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Interim Budget: Cheers for taxpayers likely

January 28, 2019 15:50 IST

The finance minister is likely to announce the government’s vision for a tax-friendly regime by raising the I-T exemption limit from the current Rs 250,000 per annum.

Illustration: Dominic Xavier/Rediff.com

The 2019-20 interim Budget may lay out a road map for possible tax incentives for the middle class.

While the specific measures are expected to wait for the full Budget, the finance minister is likely to announce the government’s vision for an income-tax (I-T)-friendly regime, possibly including exemptions and raising of the I-T exemption limit from the current Rs 250,000 per annum.

 

However, the government is still considering whether to bring these changes in the Finance Bill to enable amendments to the I-T Act or stick to convention and merely announce its intention to introduce them in the July post-election Budget if it is re-elected to power.

The interim Budget will be presented on February 1.

A senior official privy to discussions explained the situation: “It is purely a matter of following the set convention or not.

"Theoretically speaking, the Finance Bill, even if it seeks to amend the I-T Act to reflect changes in the tax slabs, will be passed in the Lok Sabha because of the ruling coalition majority.

"However, the government wants to avoid another spat with the Opposition in the Budget session, just before the election.”

To that effect, a set of announcements regarding I-T sops, with the promise that they will be implemented and given legislative backing if the Bharatiya Janata Party (BJP) comes back to power, is the most likely path that the Budget will present.

This way, a short Finance Bill will be tabled for clearance in a short Budget session and no immediate amendments to the tax laws will be sought, officials say.

Like any other Money Bill, the Finance Bill only requires passage in the Lok Sabha, though it will be debated in the Rajya Sabha as well.

The Budget session is expected to be held from January 31 to February 13.

According to convention, interim Budgets don’t have a separate Part B for listing tax measures and don’t seek to amend the I-T Act.

Past interim Budgets have changed indirect tax rates but, with the goods and services tax (GST) now under the purview of the GST Council, if a finance minister follows the set convention, he or she can now only touch Customs rates.

When it comes to the law, however - as distinct from convention - there is no law which prevents a government from announcing and implementing major direct tax changes in an interim Budget.

As to what Jaitley is likely to say in the Budget speech, another senior official said: “Jaitley is likely to talk at length about the widening of the tax base due to increased compliance and will thank the salaried and middle classes for helping bring about this change, with a promise that the government will keep their needs in mind and will bring about the necessary taxation changes in the July Budget.”

Last week, while addressing an event in Mumbai from New York via teleconference, Jaitley said although the government will work “within the parameters of the conventions that exist”, the contents of the interim Budget will be decided by the larger interests of the economy.

“Ordinarily there should be no reason why we should move away from that convention, but then the larger interests of the economy always dictate what should be in the interim Budget… Without getting into the specifics, some of those challenges really can’t afford to wait.

"There would be a necessity to address some of them. We intend to work within the parameters of the conventions that exist,” said Jaitley.

Since the BJP’s election losses in three states and with a general election around the corner, much speculation has broken out over the populist measures that the government could take.

As reported earlier in the Business Standard, a massive nationwide income support programme for farmers is in the works and could include free crop insurance.

Such an announcement could be made in the Budget or earlier.

Arup Roychoudhury
Source: source
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