Interim Budget: Income tax exemption raised, farmers to get

Making a strong re-election pitch, the BJP-led NDA government Friday announced the biggest income tax sops for middle class, including complete exemption for income up to Rs 5 lakh, and Rs 6,000 annual cash dole to poor farmers in a scheme that will cost Rs 75,000 crore per year.

Converting a vote on account speech into an almost full- fledged budget announcement in Lok Sabha, Finance Minister Piyush Goyal proposed an array of incentives for both middle class and farmers, whose disenchantment was said to have cost the BJP dearly in recent assembly elections.

Over three crore salaried class, pensioners, self- employed and small businesses will save Rs 18,500 crore in income tax annually after the exemption limit was doubled to Rs 5 lakh for the next fiscal from current Rs 2.5 lakh.

Also, standard deduction was raised to Rs 50,000 from current Rs 40,000.

TDS threshold on interest from bank and post office deposits has been raised from Rs 10,000 to Rs 40,000.

Presenting the interim Budget, Goyal said capital gains of up to Rs 2 crore made from sale of immovable property can now be invested in two residential houses as against current practice of exempting such income if invested in one house within a year.

However, it can be exercised once in a lifetime, he said, adding the current tax slabs of 20 per cent tax on income between Rs 5 lakh and Rs 10 lakh and 30 per cent tax on earnings of over Rs 10 lakh would continue in the next fiscal year beginning April 1, 2019.

Also, TDS threshold for deduction of tax on rent has been increased to Rs 2.4 lakh from current Rs 1.8 lakh.

As was widely anticipated, he announced an income support scheme for 12 crore small and marginal farmers by providing Rs 6,000 in their bank accounts in three equal instalments in a year.

The eligibility for the scheme, called Pradhan Mantri Kisan Samman Nidhi, will be ownership of less than 2 hectares of cultivable land.

The scheme will be implemented from the current fiscal year, where it will cost Rs 20,000 crore. For the next fiscal year, the allocation will jump to Rs 75,000 crore.

The farm income support scheme will result in the government breaching its 3.3 per cent fiscal deficit target from the current year.

For next fiscal, he pegged fiscal deficit at 3.4 per cent of the GDP, up from fiscal consolidation roadmap of bringing it down to 3.1 per cent in 2019-20 and 3 per cent in 2020-21.

"We would have maintained fiscal deficit at 3.3 per cent for the year 2018-19 and taken further steps to consolidate fiscal deficit in the year 2019-20.

"However, considering the need for income support to farmers, we have provided Rs 20,000 crore in 2018-19 RE (Revised Estimate) and Rs 75,000 crore in 2019-20. If we exclude this, the fiscal deficit would have been less than 3.3 per cent for 2018-19 and less than 3.1 per cent for the year 2019-20," he said.

Fiscal deficit for 2018-19 has been pegged at 3.4 per cent and current account deficit at 2.5 per cent.

Justifying inclusion of tax proposals in an interim budget, he said, "Though as per convention, the main tax proposals will be presented in regular budget, small taxpayers especially middle class, salary earners, pensioners and senior citizens need certainty in their minds at the beginning of the year about their taxes.

"Therefore, proposals, particularly relating to such class of persons should not wait."