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Budget 2019: Basic tax exemption may be raised to Rs 3 lakh

By Anuj Cariappa

New Delhi, July 05: There could be some cheer for the middle class in the Union Budget 2019.

The sops announced in the interim budget could be taken further by raising the basic tax exemption limit for an individual income tax payee to Rs 3 lakh from the existing 2.50 lakh.

Budget 2019: Basic tax exemption may be raised to Rs 3 lakh

The government had in its interim budget proposed a rebate on all payable taxes if an individual's taxable income is up to Rs 5 lakh a year. However the basic tax levels remained untouched.

The budget is expected to increase the ability to buy a home. The tax deduction limit on interest on home loans may be increased to Rs 2.5 lakh per year from the existing Rs 2 lakh limit.

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The Budget to be presented today is expected to boost spending at the cost of short-term slippage in fiscal deficit targets as she lays down the Modi 2.0 government's road map for the economy and the nation in the next five years.

Some believe she may give relief to the common man by raising personal income tax threshold for certain categories while at the same time, upping spending on agriculture, healthcare and social sectors.

Also, there is expected to be a big push for infrastructure spending including on roads and railways to drive growth which had slowed to a five-year low of 5.8 per cent in the first three months of 2019 -- well below China's 6.4 per cent. The slowdown is also reflected in high-frequency numbers such as IIP and automobile sales numbers.

The economy has also been impacted by slowing trade, rising protectionism, trade conflict between the United States and China, Brexit, US sanctions on Russia, Iran and Venezuela impacted the domestic economy.

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The sluggishness in the economy has led to expectations of the budget containing further stimulus measures to boost the growth through new policy initiatives and continued reforms to achieve accelerated growth and increase in employment.

This may be in the form of a combination of capital infusion in the public sector banks, removing the roadblocks that have crept into the Insolvency and Bankruptcy Code process, providing liquidity to non-bank financial companies (NBFCs), address the agrarian crisis and step up allocations for infrastructure and social sectors.

But, the combined effect of all these would be that the budget deficit may widen to 3.5 per cent of gross domestic product (GDP) in 2019-20 that began on April 1, instead of 3.4 per cent target.

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