Usually, most governments hold back from announcing drastic changes in the interim Budget. But it is a good opportunity to win over votes with economic policies that will sway the opinion of the public and keep the government in power.
This Budget has already become quite an interesting event. Piyush Goyal has been given the portfolio of the interim finance minister due to Arun Jaitley’s poor health. And this being the final Budget presentation for the ruling government in its term, the expectations are huge.
What changes can we expect from the interim Budget 2019?
Today, businesses are facing a high incidence of the tax. 30 percent corporate tax and dividend distribution tax rate of 20 percent is eating away their surplus, making it difficult for companies to reinvest into expansion. Therefore, businesses are looking forward to a reduction of 5 percent from the current 30 percent corporate tax, irrespective of turnover.
The Confederation of Indian Industries has proposed that the tax slab rates be changed for individual taxpayers. It has suggested that 30 percent should apply only to those earning Rs 20 Lakhs plus annually. As of now, the 30 percent applies to people earning Rs 10 lakhs and above.
Presently, Section 80C of the Indian Income Tax Act provides individual taxpayers to avail tax deduction on investments up to Rs 1.5 lakhs. It is possible that the new Budget increases it to Rs 2 lakhs, which would be a breath of fresh air, especially for the salaried people.
The government has introduced new rules with respect to the National Pension Scheme (NPS).
The new rules cover the increase of the government’s contribution from 10 percent to 14 percent for central government employees. This increase will make 60 percent of the withdrawal corpus tax-free from the previous 40 percent and so on. It is possible that these provisions would be covering all taxpayers.
When a taxpayer changes from growth option to dividend option or vice-versa, LTCG tax will be applicable accordingly. Although, changing within the same scheme from debt to equity (for ULIPs, NPS, etc.) is not subject to taxation. Industry leaders expect the government to bring in uniformity between switches and make shifting within the schemes in the equity investments non-taxable.
Finance minister in Budget 2015 assured a decrease in the corporate tax rate from 30 percent to 25 percent in the coming years. He did cut the rate for specified companies in terms of the turnover in Budget 2018, but this tax relief was extended only to registered companies and not partnership firms and LLPs. The LLPs and partnership companies are very hopeful of receiving the same benefit in the Budget 2019.
Let us wait to see how many of these expectations will be realised.
First Published: IST