati Ghose, Subject Matter Expert, Deloitte India

Views on C&IP

 

  • Budget 2019, though an interim budget, has proposed a number of measures that should benefit different sections of the population. Assured income support to small and marginal farmers and interest subvention to farmers pursuing animal husbandry and fisheries are notable proposals, relevant to the rural areas. A bunch of tax proposals should benefit the low and middle income class people. These include increase in standard deduction for salaried persons, rebate to small taxpayers, extension of tax benefits under self-occupied property and increase in threshold for receiving bank interest without tax deduction at source.

~ Anil Talreja, Subject Matter Expert, Deloitte India

  • With these measures, the income available to rural as well as urban households is set to increase. As typically, consumption varies directly with disposable income. With the additional benefits announced in the budget, the income disposal will increase and typically this should go back to the economy in terms of increased investments in securities, deposits and real estate which indirectly will lead to a boost in these sectors.
  • Budget 2019, though an interim budget, has proposed a number of measures that should benefit different sections of the population. Assured income support to small and marginal farmers and interest subvention to farmers pursuing animal husbandry and fisheries are notable proposals, relevant to the rural areas. A bunch of tax proposals should benefit the low and middle income class people. These include increase in standard deduction for salaried persons, rebate to small taxpayers, extension of tax benefits under self-occupied property and increase in threshold for receiving bank interest without tax deduction at source. With these measures, the income available to rural as well as urban households is set to increase. As typically, consumption varies directly with disposable income. With the additional benefits announced in the budget, the income disposal will increase and typically this should go back to the economy in terms of increased investments in securities, deposits and real estate which indirectly will lead to a boost in these sectors.

~ Anil Talreja, Subject Matter Expert, Deloitte India

Views on Government & Public services

 

Through this budget, the government has reiterated its commitment to investments in world class infrastructure- both physical and social infrastructure. The budget, however, does not provide allocations to each sector, indicating no big-ticket increase. While on an overall basis Railways budget seems to have gotten a big push, the overall capex seems to have increased only about 7-8%. Other transportation segments are likely to continue with similar allocations as previous year, and without a steep rise in investments. The real estate sector is likely to get a boost owing to the sops on taxation and affordable housing segments. While the thrust on Electric Vehicles and renewables is in the right direction, specific steps are expected to fast-track the adoption of clean energy.

While the overall Railways budget suggests increase, the total capex estimates have increased much less by about 8%, indicating less growth as compared to previous year. Announcements related to sops and concessions to affordable housing sector, along with tax related announcements, are expected to give some boost to the real estate and housing sector.

~ Vishwas Udgirkar, Partner, Deloitte India

 

Views on Life sciences & healthcare

 

  • 21 AIIMS are currently operating in the country, 14 of which have been announced since 2014. The 22nd AIIMS will be set up in Haryana soon
  • Lakhs of poor people have benefitted from the reduced cost of medicine
  • PM launched the world’s largest Healthcare programme – Ayushman Bharat – to provide medical treatment to nearly 50 cr people.
  • 10 lac already treated till now and INR 3000 cr. Saved of middle/ poor class
  • Prices of medicines were dropped and medicines at low prices are easily available at JAN Aushidhi centres
  • Aspirational district programme helped in 115 most backward districts with ranking on parameters like health, nutrition, education, agri, water resources, etc.
  • In their vision for 2030, he mentioned that we’ll aim to create a healthy India, with distress-free and comprehensive wellness systems for all

~ Anupama Joshi, Partner, Deloitte India

Views on Economy

 

  • The interim budget of 2019 has again elongated the path to fiscal consolidation. While a change in the expected fiscal deficit from 3.3 % -3.4% is not a significant increase, whether it will convert into a fiscal stimulus triggering consumption growth needs to be seen.

~ Richa Gupta, Subject Matter expert, Deloitte India

  • The interim budget has announced definitive steps to initiate creation of a formal social security net beginning with the contributory pension scheme of the unorganised workers. The speed and the efficacy of the implementation will drive how far the scheme is actually utilised by the intended target segment.

~ Richa Gupta, Subject Matter expert, Deloitte India

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