- TDS threshold on rental income increased to Rs. 2.4 lakh from the earlier Rs. 1.8 lakh level
- Income tax exemption on notional rent for unsold properties increased to 2 years from existing 1 year
- Standard Deduction increased to Rs. 50,000 from earlier Rs. 40,000
- No TDS on interest earned from bank/post office up to Rs. 40,000 annually
- Tax burden reduction proposed for middle class. 100% tax rebate limit increased to Rs. 5 lakh
- Digital push to increase employment across the country
- GST collections expected to reach Rs. 1.3 lakh crore in January 2019
- GST has rationalized the indirect tax rate applicable to a range of products and services with most daily use items included in the nil and 5% rate
- IT Returns will be processed in 24 hours and refunds issued instantly going forward
- Direct Tax collections increased to Rs 12 lakh crore. 80% growth in Income Tax filings
- India’s voice call and data rates among lowest in the world
- Mudra Loans worth Rs. 7.23 lakh crore disbursed already
- Ujjwala Scheme to reach 8 crore LPG connections across India
- Government NPS contribution increased to 4%
- Pradhan Mantri Shram Yogi Mandhan Pension Scheme announced with Rs. 3000 per month payout for unorganised sector
- ESI increased to Rs. 21000 per month
- 2% Interest subsidy to those involved in Animal Husbandry through Kisan Credit Card. Additional benefit of 3% interest subsidy on timely repayment
- Direct account transfer in 3 equal installments of Rs. 2000 each (Start date fixed as December 1, 2018)
- PM Kisan Yojana Announced for small farmers (Rs. 6000 per year direct income support)
- MNREGA Allocation increased by 9% in FY2020
- Rs. 19,000 crore allocated for development of rural road systems
- Clean Sanitation now available in over 98% of the country
- Current Account deficit expected to be around 2.5% of GDP
- Today India is the 6th Largest Economy in the world
- Average inflation has been decreased to 4%
- Fiscal deficit down to 3.4% of GDP
- Amalgamation of banks has been achieved to improve the banking sector performance
In this article, we give you our expectations from Budget 2019 from a personal finance point of view. Budget 2019 in February is an interim budget and only valid until a new government is elected after the 2019 elections in May. Subsequent to the election of a new government, an additional Budget will be announced this year. Therefore there will be two Union Budgets in 2019. In this article, we outline our expectations for the Interim Union Budget 2019 in February.
Tax Slab Revision
Budget 2019 should do away with the 5% tax slab and reduced taxable slabs in India to just 3. Although a few tweaks have been made including the 5% slab introduced in 2017, the overall taxation limit has not been changed significantly over the past 3 years. Since 2019 is the last budget of the current government before the election, we expect a revision in tax slabs as below:
|Income Slab||Tax Rate|
|0 – Rs 5 lakh||0%|
|Rs 5 – 10 lakh||10%|
|Rs 10 – 20 lakh||20%|
|Above Rs 20 lakh||25%|
Section 80C Limit
The overall limit under Section 80C, 80CCC and 80CCD is currently Rs 1.5 lakh. This was last fixed in 2014 and is well overdue for an increase. We expect that the government may hike the deduction limit to Rs. 2.5 lakh in the Union Budget 2019. These sections encompass virtually all tax saving options in India including EPF, PPF, NPS, ELSS Funds, ULIPs and savings instruments like National Savings Certificate and SCSS.
The Central Government announced a series of reforms in the NPS in a press conference in December 2018. They have not been enacted into law and are set to enacted in Budget 2019. These include:
- Hiking the Central Govt contribution for its employees to NPS from 10% to 14%
- Hiking the tax-free portion of the NPS corpus on maturity from 40% to 60%
- Making NPS Tier 2 eligible for tax deduction under Section 80C with lock-in
Removal of LTCG on Equities and Equity Mutual Funds
Budget 2018 introduced a 10% long term capital gains tax on gains in mutual funds held for more than 1 year. It also introduced a 10% dividend distribution tax on dividends paid by mutual funds. This led to high level of criticism from market commentators and investors. The equity market has also performed poorly since then. The government may offer some kind of tax relief to investors who were affected by LTCG. A key demand of such investors was the abolition of Securities Transaction Tax (STT) and this may be given some consideration by the government.
Direct Tax Code
The government has set up a committee to formulate a Direct Taxes Code (DTC) to replace the Income Tax Act, 1961. Budget 2019 is likely to provide further clarification on the likely shape of this code.
Draft Labour Code on Social Security
The Government has proposed a Draft Labour Code on Social Security in order to replace Employees’ Pension Scheme (EPS) and other social security laws. The Draft Labour Code proposes a limit of 17.5% on employer and employee contributions, up from the 12% cap under the Employees’ Provident Fund Act, 1952. Budget 2019 may provide further clarity on the details of these changes.
Currently, a corporate tax of 25% is levied on domestic companies with a turnover of up to Rs. 250 crore and of 30% with a turnover exceeding Rs. 250 crore. We expect that the government might set the rate of corporate tax at 25% for all domestic companies irrespective of their turnover.
Budget 2019 India Recent News
|January 31, 2019|
|Topmost on our list of Union Budget 2019 expectations is an increase in the 80C exemption limit which would help boost India’s declining savings rate. Other expectations include the removal of LTCG from equities and equity mutual funds, re-introduction of the 80EE deductions and creation of a separate exemption section for term insurance to name a few. Know more about our Interim Budget 2019 expectations.|
Budget 2019 Expectations
|June 20, 2019|
2019 Interim Budget may be bigger than a vote-on-account
The year 2019 is turning out to be unique in many ways, not the least of which is the fact that this year we are going to have two Union Budgets. We already had the Interim Budget 2019 in February which had a number of announcements capable of benefiting relatively large sections of tax payers and now in less than a month’s time, the announcements of Union Budget 2019 (the full one) are going to be released. The following are some of the top expectations for Union Budget 2019:
Increase in the Income Tax Exemption Limit
This one comes up before every budget – an increase in the income tax exemption limit. This limit determines the minimum amount beyond which income of an individual is taxable. Of course the interim budget 2019 did make a change in Section 87A and expanded the scope of relief available to those with net taxable salary of Rs. 5 lakh annually, but stopped short of actually increasing the income tax exemption limit. The expectation has long been that the income tax exemption limit be increased to Rs. 5 lakh for individuals aged up to 60 years. However, with this already addressed partially through the extended scope of Section 87A, this expectation of a higher limit may not come true.
Creating a Separate Section and Limit for Life Insurance
Life Insurance premium payments offer tax deduction benefits to tax assessees under Section 80C of the Income Tax Act, 1961. Many experts have pointed out that this section is a bit crowded and the cap of Rs. 1.5 lakh is too low considering the number of options available. Thus the idea is that insurance-based products in the category such as ULIPs and life insurance be put into a separate section with a separate limit to help increase the overall tax saving limit for the common man and help increase inflows into some products such as PPF (public provident fund), ELSS (equity linked savings schemes) and NPS (National Pension System) to name a few.
Removal of Long Term Capital Gains Tax on Equity Investments
The re-introduction of long term capital gains in Budget 2018 has often been heralded as a major cause for lower equity inflows during FY 2018-19. Some other experts suggest that even if LTCG on equities is kept, the benefit of indexation needs to be provided so as to provide some additional incentive to the common man for making equity investments. Only time will tell if either of these Union Budget 2019 expectations in fact come to pass.
Removal of Cascading Taxation on Share Dividend Income
Under existing rules, dividends on shares are taxed at two steps in case of domestic companies distributing dividends to shareholders. First, the company distributing dividends pays a tax of 15% and secondly the shareholder receiving the dividend has to pay a 10% tax on dividends received in excess of Rs. 10 lakh during a year. While the tax is applicable only to the incremental amount, its removal would help increase equity inflows from many high net worth investors.