What Did Budget 2019 Have For You?

If you were looking for a big bang budget from the Narendra Modi government after its re-election, it is likely that you have been left wanting for more. Nirmala Sitharaman ’s first budget as finance minister was high on rhetoric of growth and BJP ’s election victory, but let’s set that aside for now and take a look at the parts of the budget that affect most of us. Here’s what it looks like after piecing together the announcements made on Friday and in the interim budget in February.

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The good

The government is on your side if you want to do your bit for the environment by buying an electric car or bike. Apart from subsidies to electric vehicle manufacturers, that will hopefully lower costs over time, Sitharaman proposed a reduction of GST on electric vehicles from 12.5% to 5%. Like a tax deduction on a housing loan, the budget has proposed an additional income tax deduction of Rs 1.5 lakh on interest paid on loans to buy electric vehicles.

It’s also good news for existing and future start ups as the government pushed for the growth of entrepreneurship in India. This was by easing regulations for the dreaded Angel Tax, where entrepreneurs had to justify their valuation in order to avoid paying taxes on the funding. After backlash against the tax, the government announced on Friday that start ups who file all requisite declarations (it is not yet clear what these declarations are) will not be subjected to scrutiny over valuation. E-verification of the investors will also be done to establish their identity and source of funds. However, it remains to be seen how much of it will actually be implemented.

For those planning to buy a home, you could consider projects registered under the affordable housing category. An additional tax deduction of Rs 1.5 lakhs has been proposed on interest paid for affordable housing valued up to Rs. 45 lakhs up until 31 March 2020.

The bad

If you use cars or bikes for your daily commute or enjoy long drives on the weekends, watch out. Falling global oil prices aren’t coming your way with the budget introducing a Special Additional Excise duty and Road and Infrastructure Cess. Your petrol and diesel spend is set to get expensive by approximately Rs 2 per litre, which will leave you with less money to spend on other things.

Despite high hopes, the middle class has not been given any tax exemptions. Those who have taxable income up to Rs. 2.5 lakhs are still exempt from paying taxes. Exemptions under section 80C (where your EPF, life insurance premiums, ELSS investments go) have been at Rs 1.5 lakhs for a while now and there is no change there. However, tax benefits on investments in CPSE ETF and Bharat 22 ETFs (both are investments in government-owned companies) have been proposed under this bucket. But this is something that regular investors could choose to stay away from.

Gold buyers will pay more with the hike in customs duty from 10% to 12.5%, along with a GST of 3% that is already in place.

What else?

In what the middle class can call a relief, the rich or ultra-rich will pay more taxes now. Sitharaman proposed to increase the surcharge of those earning between Rs 2 crore and Rs 5 crore by 3% and for those earning above Rs 5 crore by 7%.

The process of filing income tax returns could become easier with the introduction of pre-filled returns. Taxpayers will just need to download it, verify the details and submit. Definitely makes life simpler.

The move to e-tax assessments without human interaction could reduce the harassment of the taxpayer in case of scrutiny and that’s a big step.

The lower corporate tax rate of 25% has been extended to all companies with a turnover of up to Rs 400 crore (earlier Rs 250 crore). So, if you work for one of these companies, it could mean a higher salary for you if they decide to pass on the benefits to their employees. Just, maybe.

If you’re a mutual fund investor, nothing has changed. You will still continue to pay tax in the same way.

Rewind to the interim budget of February 2019

• Full tax rebate for people with a taxable income of up to Rs  5,00,000 per year (this is not to be confused with a change in limits for tax exemptions). Note: This does not take into account potential tax savings by utilising the various options under Section 80C, 80D etc.
• Higher standard deduction to income tax payers of Rs 50,000 from R 40,000.
• Enhancing the tax-free gratuity limit to Rs. 30 lakhs from Rs. 20 lakhs.
• Relief for investment in second residential house – gains from the sale of one home can be spread across two home purchases (Under Section 54).
• A second home can also now be labelled as self-occupied– earlier a person owning a second home would pay tax on notional rent from the property even if it was not let out for rent.

While there are no big announcements, there is a little bit for everyone. Combined with some of the benefits offered during the interim budget, this budget continues the steady march of small changes. There’s not too much to complain about for now.

Nithin Sasikumar is the co-founder of Investography, a financial wellness company based in Bengaluru. He can be reached at nithin@investography.in or on Twitter @NithinSasikumar