What's on India's wish list for the upcoming budget 2019

The Parliament's budget session 2019 is expected to be held from January 31 to February 13 and the Finance Minister Arun Jaitley will present the Interim Budget on February 1, reportedly scrapping the standard practice of a vote-on-account. This will be his sixth and last budget presentation under the current government before the 2019 general polls.

With less than three weeks to go for Finance Minister Arun Jaitley's Budget 2019 speech, speculation is rife on what he may end up offering Indians just months ahead of the general elections. The wish list of the common man as well as industry chambers includes income tax sops, and the buzz is that the government is likely to give in.

Jaitley may double the income tax exemption threshold for the salaried from Rs 2.5 lakh currently to Rs 5 lakh and reinstate tax-free status for medical expenses and transport allowance.

Last November, the finance ministry had set up a six-member task force to rewrite the over 50-year-old Income Tax laws in line with the norms prevalent in other countries, incorporating international best practices while keeping in mind the economic needs of the country. The new Direct Tax Code will reportedly try to bring more assessees into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate, and phase out the remaining tax exemptions that lead to litigation.

While tax exemptions are a key demand, the industry chambers have recommended tinkering with tax slabs, too. The CII, in its pre-Budget recommendations, suggested lowering the highest personal income tax slab to 25% from 30% at present. On the other hand, FICCI's wishlist includes a revision in the tax slabs for the individual taxpayers with the top 30% rate applicable only beyond Rs 20 lakh annual income.

While previous governments have avoided introducing major changes in an Interim Budget, the regime at the Centre has often used this opportunity to woo voters and outline its economic policy vision for the next five years should India vote to keep it in power. For instance, in the previous interim budget in 2014, former finance minister P. Chidambaram announced 'One Rank One Pension' (OROP) with an eye on the electorally-significant community of veterans.

In the face of reality checks in the Rajasthan, Madhya Pradesh and Chhattisgarh polls, the ruling BJP party, too, is widely expected to take the populist route in the upcoming budget. In addition to the income tax benefits, the finance ministry is mulling a couple of other measures like providing tax benefits to pensioners and lowering of interest rates on housing loans.

If announced, all these measures could directly benefit the middle class, thereby avoiding a possible backlash from this demographic in the upcoming polls. The Modi government is apprehensive of this possibility since it has fallen short of its 2014 electoral promises on jobs and other benefit while demonetisation also took a toll on the middle-class.

But the government's plans may not go smoothly. The Union Budget will precede the release of the Direct Tax Code Report, scheduled on February 28, so tinkering with the tax rates ahead of the report will make it contentious.

Here's a look at the current income tax slabs:

Note that the income tax exemption limit for senior citizens aged 60 years but less than 80 years is Rs 3 lakh, while the same for those aged over 80 years is Rs 5 lakh. A surcharge of 10% of income tax is applicable where total income exceeds Rs 50 lakh and 15% for total income exceeding Rs 1 crore.

What's on India's wishlist for the upcoming budget?

According to a recent budget expectations survey conducted by LocalCircles, a citizens connect platform, 64% of the respondents wanted the government to include tax measures in the Interim budget and 64% have asked for a Universal Basic Income Scheme to counter unemployment.

The 'Citizens Budget 2019', one of the largest of its kind, saw 40,000 respondents from more than 200 districts in the country. Furthermore, the survey revealed that in terms of sector-wise allocation, 43% of the respondents want agriculture to be the top priority while 23% voted for infrastructure, 18% for skilling for employment and 16% for the environment. However, a whopping 71% of the citizens do not want the government to announce agricultural loan waivers.

Affordable housing remains a key election issue. While 31% of the respondents wanted the government to give interest rate subvention for first home buyers, 29% said separate income tax exemption limit for EMIs on housing should be made to make housing affordable for middle class and 18% demanded an increase in the home loan caps eligible for subsidy. Moreover, 22% of the voters wanted an increase in the definition of affordable housing from 60 sq mtrs to 120 sq mtrs.

In response to the survey question, what should the government do in the budget to drive faster growth, 35% of the respondents voted for increasing public expenditure followed by 30% for giving incentives for digital transactions and 26% for giving SMEs priority sector status for lending.

When it comes to the Railways, 32% want improvements on the safety front to be a focus area in 2019, while 38% want it to be on services and amenities.

Not surprisingly, 73% of startups, SMEs and entrepreneurs want Budget 2019 to abolish angel tax for Government recognised startups . An 'angel tax' is currently applicable if a startup company receives capital from an angel or HNI based in India. If the capital is raised at a value higher than the fair value of shares, the startup becomes liable to pay 30% income tax on the capital received.

According to LocalCircles, CBDT has started enforcing this and many startups reported receiving notices several years later for a 30% tax liability when they have already used the capital raised.

Although CBDT has said that it will not take any immediate coercive action against startups on the angel tax issue, it has not accepted the larger demand of startups which is to accept DCF (Discounted Cash Flow) method as official valuation method.

Meanwhile, the Confederation of Indian Industry (CII) has also submitted its wishlist. The industry chamber has urged the government to double the income tax exemption threshold to Rs 5 lakh and increase the deduction limit under Section 80C to Rs 2.50 lakh to incentivise savings.

In its pre-Budget recommendations to the finance ministry, the body also suggested lowering the highest personal income tax slab to 25 per cent from 30 per cent at present and allow exemption for medical expenses and transport allowance.

The CII further suggested that the corporate tax rate should be reduced to 25 per cent, irrespective of turnover, and should be brought down to 18 per cent in a phased manner.

What's on the cards?

The finance ministry is mulling a couple of measures like providing tax benefits to pensioners and lowering of interest rates on housing loans. If announced, all these measures could directly benefit the middle class, which could give an edge to the government that has fallen short of its 2014 poll promises on jobs and other benefits for the middle class.

Some reports also say that the government could also announce measures on the macro front like reduction in the customs duty. This will benefit consumers as well as businesses. Discussions on these measures are in final stages.

Budget 2019 India expectations on Jobs: While Jobs alert and Jobs in India continue to remain one of the most sought after queries, Prime Minister Narendra Modi has been under relentless pressure from Congress and other opposition parties to fulfill BJP’s pre-Lok Sabha elections 2014 promise on job creation in the country.

The “India Skills Report”, predicts an optimistic and positive forecast in the “Hiring intent 2019”. “In comparison to last year companies across 9 major sectors have predicted an increase of 15 per cent in their hiring numbers,” according to the report. The report predicts that while software and IT sectors are showing a positive outlook, Financial Services, Hospitality and Travel and Engineering and Automotive will see a significant increase in their hiring numbers.

BUDGET 2019 INCOME TAX CALCULATOR

The Skill India report says that most number of job announcements will be from sectors such as Banking Financial Services & Insurance, BPO, KPO & ITES, Core Sector (Oil & Gas, Power, Steel, Minerals, etc.), Engineering & Automotive (Auto & Auto Components), Manufacturing, others & Diversified, Pharma & Healthcare, Software, Hardware & IT and Travel & Hospitality (Including Aviation, Tours & Travels, Hotels). Companies will look to hire from education disciplines such as Undergraduate, ITI, Polytechnic, PG or Equivalent (MCA/MSC/MA/M.COM/CA/M.tech), Management or Equivalent- MBA, PGDM, Graduates, (BCA/BBA/B.COM/BSC) and Engineers (BE/B.Tech).

At an event late last year, Prime Minister Narendra Modi claimed that the ‘4th Industrial Revolution’ will provide more job opportunities. PM Modi said that India’s diversity, demographic potential, fast-growing market size and digital infrastructure have the potential to make India a global hub for research and implementation. PM Modi exuded confidence that artificial intelligence, machine learning, Internet of Things, blockchain and big data will take the country to “new heights”.

However, PM Modi’s assurance was rejected by Congress which alleged that over one crore jobs were lost in 2018 citing Centre for Monitoring Indian Economy (CMIE)’s report. The party said that during the 2014 elections campaign, the then Gujarat Chief Minister Modi had promised “Acche Din (good days), which included (providing) two crore jobs every year”.