We know that 2019 is an election year. We know that a full Budget will not be presented. We know that the Finance Minister has stated that it will not be a mere vote on account but something more. We know that the Finance Minister is going to come to India from his medical treatment the present the temporary Budget. However, what we don’t know is what the Budget will contain so we can only indulge with some crystal-gazing.
We can be sure that the Budget will contain something for everyone in order that they remember the Budget when they vote later during the year. There are rumours floating around that the basic income tax threshold limit is going to be increased to Rs 5 lakhs from Rs 2.5 lakhs. If this is really done without any conditions being attached, the Government can expect a grab a sizable vote bank. The Finance Minister is also expected to bring back exemptions for medical expenses and conveyance. Other rumours doing the rounds are lowering the highest income tax rate to 25% and increasing the deduction under Section 80C to Rs 2,50,000 from Rs 150,000. It is clear that the Government cannot do all of the above without ruining the fiscal deficit, some of the above measures could be announced on February 1.
Invariably, Budgets react to tax controversies that occurred since the previous Budget. The Finance Minister may make some changes to the DIPP Notification on Angel tax by extending the scope of the exemption and also ensuring that the CBDT issues a Notification that would cover all the mom-and-pop start-ups across the country that are not registered with DIPP. The Finance Minister may not touch corporate tax rates since they are at comfortable levels now.
The Government has already made their move to attract farmers by announcing the loan waiver scheme. The Government keeps repeating its intention to double farm income by 2022- this can happen only if steps are taken now. The news doing the rounds is that a direct transfer benefit scheme will be announced along with a “quick-loan” scheme. It is also possible that a nation-wide scheme on the basis of Telengana’s Rytha-Bandhu Scheme will be announced. Telengana’s Rytha -Bandhu Scheme involves paying cash of Rs 4,000 per acre per season to farmers for both the Kharif and Rabi Seasons.
There is not much the Government can do on GST since the GST Council has already done everything that can possibly be done. Yet, the Government may announce reduction of GST on cement to 18% and take baby-steps towards bringing petroleum products under GST. It is expected that the much-discussed decision to provide an option to the real estate sector of GST @ 5% without ITC will also be announced as the real estate industry does constitute a substantial vote bank and they can also influence other sectors. The tax collection at source mechanism has created some issues in implementation – some guidance on this can be given in the Budget. On the compliance front, we could expect some announcement on the proposed new system of filing GST returns.
It is clear that the Interim Budget is going to be a Budget of give-aways and there will not be too much of collection mechanisms enforced. These give-aways come at a cost and hence the Government that presents the next full Budget should think of ways and means of off-setting these give-aways.
(The writer is a Bengaluru-based tax expert)