Highlights of the Interim Budget 2019

This year’s Union Budget in February as per convention is an interim one awaiting results of elections to be held in May. A national Interim Budget refers to the budget of a government that is going through a transition period. The Interim Budget spans the transition time between the two governments in an election year so that the government can continue to function.  An Interim Budget usually is an account of income and expenditure and doesn't list out new schemes or doesn't unveil any policy measures. However, the ruling party at the Centre took this opportunity to reach out to a large electorate ahead of the Lok Sabha polls and presented a few new measures in form of tax rebates and benefits for the economically weaker sections.  

Following are the key highlights from the announcements made in the Interim Budget 2019-20:

- FY20 fiscal deficit target set at 3.4 percent

- Expenditure target for FY20 set at Rs 27.84 lakh crore

- Capital expenditure for FY20 set at Rs 3.36 lakh crore

- FY19 fiscal deficit pegged at 3.4 percent of GDP; current account deficit at 2.5 percent of GDP

- FY20 gilt repayment pegged at Rs 2.36 lakh crore

-Railway capital expenditure raised to Rs 64,586 crore in FY20 from Rs 53,060 crore in FY19

-Defence budget for FY20 raised to Rs 3 lakh crore

Taxation - Tax benefit of Rs 18,500 crore given to three crore middle-class tax payers

- Full tax rebate for income up to Rs 5 lakh per annum

-Income tax rebate for income up to Rs 6.5 lakh (Rs 5 lakh + Rs 1.5 lakh under 80C of the Income Tax Act)

- Standard deduction for salaried persons raised to Rs 50,000 from Rs 40,000

-Tax-free Gratuity limit increased from Rs 10 lakh to Rs 30 lakh

- TDS limit on bank and post-office savings hiked from Rs 10,000 to Rs 40,000

-TDS threshold on rental income raised from Rs 1.8 lakh to Rs 2.4 l lakh

- No tax on notional rent on second self-occupied house

- Benefit of rollover of capital tax gains under Section 54 to be increased from investment in one residential house to two, for capital gains up to 2 crore rupees

-Vision to create a tech enabled taxpayer friendly tax department

-Benefits under Sec 80(i)BA being extended for one more year for all housing projects approved till end of 2019-2020

-Businesses with less than Rs. 5 crore annual turnover, comprising over 90% of GST payers, will be allowed to file quarterly returns

Agricultural sector -Farmers with less than two hectares to be offered Rs 6,000 per year as direct transfer. Around 12 crore farmers to benefit from the scheme. This scheme will cost the government around Rs 75,000 crore (around 0.36% of the GDP (2019-20 Budget estimate).

-To provide Rs 750 crore in FY19 to support animal husbandry and fishing

-Farmers struck by natural calamities will now receive 2-5 percent interest subvention under insurance scheme

- Two percent interest subsidy to be given to farmers involved in animal husbandry activities via kisaan credit card scheme. An additional three percent subsidy will be paid on timely payment of loans

-Decision taken to increase MSP (minimum support price) by 1.5 times the production cost for all 22 crops

Micro, Medium and Small Enterprises (MSMEs) -2% interest rebate for MSMEs registered under GST for loans up to INR 1 crore

- Requirement of sourcing by government enterprises from SMEs increased up to 25%, of which, at least 3% to be sourced from women-led SMEs

-Government E-procurement Marketplace (GeM) platform extended to Central Public Sector Enterprises

Social security -Mega scheme has been announced for workers in the unorganised sector with a monthly income upto Rs 15,000. The scheme will provide them with an assured monthly pension of Rs 3,000. The scheme is contributory and the government will make a matching contribution

-Rs 60,000 crore allocated for MNREGA for FY20

-Employees' State Insurance eligibility cover limit has been raised to Rs 21,000 per month from Rs 15,000 per month

- Workers who suffer grievous injuries will now receive Rs 6 lakh from Rs 2.5 lakh through Employee Provident Fund Organisation (EPFO)

Income Tax rebates are provided for in place of increasing the non-Tax bracket as the government has made an explicit target to increase the number of tax filers in the country. In the Budget speech, it was pointed out that the number of returns filed has increased from 3.79 crore to 6.85 crore, a growth of 80% growth since 2014.

The Interim Budget announcements when implemented are likely to stimulate demand and boost economic growth, with a slew of benrfits for the middle class, farmers and workers in the unorganised sector, leading to more disposable income in their hands. The overall announcements are positive for consumption and investment, while being slightly negative for inflation, fiscal consolidation and bond markets. Analysts are also worried about how the revenue side estimates will actually pan out. The full budget, which is likely in July 2019, would have more details on spending and revenue mobilization.