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2019 BUDGET EXPECTATIONS

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Budget 2019, last budget of current NDA Government is expected to see various announcements to woo voters. This budget is different from regular budget & is known as interim budget which is the last opportunity to introduce important measures ahead of elections & is traditionally considered as full of highlighting the achievements or in short a preview of election manifesto of current government following the indirect appeal to re-elect them. It is most likely to be presented on February 1.

In 2018 budget, FM reintroduced standard deduction of Rs. 40,000 replacing the transport & medical allowance. However, it failed to please the salaried class. Other announcement includes increase in tax exemption from Rs. 30,000 to Rs. 50,000 on account of health insurance for individuals more than the age of 60 years.

Also, no requirement of paying tax by individuals aged less than 60 years, upto income earned Rs. 2.5 Lac & Introduction of tax on LTCG above Rs. 1 Lac. Also, the important announcement of reducing corporate tax to Rs. 25% on businesses having turnover upto Rs. 250 Cr. So, it can be said that government somewhat tried to intensify its tax base (LTCG tax, promoted more registration under GST etc.) and tried to eliminate parallel economy. Also, the formation of committee for drafting new income tax act to simplify & make it non adversarial can be counted as an important step towards major tax reform.

From the perusal of last 4 years budget, it can be seen that FM tried to give more benefits to the salaried class as it is the most honest taxpayer class and to senior citizen class. So, it may be expected that again salaried class, pensioners and somewhere middle class (for healing the wounds of demonetization & woo rural and urban middle class for votes) may get big income tax reliefs. For this purpose, some proposals like increase in tax benefits for various classes of persons such as pensioners etc. , increasing saving limits, lowering interest rates on housing loans & many more are under consideration between FM & tax department. Hence, some positive surprises are expected in terms of exemption limits due to increase in the health & education Cess in the last year budget. 

Confederation of Indian Industry (CCI), a prominent business association presented various proposals to the government in terms of reduction in corporate tax & increase in income tax slab rates to cheer up corporate sector as well as individuals. In its pre-budget memorandum presented to FM, it recommended the corporate tax to be reduced to 18% not subject to any condition in terms of turnover etc. from the existing rate of 25% which is currently subject to turnover limit of upto Rs. 250Cr.

Further, CII recommended change in income tax slabs i.e. 0% tax on income upto Rs. 5 Lac, 10% tax income upto Rs. 10 Lac, 20% tax on income upto Rs. 20 Lac and 25% tax on income above Rs. 20 Lac.

As per reports, FM may consider changes in basic custom duty as well. But CII recommended no change in 10% peak rate of custom duty for safeguarding the interest of indigenous industry which is already suffering various disadvantages in terms of high interest rates, power etc. However, it recommended suitable increase in custom duty on import of FMCG & other consumer product which have become cheaper due to GST implementation to protect indigenous manufacturers.

Last but not the least, as very well known, FM mentioned in last year December that GST council has decided to reducing tax rate on various items, phasing out 28% tax rate except on some luxury & sin goods and most importantly the converging of 18% & 12% tax rate to single rate. So, some announcements in this respect are also expected.

Conventionally, it is the practice of the leaving government not to take bold decisions in the interim budget. Considering the current political scenario, if the government takes harsh steps (though not expected) while considering the abovementioned proposals, then it may have bearing upon the election depending upon the positive & negative effects of the steps.