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Highlights of Interim Budget 2019 - 20 - Analysis & Important points

 

Download Union Budget 2019-20 Highlights PDF

 

Finance Minister Piyush Goyal on 1^st February, 2019, presented the interim Union Budget in Lok Sabha. The Budget is notable for its roadmap for 2030 focusing on 10 dimensions which are key growth drivers of the Indian economy.

 

Highlights and important points of the Interim Budget 2019

- Income Tax & other Personal Taxes - 

• Individual taxpayers with annual income up to Rs. 5 lakh rupees to get full tax rebate. For others, the tax rate remains unchanged.
• Individuals with gross income up to 6.5 lakh rupees will not need to pay any tax if they make investments of Rs.1.5 Lakh in instruments prescribed eligible for tax savings under Section 80C.
• Standard tax deduction for salaried persons raised from Rs. 40,000 rupees to 50,000.
• TDS threshold on rental income raised from Rs. 1.8 lakh to Rs. 2.4 lakh. Around 3 crore middle-class taxpayers will get tax exemption due to this measure.
• Benefit of rollover of capital tax gains to be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains up to 2 crore rupees; can be exercised once in a lifetime.
• Benefits under Sec 80(i) BA being extended for one more year, for all housing projects approved till end of 2019-2020.
• Group of Ministers examining how prospective house buyers can benefit under GST.
• Within almost two years, almost all assessment and verification of IT returns will be done electronically by an anonymized tax system without any intervention by tax officials.

- Business Taxes - 

• Businesses with less than Rs. 5 crore annual turnover, comprising over 90% of GST payers, will be allowed to return quarterly returns.
• 2 % interest subvention on loan of 1 crore for GST registered MSME units.

- GST Implications - 

• In January 2019, GST collections have crossed Rs. 1 lakh crore.
• GST has been continuously reduced, resulting in relief of Rs. 80,000 crore to consumers; most items of daily use for poor and middle class are now in the 0%-5% tax bracket.
• GST is the biggest taxation reform implemented since Independence; through tax consolidation, India became one common market; inter-state movements became faster through e-way bills, improving Ease of Doing Business.

- Tax Collection - 

• Direct tax collections from 6.38 lakh crore rupees in 2013-14 to almost 12 lakh crore rupees; tax base up from Rs 3.79 crore to Rs 6.85 crore.
• 54% returns have been accepted without any scrutiny.

- Business Scenario - 

• Cost of data and voice calls in India is now possibly the lowest in the world.
• Mobile and mobile part manufacturing companies have increased from 2 to 268.
• Single window clearance for filmmaking to be made available to Indian filmmakers.
• Anti-camcording provision to be introduced to Cinematography Act to combat film privacy.
• Digitization of Export and Import transaction.
• India is the second largest start up hub of the world.

- North East India - 

• Allocation for North Eastern region proposed to be increased to Rs 58,166 crore in this year a rise of over 21% from the previous year.
• Government will introduce container cargo movement to the Northeast by improving the navigation capacity of the Brahmaputra River.
• The budget allocation of Rs. 580 crore for various schemes of the North Eastern Council
• 931 crore under Central Pool of Resources for Northeast and Sikkim
• 674 crore under other subsidy payable including for North Eastern Region
• 1,700 crore for refund of Central and Integrated GST to Industrial Units in Northeastern region and Himalayan states.
• Arunachal Pradesh has come on the air map recently and Meghalaya, Tripura and Mizoram have come on India’s rail map for the first time.
• Many Projects stuck for decades like the Bogibeel rail-cum-road bridge have been completed.

- Agriculture & Allied sector - 

• Increased allocation for Rashtriya Gokul Mission to Rs. 750 crore in current year.
• Two per cent interest subvention to farmers pursuing animal husbandry and fisheries.
• Under Pradhan Mantri Kisan Samman Nidhi, 6000 per year for each farmer, in three installments, to be transferred directly to farmers’ bank accounts, for farmers with less than 2 hectares land holding. This initiative is likely to benefit 12 crore small and marginal farmers, at an estimated cost of Rs 75,000 crore.
• Government announced setting up of Rashtriya Kamdhenu Aayog to enhance productivity of cows.

- Mining and Core Industry sector - 

• Urgent action needed to increase hydrocarbon production to decrease imports; change in bidding procedure and exploration procedure being implemented.

- Banking and Financial Sector - 

• The 4R approach has been implemented to ensure clean banking –

1. Recognition
2. Resolution
3. Recapitalisation
4. Reform

• The government spent Rs 2.6 lakh crore in the recapitalisation of the public sector banks and recovered Rs 3 lakh crore so far, through the Insolvency and Bankruptcy Code procedures. The Bank of India, Bank of Maharashtra and the Oriental Bank of Commerce are out of the PCA framework.
• 56 lakh loans worth Rs 7.23 lakh crore have been sanctioned under Mudra scheme.

- Technology Sector - 

• Mobile Date consumption has increased by 50% in the country in the last five years. More than 3 lakh service centres are employing over 12 lakh today under the Digital India push.
• National Program on Artificial Intelligence is up next with centres of excellence to give the push. The aim is to empower the MSME sector.

- Infrastructure Sector - 

• Sagarmala Project, a strategic and customer-oriented initiative to modernize India’s Ports, will be scaled up.
• On realty sector, RERA and Benami Properties Act helped bring transparency in the sector.
• Promise of electricity for all households by March 2019.
• Digital villages are the next big scheme with an aim of 1,00,000 lakh such villages in the next five years.
• India has achieved 98 percent rural sanitation coverage.

- Railway Sector - 

• Planned expenditure of Rs. 1,58,658 crore.
• The operating ratio, a measure of Indian Railways financial health, improved and further improvement is being eyed. The operating ratio for the current fiscal year has improved to 96.2%.
• Trains sets like Train 18, now Vande Bharat Express, will offer world-class travel experience to passengers in the coming years.
• Vande Bharat Express was pitched as the indigenous technology leap that will ensure speed, service and safety in rail travel.
• An outlay of Rs 64,587 crore for Indian Railways.

- Defense Sector - 

• Defense Budget gets mega boost, which is set for Rs. 3 lakh crore.

- Social Welfare - 

• Pradhan Mantri Shram Yogi Mandhan, to provide assured monthly pension of 3000 rupees per month, with contribution of 100 rupees per month, for workers in unorganised sector after 60 years of age. This will benefit 10 crore workers in unorganized sector, may become the world’s biggest pension scheme for unorganized sector in five years.
• 500 crore to be set aside for the above scheme, which is to be implemented from this year.
• Massive announcement for work sector wish increase in gratuity limit from Rs 10 lakh to Rs 30 lakh.
• Rs 60,000 crore has also been set aside for
• Rs 19,000 crore has been allocated for Pradhan Mantri Gram Sadak Yojana.
• Allocation for National Education Scheme is 38578 crore.
• 76,800 crore for SC/ST/OBC welfare schemes.
• Committee under NITI Aayog to be set up to identify and denotify nomadic and semi-nomadic communities; Welfare Development Board to be set up under Ministry of Social Justice and Empowerment for welfare of these hard-to-reach communities and for tailored strategic interventions.

- Women and Child Development - 

• Rs 29,000 crore has been set aside for the Women and Child Development (WCD) Ministry for the next fiscal, a 20 % increase over the 2018-2019 financial year with the Centre’s programmes of maternity benefit and child protection services.
• The allocation for the Pradhan Mantri Matru Vandana Yojana (PMMVY), a maternity benefit programme, was more than doubled to Rs 2,500 crore from Rs 1,200 crore. The programme provides Rs 6,000 each to pregnant women and lactating mothers.
• The Child Protection Services programme under the Integrated Child Development Services was increased to Rs 1,500 crore from Rs 925 crore.
• The government has already provided 6 crore free LPG connection. Government aims to complete the promise of 8 crore Free LPG connections by next year.

- Growth of Indian Economy - 

• India is poised to become a 5 trillion dollar economy in the next five years and will become a 10 trillion dollar economy in the next eight years.
• Inflation is a hidden and unfair tax; from 10.1% during 2009-14, inflation in December 2018 was just 1%.

- Fiscal Scenario - 

• Fiscal deficit has been bought down to 3.4%
• CAD (Current Account Deficit) likely to be 5% of GDP this year.
• Total expenditure target for FY20 is at 27,84,200 crore a rise of 13.3%
• Capital expenditure target is at Rs 3.36 lakh crore.
• In 2018-19, dividend from RBI, PSU Banks is Rs 74,100 crore. For the current financial year, target for the same has been pegged at Rs 82,900 crore.
• Revenue Deficit target has been pegged at 2 percent of the GDP.
• Gilt repayment is pegged at Rs 2.36 lakh crore.
• Net market borrowing has been pegged at Rs 4.73 lakh crore, while the gross market borrowing for the financial year has been pegged at Rs 7.1 lakh crore.
• Dividend from PSU units has been pegged at Rs 53,160 crore.
• Divestment target for Financial year 2020 has been pegged at Rs 90,000 crore.

 

What is Interim Budget & Vote-on-account?

Interim Budget: An interim budget is akin to a full budget but made by the government during the last year of its term, before the election. It has complete set of accounts, including both expenditure and receipts, but may not have any major policy proposals.

• The interim Budget will seek the Parliament’s nod for meeting the expenditure for the first six months of new fiscal 2019-20 and a full-fledged Budget will be presented in Parliament once the new Central government is formed after the general elections.
• It is not mandatory to present an interim budget in an election year, but the convention is to present an interim budget and get the fund required for spending.

Vote on Account: Vote on Account is a grant in advance to enable the government to carry on until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill.

• Generally, the Vote on Account is taken for two months only and thus the sum of the grant would be equivalent to one-sixth of the estimated total expenditure for the entire year.
• Vote on Account deals only with the expenditure side of the government’s budget.
• Vote on Account cannot alter direct taxes and is treated as a formal matter and passed by the Lok Sabha without discussion.
• The provisions of Vote on Account are given in the Article 116 of the Constitution.

Purpose of Budget/vote-on-account/interim budget

• Article 266 of the Constitution of India mandates that parliamentary approval is required to draw money from the Consolidated Fund of India.

Budget: Glossary of Terms

 

Consolidated Fund

All revenues received by the Government including tax and non-tax revenues, loans raised and repayment of loans given (including the interest thereon) form the Consolidated Fund. All expenditure and disbursements of the Government, including release of loans and repayments of loans taken (and the interest thereon), are met from this fund.

 

Contingency Fund

A reserve fund set aside for possible unforeseen expenditure and established under Article 267(2) of the Constitution. It is an imprest placed at the disposal of the Governor.

 

Public Account

All public moneys received, other than those credited to the Consolidated Fund, are accounted for under the Public Account. In respect of such receipts, Government acts as a banker or trustee. The Public Account comprises of repayable like Small Savings and Provident Funds, Reserve Fund, Deposits and Advances, Suspense and Miscellaneous transaction (adjusting entries pending booking to fi nal heads of account), Remittances between accounting entities, and Cash Balance.

 

Deficit

It is the gap between Revenue and Expenditure. The kind of deficit, how the deficit is financed, and application of funds are important indicators of prudence in Financial Management.

 

Fiscal Deficit

When the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money form the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit.

 

Primary Deficit

The primary deficit is the fiscal deficit minus interest payments. It tells how much of the Government’s borrowings are going towards meeting expenses other than interest payments.

 

Revenue Deficit/ Surplus

It is the gap between Revenue Receipts and Revenue Expenditure. Revenue Expenditure is required to maintain the existing establishment of Government and ideally, should be fully met from Revenue Receipts.

 

Direct and Indirect Taxes

Direct taxes are the one that fall directly on individuals and corporations. Eg. Income tax, corporate tax etc. Indirect taxes are imposed on goods and services. They are paid by consumers when they buy goods and services. These include excise duty, customs duty etc.

 

Fiscal policy

It is the government actions with respect to aggregate levels of revenue and spending. Fiscal policy is implemented though the budget and is the primary means by which the government can influence the economy.

 

Capital Budget

The Capital Budget consists of capital receipts and payments. It includes investments in shares, loans and advances granted by the central Government to State Governments, Government companies, corporations and other parties

 

Revenue Budget

The revenue budget consists of revenue receipts of the Government and it expenditure. Revenue receipts are divided into tax and non-tax revenue.

 

Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the Government levies.

 

Non-tax revenue sources include interest on loans, dividend on investments.

 

Budget Estimates Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.

 

Guillotine

Parliament, unfortunately, has very limited time for scrutinizing the expenditure demands of all the Ministries. So, once the prescribed period for the discussion on Demands for Grants is over, the Speaker of Lok Sabha puts all the outstanding Demands for Grants, Whether discussed or not, to the vote of the House.

 

Download Union Budget 2019-20 Highlights PDF

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Union Budget 2018-19