Union Budget 2019 : Latest News & Expectations

1. Deductions for investments/payments

  1. Under section 80C a taxpayer can claim deductions for investments and payments. These investments and payments may include government backed securities (PPF, NSC), life insurance premium, payments made for tuition fees for children, repayment of housing loan, making it a channel for risk-free investments capped at Rs 1.5 Lakh
  2. Section 80C today is one of the key investments and tax saving tool for many taxpayers, primarily for the salaried class. Therefore, expectations are rife that the government may increase the tax deduction limit u/s 80C to Rs 2 lakh.
  3. The enhanced limit up could be considered for raising funds for infrastructure projects from taxpayers. Inclusion of risk-free securities such as debt mutual funds would find favour from taxpayers.

2. Income-tax slabs

  1. The interim budget provided relief to taxpayers having income up to Rs 5 lakh by introducing a full tax rebate for them. However, now the masses expect the rebate relief to extend to other Income tax slabs too.
  2. The current tax slabs are taxed at the range of 5% for the category Rs 2.5 lakh to Rs 5 Lakh, surging to 20% for the category Rs 5 Lakh to Rs 10 Lakh. There has been a long-standing demand to rationalise these slabs for the 5% to 20% category
  3. A 10% slab could be introduced for income in the range of Rs 5 Lakh to Rs 7.5 Lakh. And, the 20% slab could be fixed for the range of Rs 7.5 Lakh to Rs 15 Lakh.
  4. Such a move can be beneficial for the economy as well as it would put more money in the hands of the taxpayer which may, in turn, boost consumer spending and increase demand in the slowing economy.

3. Simplification of corporate taxes

  1. One of the most sought after demands of Indian corporates is – simplification of the corporate taxes. It is likely that the government may reduce the tax rate for corporate as the preceding FinMin had promised.
  2. The corporate tax should not be more than 18% to 20% per cent coupled with a zero-exemption limit.
  3. The Ministry of Finance must announce some majors that would help contain the rampant over-regulation of the economy.
  4. At this juncture, Foreign Direct Investments (FDI) can play a huge role in re-invigorating the economy. If relief is granted to corporate it is sure to attract a huge bounty of foreign investors which may pave the way for FDI in a sedentary Indian economy.

4. Benefits for housing

  1. Individuals were given the benefit of declaring up to 2 self-occupied houses in the interim budget 2019.
  2. The deduction for interest is capped at Rs 2 Lakh only. The government could consider enhancing the deduction for interest payment up to Rs 3 Lakh a year considering the average price of a flat and ticket size of housing loans.
  3. As a tax policy initiative, the government could also consider aggregating the tax benefits for interest and principal repayment for house property under a single head thus concentrating the benefits of section 80C to investments.

5. Benefits to women

  1. The government seeks to empower women entrepreneurs for a progressive society. Women are expecting that a woman Finance Minister must include at least something in the budget for them.
  2. This could come in the form of tax relief – which would be best addressed by allowing working women a deduction for child care and house help expenses

6.Regulation for virtual currencies

  1. Cryptocurrencies are a mode for making digital payments. The Reserve Bank of India (RBI) has in its notification dated 6 April 2018 banned entities regulated by it from dealing in or providing services to any person or entity with respect to dealing or settling virtual currencies including bitcoins.
  2. The Supreme Court of India, in its ruling dated 25 February 2019 required the Government to come up with Cryptocurrency regulation policies
  3. The matter is due for hearing in the second week of July 2019.The government is looking at promoting and increasing digital transactions.
  4. The government needs to reconsider the ban imposed on virtual currencies and draft a law to regulate all dealings in virtual currencies.
  5. While bringing in law for regulating bitcoins, the government could look at bringing in rules for taxation of all dealings including investments in bitcoins.
  6. Apart from these major reforms, there is also hope that the government may reform the banking sector enabling the sector to play a pivotal role in pushing India towards the $5 trillion economy.
  7. Most notably, the government now must divert all its energy in revitalizing the sluggishly moving economy and simultaneously add more jobs in its fold for the under-utilized manpower of the country.
  8. The optimum way to attaining equitable distribution of income and consistent decrease in the unemployment rate is to introduce a simplified policy for boosting the growth of Small and Micro businesses.