By tweeting what Nirmala Sitharaman did, she probably didn’t realize what she was getting herself into. In response to her initial tweet, ‘Grateful for every thought/idea that’s being shared by scholars, economists and enthusiasts through print, electronic, and on social media. I read many of them; also, my team carefully collates them for me. Value every bit. Thanks. Please keep them coming,’ because of this Sitharaman was swamped with suggestions regarding the budget and the budget survey, from every people place and people.
This probably is the first time that any finance minister is looking beyond the usual suspects— the economists, corporate honchos and various lobby groups — to the aam aadmi, for budget-related suggestions. Even if only a few Indians responds, that’s enough to keep the new minister on her toes.
She would do well if she follows the advice given in William Shakespeare’s Hamlet: ‘Listen to all opinion, but answer only the reasonable. Acknowledge criticism, but keep your judgment on hold, be patient and wait for the opportune moment.’
Her real problem is the BJP’s election manifesto making a lot of extravagant promises. Some of them include:
- Investing Rs 25 lakh crore in the agricultural sector.
- Give interest-free Kisan Credit Card loans up to Rs 1 lakh for 1-5 years.
- Implement a pension scheme for small and marginal farmers.
- Create a ‘Seed Startup Fund’ of Rs 20,000 crore.
- Invest Rs 100 lakh crore in the infrastructure sector by 2024
In reality, none of these is going to be easy to deliver. All the resources are stretched and scope for additional revenue is very limited, disinvestment is speeding up and GoI hits pay dirt with the Jalan Committee recommendations on transfer from RBI’s reserves. Also, a major part of government expenses is pre-committed.
Sitharaman is sure to bring good changes with the budget-making skills she has learned as part of the ‘fashionably impecunious’ Jawaharlal Nehru University (JNU) student. We are sure we are in safe hands.
But, lack of jobs has begun to hurt India. LTCG tax continues to rankle badly, but India wants Sitharaman to focus on another tax matter first. Farmers’ plight is continuous, there are a lot of people to clear their loan dues. These are just a few eye-opening and shocking findings that just emerged in ET’s pre-budget survey.
The economy at a 20-quarter low phase and there are no signs of easing. So, now what is desired by the people of India this budget day?
All of these problems combined fail to meet Modi’s $5-trillion-in-5-years GDP dream.
Modi also had his GDP dream intact during his last ruling session.
During the period of the first terms of Modi government, the Finance Minister Arun Jaitley, announced a sunned change in income tax slabs for the salaried class of India in the 2014-18 Union Budget, but his ill health compelled him to pass on the baton to Piyush Goyal.
Read on to find out how Jaitley changed your income tax burden during the four financial years.
- Jaitley presented his first Union Budget just after NDA’s dispensation winning an overwhelming mandate at Lok Sabha election.
- The then Finance Minister, Arun Jaitley raised the exemption limit of the personal income tax for ₹2 lakh to ₹2.5 lakh. For senior citizens, the exemption limit was increased from ₹2.5 lakh to ₹3 lakh. But for the people aged 80 years and above, termed as the very senior citizens the exemption remained still at ₹5 lakh.
- During that period only, under Section 80C, the Limit for deduction was increased to ₹1.5 lakh and the deduction limits for the interests on home loan was increased to ₹2 lakh from ₹1.5 lakh.
- Under the Public Provident Fund (PPF), Arun Jaitley increased the annual ceiling from ₹1 lakh to ₹1.5 lakh.
- The finance minister then, increased the limit of deduction on health insurance premium from ₹15,000 to ₹25,000 and for senior citizens it was increased to ₹30,000 from ₹20,000. He also increased the transport costs exemption from ₹800 to ₹1,600 per month.
- An additional deduction of ₹50,000 under New Pension Scheme (NPS) under Section 80 CCD was done.
- There was in increase in surcharged for income above ₹1 crore. It increased from 10% to 12%.
- Arun Jaitley also abolished the wealth tax and replaced it with an additional surcharge of 2% on the super-rich who had a taxable income of more than ₹1 crore.
- During the Union Budget session 2016, Arun Jaitley increased the tax rebate from ₹2,000 to ₹5,000 under Section 87A for those with income not exceeding ₹5 lakh per annum.
- He also increased the limit of deduction on rent paid from ₹24,000 per year to ₹60,000 per year under Section 80GG.
- The surcharge for income above ₹1 crore was increased to 15% from 12%.
- 10% income tax was imposed on dividends in excess of ₹10 lakh annually.
- During the Union Budget session 2017, Arun Jaitley reduced the tax rate from 10% to 5% for those who were under the ₹2.5 lakh- ₹5 lakh bracket.
- He also reduced the tax rebate under Section 87A from ₹5,000 to ₹2,500, applicable to taxpayers with annual income up to ₹3.5 lakh.
- Surcharge of 10% was introduced on annual taxable income between ₹50 lakh and ₹1 crore.
- Arun Jaitley allowed a standard deduction of ₹40,000 in lieu of current exemption in transport allowance and reimbursement of miscellaneous medical expenses.
- Deduction for medical expenditure was raised to ₹50,000 from ₹30,000 for senior citizens.
- He also announced the deduction for interest income earned on deposits with banks, post offices will be increased to ₹50,000 from ₹10,000 in case of senior citizens, along with an exemption from deduction for tax for interest income up to ₹50,000.
- Alongside he proposed to replace existing 3% education cess on personal income tax and corporation tax with a 4% ‘Health and Education Cess’ to take care the education and health needs of poor and rural families
The major move during this Budget was the Finance Minister’s decision to tax long term capital gains exceeding ₹1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31 January, 2018 will be grandfathered, he said.
But now that Nirmala Sitharaman has taken over, what will be her first stop? Jobs or GDP?
There is a very serious jobs problem prevalent, but the survey respondents think this budget’s top priority should be on pushing broader economic growth first.
During the budget survey when asked, ‘What would you like the Budget’s top focus to be?’
- 35.4% of the participants vouched that Sitharaman’s main focus should to be on measures that would bring the economy back on track.
- 31.5% of them picked job generation over growth.
- 19.7% voted for a raise in tax slabs.
When asked during the budget survey, what should Sitharaman do to alleviate India’s farm crisis.
- Much over 42.8% of respondent think raising MSP is the best solution
- And 29% picked a fixed per-acre payout system for all of India.
- The debate was not over here, 6.5% people wanted the Budget to waive off farm loans
When asked around the tax front:
- More than 38% respondents during the budget survey want the basic slab to be raised to Rs 5 lakh.
- 33% of the respondents backed the idea of rewarding honest taxpayers in some way of the other.
When asked which reform they thought couldn’t wait any longer.
- In the budget survey, 34% said that the changed indirect tax is the one.
- 25.7% of them preferred to go with land reforms while an almost equal number
- 24.7% wanted labor code to be put on the fast track.
- Power sector reforms came in at the last position.
When surveyed about bringing back the jobs
- 27.5% people wants the government to start a mechanism for providing incentives to the top job creators.
- 21.9% of the respondents backed labor reforms, and the rest said they wanted the government to take more initiatives on the lines of MUDRA loans.
Keeping all this is mind, we know that the Indian economy is firmly stuck in a slow lane is no longer news. Many measures to help the economy get its mojo back have been tried with not much success.
When asked where to invest more money in:
- A higher number of participants in the survey thought that putting more money in the investor’s hands via reduced taxation was the best thing Sitharaman could do in this Budget.
- 27.4% of the respondents thought the Finance minister should abolish, or at least cut, the LTCG tax on stocks.
- 14.1% wanted a level playing field for equity mutual funds and ULIPs.
What do you think will happen on 5th?