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LIC IPO to lead disinvestment thrust, generate revenueChallenges to fiscal consolidation from slower growth remain Unimpressed Sensex closes nearly 988 points, or 2.43%, down

Union Finance Minister Nirmala Sitharaman’s second Budget speech on Saturday sought to make up in length and breadth for what it couldn’t deliver in the form of an effective stimulus for India’s fast-slowing economy.

Interspersed with some feel-good decisions, such as lower personal income tax rates and a hike in the deposit insurance cover for bank depositors (from ₹1 lakh to ₹5 lakh), were some bold decisions like listing the Life Insurance Corporation of India and abolishing the Dividend Distribution Tax.

A caring society

Ms. Sitharaman expounded on three themes — aspirational India (a better life for all), economic development for all (yielding more space for the private sector) and creating a caring society — in her record-breaking speech of more than two-and-a- half hours, aimed at boosting incomes and purchasing power. Inflation, she said, was well-contained and the economy’s fundamentals remained strong.

To boost farm incomes and the rural sectors, the Finance Minister allocated ₹2.83 lakh crore and fixed ₹15 lakh crore target for agriculture credit, along with 16 new and renewed measures. Another ₹1.7 lakh crore was allocated for transport infrastructure and ₹40,740 crore for the energy sector.

Taking a cue from the Economic Survey, which dwelt at length on India’s ancient economic prowess, Ms. Sitharaman cited the guilds of Saraswati-Sindhu civilisation and the Harappan seals (of 3300 BCE) and commerce and trade-related words deciphered from Indus hieroglyphs that show India has been rich in skills and trade for millennia.

The Minister also accepted the Survey’s call for loosening fiscal strings, taking a 0.5% deviation from fiscal deficit targets under the Fiscal Responsibility and Budget Management law to end 2019-20 with a 3.8% deficit and a promise to attain a 3.5% deficit in the coming year.

The Survey’s suggestion for a more aggressive approach to disinvestment was heard too, with a massive target of ₹2.1 lakh crore — 223% higher than the revised estimates for the current year. Any slip-ups on this front would make the deficit target untenable.

Taxpayers’ Charter

Stating that any tax system requires trust between taxpayers and the administration, which will be possible only when taxpayer’s rights are clearly laid out, Ms. Sitharaman said: “With the objective of enhancing the efficiency of the delivery system of the Income Tax Department, I propose to amend the provisions of the Income Tax Act to mandate the Central Board of Direct Taxes to adopt a Taxpayers’ Charter.”

The Budget deferred taxes for ESOPs in the hands of employees, which will be an important decision for the employees to own shares in the employer without getting worried about organising cash to pay taxes.

One proposal that could become contentious was tax being imposed on Indian citizens abroad if they are not taxable in their home country.

Proposed market borrowings for the coming year have been raised to ₹5.36 lakh crore, following a ₹26,000 crore hike in this year’s borrowing plan from ₹4.73 lakh crore to ₹4.99 lakh crore.

The impact of lower tax rates on demand creation may not be too high, and removing tax exemptions that spur financial savings could dent an already falling savings rate. Ms. Sitharaman expects 10% nominal GDP growth in 2020-21, which suggests she doesn’t share the Survey’s optimism about returning to 6%-6.5% real GDP growth.

The markets reacted negatively to the Budget, with the Sensex closing nearly 2.43% or 988 points down to end below 40,000 points.

“Today being a Saturday, I’m not sure if every aspect of the stock market is open today,” said Ms. Sitharaman in response to the stock market collapse. I think that many of the things we’ve said in the Budget would definitely have a positive impact on the stock market. I will reserve my comments till Monday.”

(With inputs from PTI)

ILLUSTRATION:

DEEPAK HARICHANDAN

Rates will be reduced for those giving up exemptions

Aimed at spurring consumption demand and offering relief to taxpayers, especially those from the middle class, Finance Minister Nirmala Sitharaman proposed a personal income tax regime with reduced rates for those earning up to ₹15 lakh.

The tax rate for those earning between ₹5 lakh and ₹7. 5 lakh has been lowered from 20% to 10%, and for incomes between ₹7.5 lakh and ₹10 lakh to 15% from 20%. Similarly, tax rates have been lowered from 30% to 20% for those earning between ₹10 lakh and ₹12.5 lakh, and to 25% for those with incomes from ₹12.5 lakh to ₹15 lakh.

Tax payers can, however, opt for the new rates if they give up almost all tax exemptions and deductions they enjoy under the current regime, akin to the conditional tax rate cuts announced for corporates last September.

Revenue Secretary Ajay Bhushan Pandey said even those opting for the lower rates will retain tax benefits on payouts at the time of retirement such as gratuity, employees’ PF and NPS accumulations, employers’ contributions to EPFO, the National Pension System or superannuation payments (up to ₹7.5 lakh), and amounts received on VRS (up to ₹5 lakh).

But most exemptions used by salaried employees on account of leave travel allowance, house rent allowance, housing loan repayments, savings instruments such as PPF and LIC, as well as the standard deduction will cease to be available.

The Finance Minister said this could result in savings of ₹78,000 for someone earning ₹15 lakh and not availing any incentives in the existing regime.

Tax practitioners noted that the new regime would only be attractive for non-salaried taxpayers or those who don’t avail any exemptions as of now. For many taxpayers who avail benefits, the difference in tax outgo may not be substantial.

“It is almost impossible for a taxpayer to comply with the income tax law without taking help from professionals,” the Minister said. However, most individuals may still need accountants’ help to determine if moving to the lower tax rates would benefit them.

The Finance Bill also proposed three major changes to prevent tax abuse by citizens who don’t pay taxes anywhere in the world.

No one injured; shooter, who shouted pro-Hindu slogans, detained

Police taking away Kapil Gujjar after he opened fire in the Shaheen Bagh area of Delhi on Saturday. ANI

For the second time in three days, a man opened fire near the site of an anti-CAA protest in the Capital. The man, identified as Kapil Gujjar, 25, declared that only the “voice of Hindus would count” in the country as he was taken away by the police from the protest site at Shaheen Bagh.

No one was injured as Gujjar fired two shots in the air, police said on Saturday.

Chinmoy Biswal, DCP (South East), said the shooter was a resident of Dallupura area. Police were trying find out from where he had procured the pistol. An FIR has been registered under sections of the Arms Act.

“We have recovered the countrymade weapon from his possession,” said a police officer. “He is in the dairy business and claimed that his family faces problems while commuting to the Lajpat Nagar area in south Delhi to shop for an upcoming wedding because of the road blockade by the protesters.”

Police said they had beefed up security around the protest site and people entering the area would be frisked with the help of volunteers.

“People roaming around the protest site will be randomly checked. It is for the safety of the protesters,” said the officer.

With polling in Delhi only six days away, Home Minister Amit Shah has gone on record asking voters to press the button for the BJP on the electronic voting machine so that the “current” was felt in Shaheen Bagh.

Earlier on Saturday, Uttar Pradesh Chief Minister Yogi Adityanath hit out at the Aam Aadmi Party (AAP) at a rally in Delhi.

“They [the AAP] don’t want good quality roads, water, the expansion of the metro... all they want is Shaheen Bagh... You have to decide whether you want all-round development or Shaheen Bagh... he will waste taxpayers’ money on feeding them biryani.”

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