Changes to tax structure in Piyush Goyal’s budget is unprecedented because an interim budget is only for a short period — for transition between two govts.
New Delhi: Finance Minister Piyush Goyal announced an unprecedented series of direct tax changes in the interim budget 2019-20.
Such large-scale changes have never been made in an interim budget. In fact, the only budget presented by the Narendra Modi government that came close to such wholesale tax changes was its first budget in July 2014.
Goyal’s slew of changes included tax sops for middle-class taxpayers, including full tax rebate for people with an income of up to Rs 5 lakh, raising the standard exemption limit to Rs 50,000, as well as tax deducted at source limits on bank deposits to Rs 50,000.
Tax changes in Modi govt’s budgets so far
In the July 2014 budget, the government had increased the basic exemption limit to Rs 2.5 lakh from Rs 2 lakh, and raised the deduction limit for savings under section 80 (C) to Rs 1.5 lakh from Rs 1 lakh.
The deduction limit of interest for self-occupied house property was also raised to Rs 2 lakh from Rs 1.5 lakh.
In 2017-18, the government reduced the tax rate to 5 per cent from 10 per cent for the tax slab of Rs 2.5 lakh to Rs 5 lakh. In 2018-19, it introduced a standard deduction of Rs 40,000 for the salaried class.
Also read: Piyush Goyal’s big sop for middle class — full tax rebate for income up to Rs 5 lakh
Breaking from tradition
Typically, an interim budget is only for a short period — for the transition between two governments.
An interim budget also usually does not have any tax measures, but there have been instances in the past when some indirect tax changes have been introduced by the outgoing finance ministers for a few months, citing the urgent need for ‘benefits for the people’, or sops.
For instance, in the interim budget in February 2014, then-finance minister P. Chidambaram announced excise duty cuts for the manufacturing sector, including capital goods and automobiles, effective till 30 June that year, so that the decision could be reviewed at the time of the full budget.
In his interim budget speech in February 2009, then-finance minister Pranab Mukherjee did not tinker with the tax rates, though he extended the interest subvention scheme, wherein exporters battling global recession post the financial crisis in sectors like textiles, carpets, leather, gems and jewellery, and SMEs got pre- and post-shipment credit from banks at an interest rate that was two percentage points lower.
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