Budget 2019: For a moment, salaried-class thought the tax rebate is for all
After Goyal's announcement, the floor of the house witnessed a cheer and celebration for around two minutes. It started with joyful roars and tapping on the desk. Prime Minister Modi also joined the chorus.
In the Interim Budget 2019, when Finance Minister Piyush Goyal announced that the "individual taxpayers (pause) having taxable annual income (pause) up to Rs 5 lakh will get full tax rebate", the middle-class earners overjoyed expecting it would reduce their tax burden dramatically. The BJP lawmakers who were waiting for the dhamaka announcement exploded in cheer at the Lok Sabha. There is a reason for the joy of the salaried class. The highest onetime tax relaxation in the previous times was on an income of Rs 50,000. But this time, they thought that the exemption would be for a sizable Rs 2.5 lakh income. The people who come in the 30 per cent tax slab calculated it as an annual saving of Rs 75,000 or monthly Rs 6,250. "It's a big money," some quipped.
Most of the viewers were anticipating the FM to relax the income tax slab rates and, in that excitement, almost all did not listen to the wordings rightly. The immediate interpretation was that the tax slabs have moved from Rs 2.5 lakh to Rs 5 lakh and thus a bonaza for all.
After Goyal's announcement, the floor of the house witnessed a cheer and celebration for around two minutes. It started with joyful roars and tapping on the desk. Prime Minister Modi also joined the chorus. But after sometime, the cheer has turned into a chant. The BJP lawmakers thought that the zero tax bracket has been widened to Rs 5 lakh from Rs 2.5 lakh for everybody, irrespective of the salary size. In the belief that it would help them in winning the coming Lok Sabha election, the BJP leaders continued the "Modi... Modi..." chant for a longer time and the PM Modi was seen enjoying the rousing festivity.
But the reality came in much later. The actual announcement was that the individual taxpayers, who are having taxable annual income of up to Rs 5 lakh, will get a full tax rebate. It means the ones who earn taxable income of Rs 5,00,001 or above will have to pay the tax according to the earlier tax structure. The wrong pauses and emphasis - on "upto Rs 5 lakhs will get full tax rebate" - misled the lawmakers as well as the budget viewers. It took more than half an hour even for the TV channels and the business newspapers to understand the reality. The channels showed that "taxable annual income up to Rs 5 lakh to get tax rebate".
The FM also mentioned that three crore taxpayers would get the benefit and the initiative would cost Rs 18,500 crore to the exchequer. It raised doubts about the reach of the tax rebate. The allocated amount was insufficient for covering every taxpayers. Later the finance ministry came up with the clarification that the rebate won't cover the people who earn above Rs 5 lakh of taxable income. Besides, it would be a relief of average Rs 6,166 a person annually and not a big bonanza to seek votes based on it. Earners of the upper limit would get a benefit of Rs 12,500 annually.