I-T sops, farm relief may figure in Budget 2019

Prime Minister Narendra Modi-led government’s sixth and final budget before the polls due by May is supposed to be an interim budget or a Vote on Account. But it is widely expected that Goyal may go beyond seeking Parliament nod for government expenditure for four months of next fiscal and announce sops to woo rural and urban middle-class voters, industry sources and experts said.

As per convention, the outgoing government only seeks parliamentary approval for limited period spending, leaving the full Budget presentation for the new regime in July.

Goyal, who stepped in as interim finance minister after Arun Jaitley had to fly to New York for medical treatment, is widely expected to raise income tax exemption thresholds.

Basic exemption limit may be raised from Rs 2.5 lakh to Rs 3 lakh for individuals of less than 60 years of age and from Rs 3 lakh to Rs 3.5 lakh for those aged 60 years or more but less than 80. Women taxpayers may get higher basic exemption of Rs 3.25 lakh or even at par with senior citizens, as per sources. An alternative to raising the exemption limit is to raise the 80C deduction to Rs 2 lakh from Rs 1.5 lakh to encourage taxpayers to save more for their future.

Considering delay in housing projects and also rising interest rates, deduction of interest amount on housing loan for a self-occupied house property may be enhanced to Rs 2.5 lakh from Rs 2 lakh. The set off cap of adjusting loss from house property against other heads of income may also be accordingly raised to Rs 2.5 lakh from Rs 2 lakh, according to sources.

The increase in personal income tax exemption limit is unlikely to meaningfully reduce collections unless the successive tax slabs are also changed. Also being speculated are cheap loans for small businesses and increased rural spending. For the farm sector, the possible options include direct transfer of money to farmers like in the Telangana model of Rythu Bandhu, interest free crop loan for those farmers who pay on time and zero premium for insurance of food grain crops. The farm relief package may cost anywhere between Rs 70,000 crore to Rs 1 lakh crore, according to sources.

The measures, industry and informed sources say, could include those to create employment as the government faces a tag of giving a jobless high GDP growth.

For investors, these sops may translate into another breach in the budget deficit target of 3.3 per cent of GDP for the current fiscal and a possible record borrowing in the coming financial year.

In 2018-19, the largest downside to revenues has been from the GST collections with the shortfall likely at around Rs 1.4 lakh crore. Goyal may also look at higher interim dividend from RBI and deferring subsidy payouts on fertiliser as well as LPG and kerosene to provide funds for the populist schemes.

Credit rating agencies have warned that without bringing down other spending, a higher farm subsidy bill will increase future fiscal deficits.