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Budget 2019: Impact on the Common Man in India

  • 1st Oct 2019
  • 695
Budget 2019: Impact on the Common Man in India

Budget 2019 introduced various changes, which have an impact on the citizens of India.The important announcements are discussed below.

Home loan benefit for affordable housing

There is an efficient impact of Budget on real estate in the country. Affordable housing is an important project by the Government of India and the Budget has provided impetus to it. Home loan borrowers can now avail of an extra deduction amounting to INR 1.5 lakh annually on the interest payment, provided, the home loan has been borrowed by the end of March 2020 and applied for the purchase of a home that is valued less than INR 45 lakh. The benefit will be in addition to the benefit of INR 2 lakh given under Section 24 of the income Tax Act, 1961. This means that loan borrowers can get an exemption of approximately INR 3.5 lakh in a financial year.

No tax for individuals with an Income below INR 5 lakh

The biggest impact of the Budget is the rebate of 100% amounting to INR 12,500 under Section 87A. This applies to those with a yearly income up to INR 5 lakh. Individuals with a taxable income up to INR 5 lakh or less will not be liable to pay any tax. If there is a Tax Deducted at Source (TDS) in case of salaried employees, they will receive a refund for the income tax deduction on salary.

Incentives for National Pension System (NPS) subscribers

NPS has offered additional incentives for investors. The exemption limit is hiked from 40% to 60% of the total corpus. The central government has hiked the employer’s contribution from 10% to 14%. It also offers further tax relief in case of Tier 2 NPS investments made by the employees of the central government.

Tax exemption for an electric vehicle purchase loan

The Budget provided an incentive for individuals who are planning to invest in electric vehicles. There is a tax deduction amounting to INR 1.5 lakh on the loans, which are used for the purchase of electric vehicles and it can generate benefits amounting to INR 2.5 lakh for the borrower. This is an important income tax deduction that will have a significant impact on the purchase of such vehicles.

Hike in petrol and diesel prices

This amendment will have a huge impact on residents of the country. The cess on fuel will lead to a hike in petrol price and diesel costs by INR 1 per liter. It will thus result in a hike in fuel rates across the nation. According to the announcement, the lowering of crude prices across the world has allowed raising the cess on fuel

Hike in the surcharge for high-income individuals

Wealthy Individuals who earn a very high income will have to pay more tax. The Budget has proposed to increase the surcharge on taxpayers’ earnings from INR 2 crore up to INR 5 crore to 3% and for taxpayers earning more than INR 5 crore to 7%. There are no specific changes in tax slab applicable to the citizens. This is only a change in the surcharge.

TDS on cash withdrawal transactions exceeding INR 1 crore

In an attempt to cut down cash transactions in the country, the Budget has proposed a 2% TDS on cash withdrawals if the amount drawn from a bank account exceeds INR 1 crore in a year. In addition, the Budget has also given a boost to online payments like Aadhaar Pay, Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), Unified Payments Interface (UPI), and debit cards by removing the merchant discounts for merchants and customers. This facilitates individuals to make quick and convenient digital payments at a low cost.

Improvement in tax filing systems

A key announcement of the Budget 2019 India was the interchangeability of PAN and Aadhaar with regard to income tax filing. This makes it convenient for those who do not
hold PAN or Aadhaar, as they can easily file an income tax return (ITR) without any trouble. The bigger implication of the announcement is yet to be elaborated upon with concerning other financial institutions. The announcement also stated other amendments in the filing process like the introduction of ITR forms, a random selection of scrutiny cases, and aceless e-assessment. These amendments can make the entire process of ITR filing much easier for individuals.

Gold to become more expensive

The custom duty applicable to gold and has been raised to 12.5% from 10%, thereby making gold even more expensive.

It is important to note that there are no changes in tax rates. However, these amendments will have a strong impact on the citizens of the country. It will help improve the tax filing system and hence, make it and convenient for individuals to file their returns. Additionally, the incentives on home loan and NPS will also lead to an increase in savings.

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