What did We Learn from the 2019 Budget and What to Expect from Budget 2020?

As India ushers in another year, hopes are again high even as the tough job of meeting budget expectations rests on the shoulders of Finance Minister Nirmala Sitharaman. The economy and consumer confidence is at a six-year low and the unemployment rate is highest in the last 45 years at 6%. It remains to be seen how the Financial Minister will perform a balancing act in the upcoming Budget on February 1.

With India lagging behind countries such as the Philippines, Vietnam, and Indonesia, it would be a tough job to restore economic growth and get the engines running at full speed towards a brighter future. Let us take a look at what to expect from budget 2020, while also taking stock of finance budget 2019.  

Learnings from the previous budget

1. No changes to personal income tax slabs were made, which was contrary to budget expectations, while the super-rich were taxed with an additional surcharge, a 25% rate on income between 2 and 5 crores and a 37% rate on income of 5 crores and above.

2. Finance budget 2019 provided relief to companies with a turnover not exceeding 400 crores on payment of corporate tax payments. The new rate of 25 percent was 5 percent less than the earlier 30 percent.
3. Those purchasing a house under ₹45 lakhs got an additional deduction of ₹ 1.5 lakh on home loan for tax purposes.
4. To encourage digital payments, withdrawals of more than 1 crore annually from a bank account attracted tax deducted at source(TDS) at 2%.
5. A pension benefit was proposed for retail traders with a turnover under ₹1.5 crores across the country.
6. Reforms were put in place for Micro, small and medium enterprises(MSMEs) with an allocation of ₹350 crores for 2% interest grant for those registered under GST, looking to avail new or additional loans.
7. A slew of measures was introduced in finance budget 2019 to provide a fillip to start-ups such as lifting scrutiny from the Income Tax department on angel tax as well online verification of investor identity and funding.
8. Empowerment of women was a focus area with the expansion of women self-help group(SHG) scheme across India, a loan of ₹ 1lakh, and ₹5000 overdraft facility to every SHG member

What to expect from budget 2020

1. The salaried class might get some relief. Personal income tax cuts would help increase disposable income and, thereby, purchasing power. New income tax slabs and rates have been floated by a committee set to review direct taxes.  

Prospective Income Tax Slabs	Prospective Income Tax Rates
Up to Rs. 10 lakhs	10%
Rs. 10 lakhs to 20 lakhs	20%
Rs. 20 lakhs to Rs 2 crore	30%
Above Rs. 2 crore	35%

2. Increasing the tax benefit under the National Pension Scheme(NPS) to ₹1 lakh is one of the budget expectations, long-awaited by those looking to up their household savings.  14% tax free government contribution to all subscribers under NPS is also proposed. 

In light of this expected development, you too should opt into the NPS. You can invest in the National Pension Scheme on Bajaj Markets and benefit from 100% guaranteed transparency, swift and simple online processing, completely paperless in nature! You can avail the flexibility of choice by switching between funds as per your evolving financial goals and even choosing your preferred investment distribution mode - ‘Auto’ or ‘Active’. Invest in the NPS on Bajaj Markets now and reap the benefits later!

3. Rental income deduction as per Section 24(a) of Income Tax is also to be hiked to 50% from the current 30%, while houses under 90 square meters should be completely exempted from paying any tax whatsoever, to make affordable housing for all, a reality.

4. Citing the earlier additional deduction allowed on stamp duty for property purchased under ₹45 lakh as not beneficial to those in Tier 1 cities, an increase is sought. It is recommended that Budget 2020 will allow houses with a value less than ₹65 lakhs bought in metros to benefit from this rule.

5. The MSME sector is seeking changes in the Corporate Insolvency Resolution Process (CIRP), which qualifies them as operational creditors, with no benefits when a buyer undergoes CIRP. Close to 1 crore MSMEs have been affected due to this discrepancy which does not allow payment of due costs from corporate debtors prior to and during the recovery process under the Insolvency and Bankruptcy Code (IBC).

With the Economic Survey to be completed by the end of January, and the budget to be presented a day later, the nation will be keenly watching what the Finance Minister has to offer this time. 

From measures to rein in the growing fiscal deficit to tax sops for salaried class, corporate sector, real estate, MSMEs and introduction of progressive schemes to spur the growth of the economy, the government has its work cut out. Appeasing everyone is not going to be easy. We can only wait and watch as we hope that the budget brings in much needed good news.