It's just what the doctor ordered. Interim FM Piyush Goyal rose to present the outgoing government's last Budget in the midst of a grave agrarian crisis, question mark over job creation in the country and at a time when the small businesses were still smarting under the twin blows of DeMo and GST.
He had to appease these three constituencies--farmers; middle class and small businesses--desperately to ensure that the outgoing BJP government's nominees won't face embarrassment when they stand for re-election in less than 90 days.
He didn't disappoint either. In the process, he even prodded an ailing sector such as real estate to kickstart growth. It's another matter how many of today's announcements would reach the intended beneficiaries before the ballot boxes close. But with election nearing, BJP needed a quick fix-a maximum impact but low effort move that would appease the three target groups somewhat. And it did.
The political class has been looking for an atonement for their betrayal of their promise to improve the farmer's life.
Relief for the farming community in the form of a direct benefit transfer-- Pradhan Mantri Kisan Samman Nidhi--scheme has been in the making for at least a few months. But it was linked to the crop season. BJP has tweaked it to make it a no-questions asked Rs 6,000 transfer to every farmer owning 2 hectares (5 acres of land). To make its impact felt, the first instalment will be credited by March 31, 2019, just in time for the elections.
But this only benefits the landed farmers who are 92.2 per cent of the 10 crore agri households. The government clearly has no solution yet for the 7.8 per cent landless farmers-which will remain a key sticking point. For the unorganised worked it proposed an insurance scheme the Pradhan Mantri Shram Yogi Maandhan for workers earning up to Rs 15,000 per month to provide a monthly pension of Rs 3,000 when they hit 60 years of age.
Farmers were also showered with a 2 per cent interest subvention for crops struck by natural calamities and an addition 3 per cent subvention for such restructured loans. They will also get a 2 per cent interest subvention for animal husbandry and fisheries when availing loan through Kisan Credit Card.
Middle class also hit by DeMo was finally address with a proposal not to tax individual taxpayers with annual income up to Rs 5 lakh. Those with gross income up to Rs 6.5 lakh will not need to pay any tax if they make tax-savings investments. As a result, anybody earning up to Rs 5 lakh gains Rs 13,000 per annum; those up to Rs 4 lakh Rs 7,800 and those up to Rs 3,5 lakh Rs 2,600. Interestingly, this exemption only applies to those with income up to Rs 5 lakh. Individuals earning higher will have to pay tax as per the existing slabs of 5 per cent, 20 per cent and 30 per cent for Rs 2.5 lakh to 5 lakh; Rs 5 lakh to Rs 10 lakh and for Rs 10 lakh and above.
The salaried class also got a Rs 10,000 hike in standard deduction from Rs 40,000 to Rs 50,000. These provisions help over 3 crore salary earners and pensioners. Goyal also raised the TDS threshold on interest earned on bank/post office deposits from Rs 10,000 to Rs 40,000.
FM Goyal also gave in to the long standing demand of the middle class to raise the ceiling for tax free gratuity from Rs 10 lakh to Rs 20 lakh.
But the big benefit for those who are above the Rs 5 lakh bracket and missed out on that bonanza comes in the housing area. TDS threshold for deduction of tax on rent has been raised from Rs 1.8 lakh to Rs 2.4 lakh, providing a big relief. He also exempted notional rent on a second self-occupied house to help families which maintain two houses.
FM Goyal also agreed with a long standing demand to roll over capital gains on a second residential house (in buying another house). This will attract more investors to buy second homes and prop up the ailing real estate sector. There are more than 6.73 lakh unsold units across the top 7 cities, according to real estate consultancy Anarock.
MSMEs hurt by the two blows of DeMo and a rushed GST implementation was the third constituency Goyal tried to address. All GST registered SMEs will get a 2 per cent interest subvention on loans higher than Rs 1 crore. To provide help to sourcing of products made by SMEs, all government firms have been mandated to source 25 per cent of their requirements from SMEs. Of that, at least 3 per cent should be sourced from SMEs owned by women entrepreneurs.
Giving in to SMEs' demand for ease of doing business, nearly 90 per cent of GST payers will now be allowed to file quarterly return soon, instead of monthly return.
While the Centre's tax proposals for the middle class are only going to be effective from the next fiscal, the DBT scheme and the rush of populist announcements means the impact of Interim Budget 2019 may be hard to resist for the electorate in the General Elections.