Budget: Not much for individual taxpayer

Budget: Not much for individual taxpayer

Mrin Agarwal

Budget 2019 is behind us. A highly anticipated event with finance minister crowdsourcing ideas for the budget.

As usual, there were many expectations on tax rationalization but I did not really expect too many changes as there had been many changes already announced in the interim budget.

The positives of the budget are certainly the focus on ease of living with measures like a transportation card that can be used to pay toll, travel charges across India. The interchangeability of PAN and Aadhar for filing taxes, pre-filled tax forms are convenient features.

The budget had also laid out some measures to increase the number of taxpayers. It is proposed to levy a 5% TDS on all payments made by individuals to contractors in excess of Rs 50 lakh per year. Further, people depositing more than Rs 1 crore in current account, spending more than Rs 1 lakh for electricity bill and more than Rs 2 lakh for overseas travel in a year will have to mandatorily file taxes. Cash withdrawals above Rs 1 crore from a bank account will also attract a TDS of 2%.

While it is good to see some measures being finally taken to increase the tax net, I am not sure if these will result in any significant impact. For one, the limits of Rs 50 lakh and Rs 1 crore are very high.

Also people can easily split bills, deposit in different accounts to evade the rules. Funnily, the limits for individuals are generally very low like Rs 1.5 lakhs for Section 80C or Rs 50,000 for NPS. But when it comes to business owners who are the main tax evaders, the threshold has been kept too high.

Budget 2019 will increase costs for individuals. While Rs 1 petrol and diesel cess looks small, not only will it increase petrol prices but also prices of most commodity items that are consumed on a daily basis.

Affordable housing (houses up to Rs 45 lakh) homebuyers have been given a big tax break, with an additional Rs 1.5 lakh on interest payment being tax deductible over and above Rs 2 lakh under Section 24. However, people buying houses for more than Rs 50 lakh will now need to include charges like club membership fee, car parking fee, electricity and water facility fee, maintenance fee and any other advance fee as part of the overall cost of the property, and pay TDS on the same.  

A super rich tax of 3% and 7% respectively, has been imposed with those having taxable income between Rs 2 to Rs 5 crore and above Rs 5 crore.

This will not increase tax collections significantly and the government should be focusing on getting more people to pay tax.

Sadly, the budget doesn’t do much for ease of investing for the retail investor. The move of increasing minimum public shareholding will not really get people to invest into equity.

Giving CPSE ETFs ELSS type tax benefits may help mop up funds. However, there are many existing ELSS which are more diversified and better performing.

Too many small investors fall prey to ponzi schemes and it would have been good to see the budget addressing the issue of financial illiteracy, which is very widespread in India. I would give the budget 6/10 for its measures towards individual taxpayers and 10/10 for the finance minister’s mojo which certainly left many women spellbound.

(The writer is a financial educator, founder director of Finsafe India Pvt. Ltd)