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Finance Minister Nirmala Sitharaman is all set to present her maiden budget in the Lok Sabha today. Friday at a crucial juncture in the economy when growth is slowing down and so are revenue collections. Consumer demand which has so far been the only engine driving the economy now looks vulnerable.
Here is a look at five key expectations that the common man has from Budget 2019:
This is one of the key demands of salaried and middle class. Last time the basic exemption limit was hiked was in 2014 when it was increased by Rs 50,000 to Rs 2.5 lakh. Since then no changes have been made. However, in Budget 2017, then finance minister, Arun Jaitely, slashed the income tax rate for the lowest tax bracket to 5 percent.
The 11.5% nominal GDP growth for 2019-20 assumed in the interim Budget is unlikely to be achieved since the Economic Survey has now pegged real GDP growth at 7% for the same year and retail inflation is firmly anchored below 4%. A lower nominal GDP growth may make it difficult to achieve the fiscal deficit target of 3.4% of GDP in 2019-20 while a high nominal GDP print will be looked at with suspect by analysts.
Another thing on the taxpayer’s wish list is the raising the amount of tax benefit available under section 80C. As per current income tax laws, an individual can claim a maximum tax benefit of Rs 1.5 lakh by investing in specified instruments to save tax. This limit was hiked to Rs 1.5 lakh in Budget 2014.
With growth slowing down, the government is unlikely to meet its revenue collection targets assumed in the interim Budget. As per the provisional estimates of Controller General of Accounts, the total receipts of the government in 2018-19 witnessed a shortfall of ₹1.46 trillion, compared with the revised estimates of ₹14.8 trillion for the same fiscal year. This was mainly on account of lower tax revenue collections. Greater reliance on off-balance sheet borrowing and lower subsidy allocations will raise question marks on the credibility of the fiscal math.
To give a boost to the real estate sector and the government’s objective of ‘Housing for all’ by 2022, it is likely that the deduction available on interest paid on the housing loans will be hiked. Currently, the income tax laws allow maximum deduction of Rs 2 lakh in a financial year on the interest paid on a home loan. This limit was last revised in 2014.
While digression from the fiscal consolidation path is unlikely, policy measures and incentives that the government may announce to boost the economy which is at a five year low of 6.8% in 2018-19 will be keenly watched. Finance minister Nirmala Sitharaman in Rajya Sabha on Tuesday promised that the government will take immediate steps to arrest the slowdown in economic growth and encourage manufacturing.
While the government has announced the PM-KISAN scheme to support farmer’s income, it may announce more measures to revive rural demand. Similarly, the drought scenario in a large part of the country may force the government to formulate concrete measures for water conservation under the new water ministry.
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