New Delhi: Nirmala Sitharaman presented her first Budget in Parliament on Friday, dividing her speech equally between rural and urban India, between corporate and the kisan, focusing on women and youth. As the first full-time woman finance minister of India, Sitharaman, announced a slew of measures but what does this budget hold for the common man? Here is a quick view of what she has proposed for some of the crucial sectors:
1) Income Tax: There are no new tax breaks for the salaried aam aadmi. As proposed in the Interim Budget this February, those having taxable income less than Rs 5 lakh will not have to pay any tax. But for individuals having taxable income of over Rs 5 lakh, there is no change in slabs. Sonu Iyer, Partner & National Leader, People Advisory Services, EY India says additional tax breaks for low-income earners have been given by way of a deduction of Rs 1.5 lakh for interest paid on a loan taken in FY 2019-20 to buy a house, for which the stamp duty value does not exceed Rs 45 lakh.
For the super-rich though, the budget spells doom. It proposes a fairly steep increase in taxes for those earnings over Rs 2 crore annually. For annual income between Rs 2 crore to 5 crore, the effective tax rate is proposed to be hiked by 3%, while for those earning over Rs 5 crore will face an effective tax rate increase of 7%. So, for anyone making over Rs 5 crore a year, the effective tax rate has climbed to 40%. This has not just upset the super-rich but also spooked the stock markets. Tax experts say just about a lakh and a half Indians have taxable income above Rs 1 crore and those the finance minister has targeted through increased effective tax would be even smaller in number. Iyer says the Budget fine print also talks about mandatory requirement to file tax returns for the following new categories of tax payers who carry out high-value transactions:
-Electricity consumption bill over Rs 1 lakh.
-Foreign travel for self or someone else for Rs 2 lakh or more.
-Deposit of an amount or an aggregate of the amounts exceeding Rs 1 crore in a current account.
-Persons claiming benefits of tax exemption for long-term capital gains under various provisions under Section 54 of the Income Tax Act.
2) Corporate Tax: Companies with a turnover of up to Rs 400 crore will now have to pay the lower rate of 25%, which means more than 99% of India Inc is now in the lower tax bracket. But that doesn’t help matters much since the biggest tax payers in India Inc are the companies which have been kept out and will continue to attract the 30% rate.3) Fuel: In an effort to raise resources, the Finance Minister hiked excise duty and cess on petrol and diesel. This would likely make the two fuels dearer by about Rs 2 per litre when the oil companies pass on the duty hike. The inflation in fuel prices will not be liked by the aam aadmi. Kerala Finance Minister Thomas Issac tweeted, “Tax hikes on petroleum have been single largest source of additional resource mobilisation for NDA regime. During the last five years tax on petrol increase from Rs 9.20 to Rs 17.98 and that of diesel from Rs 3.46 to Rs 13.83. True to tradition FM hike them both yet another Rs 2.
4)Electric Vehicles: A slew of measures have been announced to make electric vehicles (EVs) more viable for the automobile industry and more affordable for the common man. These steps include reducing GST on EVs to 5%, exemption in customs duty on EV parts, income tax deduction on the interest component paid for loans taken for purchasing EVs. This will be in addition to the already existing Rs 2 lakh interest deduction. In line with Green India and reducing the carbon footprint, the finance minister also proposed a deduction for interest paid on car loan taken to purchase an electric vehicle between April 1, 2019 and March 31, 2023.These measures come amid a determined push by the government to bring in EVs and phase out vehicles running on conventional fuels, petrol and diesel. Only the automobile industry is not happy with these concessions as the oft-repeated demand of a scrappage policy (so that older vehicles can be retired and demand for new purchases rises) has been ignored once again. For buyers, it remains to be seen whether lower duties and tax breaks push the common man to go for electric scooters.
5)Angel Tax: After a bruising battle over Angel Tax last year, the budget proposes that those start-ups and their investors who file requisite declarations and provide information on their returns will be exempted from scrutiny on share premiums. And identity of the investor will be determined through e-verification. Pending assessments of start-ups and redressal of grievances will be eased.
6)Farmers: The finance minister reiterated the commitment made during the previous regime of the NDA of doubling farm incomes by 2022. However, she spoke only of small measures to help farmers sell their produce. BJP MP Subramanian Swamy wrote on Twitter, “The target stated in Budget is doubling of farm income by 2022 from base year 2018. That means doubling in 4 years which means a compound average annual rate of growth of 18% per year. At present farm income is growing at 2.0% per year. Sweet dreams.”(The author is a senior journalist.)