The recently announced interim budget was a highly anticipated one. Riding on the wave of the upcoming election, it was touted to be a populist budget giving in to the wishes of the Indian electorate. Media channels and publications predicted that the interim finance minister Piyush Goyal would give a budget speech with the flavour of an election speech.
The union budget did not fall short of those expectations and brought in budget-sops, tax changes and new schemes for many sections of the society. The important thing to note was that the budget laid the context of how the government is aiming for far reaching structural changes and not just incremental adjustments – thereby trying to find a balance between short term priorities and long-term vision.
Key Highlights for workplaces and employees in the interim budget
The budget focused on the three focal points of the Indian electorate – the farmer or the rural Indian, the tax-paying salaried individual and the small business owner. The large mass of workforce across corporate offices in India already contributes a significant amount to the nation’s success. They are the ones who get majorly impacted by budget-related decision making. This year’s budget had several benefits in store for them along with some missed opportunities.
Here are the five key highlights from the union budget, which can significantly impact any organization and its employees.
- Tax exemption and relief
For the salaried employee, the relief from the tax burden in the form of an income tax rebate for those with an annual income of INR 5 lacs or less, was a welcome respite. Also, the increase in standard tax deduction from Rs.40,000 to Rs.50,000 will further ease-off the financial burden on the salaried employees who fall in the higher income brackets. All in all, salary earners and pensioners are going to get a tax benefit of around INR 4,700 crore.
As per the new tax laws, there will be no tax levied on notional rent on the second self-occupied house. Earlier, if a person had more than one self-occupied house then he had to pay a tax on notional rent on the second self-occupied house. The interim finance minister Piyush Goyal announced that this tax benefit is being proposed as there are many middle-class citizens maintaining families at two locations in order to work, provide education to their children or care for elderly parents. Abolition of tax on notional rent will hence provide them with some financial relief.
Government has provided an option to higher income individuals to ensure effective tax planning. They can make the most of additional deductions such as deduction on home loan of up to INR 2 lacs, interest on education loans, contribution to the National Pension Scheme, medical expenditure on senior citizens etc. Anyone with a gross income of up to INR 6.5 lacs may not be required to pay income tax if they invest in financial instruments like provident funds, specified saving schemes and insurance. This will provide a tax benefit of around INR 18,500 crores to 3 crore middle class tax payers comprising self-employed, small businesses, small traders, salary earners, pensioners and senior citizens.
The decision to carry all the tax verifications through a digital and anonymous interface (without any intervention by officials) within nearly 2 years will bring in more transparency to the process. Finally, the implementation of processing of tax returns within 24 hours and immediate payment of refunds will provide the much-needed financial liquidity and convenience to any employed individual.
- Incentives for the workers in the unorganised sector
The government has introduced many incentives for the workers in the unorganised sector. It has introduced an annual pension of Rs. 3000 for the unorganised sector workers. New Pradhan Mantri Shram Yogi Maandhan Yojna has been launched to provide an income of up to Rs.15,000 per month to the workers in the unorganised sector. The beneficiaries will get a pension of Rs.3,000 per month with a monthly contribution of Rs.100 towards their retirement. INR 500 crore have been allocated for this scheme. In addition to this, the government has also increased the gratuity limit to Rs.30 lacs.
- Skill development
As one of the countries with the youngest population in the world, India’s stress on higher education is important to its global relevance. The government’s Vision 2030 focuses on the implementation of higher education reforms through an innovative use of technology, funding, partnerships, curriculum, pedagogy and governance in education. Also, the focus on technological support to small and medium enterprises as well as the promise of converting 1 lac villages into digital villages over the next five years provides further impetus to technological skill development.
As India becomes future ready, the announcement of the National Artificial Intelligence portal will accelerate the adoption of artificial intelligence to the last mile. It will give rise to better educational and job opportunities to the youth. Already access to internet technology has resulted in a 54% YOY increase in e-recruitments within the manufacturing and production sectors last year.
- Employee well being
In the absence of any formal social security scheme in India, the launch of one of the world’s largest pension schemes – Pradhan Mantri Shram Yogi Maandhan, is a big move for those working in the unorganized sector. Considering the fact that the gig-economy is all set to get bigger, India’s preparedness in addressing the social security of its freelance workers will work in their favour.
The government also announced the provision of reimbursing employers for 7 out of the 26 weeks of extended maternity leave meant for the female employees. This is a welcome move for employers as it eases-off some of their financial burden. However, the government could have also looked into motivating the employers to incentivize paternity leaves. This could have a positive effect on gender equality at home and workplace, while enabling a better work-life balance for all employees, irrespective of their gender.
- Job creation
One of the major expectations that any HR professional has from a budget is the introduction of schemes and strategies that can fuel the growth in job opportunities. This year’s budget has launched schemes like income support of Rs.6000 per year to farmers which will increase the flow of cash into rural economy. This will drive consumption in rural areas leading to more jobs in the consumer-oriented industries. The government has also launched the rural employment generation scheme which promises significant increase in jobs in rural areas.
As per the new budget, the allocation of funds for MGNREGA has been increased to INR 60,000 crore from INR 48,000 crore last year. MGNREGA guarantees at least 100 days of manual work with daily wages in the rural areas. The budget is demand-driven, as the government is required to provide at least 100 days of work. An increase in funds is indicative of the increase in demand for jobs. However, many activists have argued this increase in amount is also insufficient to meet the ever-increasing demand for jobs in rural India. As creation of jobs is the key driver of any economy and its smooth functioning, there is a need to be more action-oriented in this matter. A report by the National Sample Survey Office has highlighted an increase in the country’s unemployment rate. Keeping this in mind, it becomes even more crucial to provide a systemic solution to India’s unemployment situation. The union budget would have been an apt opportunity to address the same.
The Union Finance Minister Piyush Goyal also said he would be back with Arun Jaitley after the elections with more announcements for taxpayers.
While the jury is still out on whether the budget will be able to balance the fiscal needs with its visionary schemes, from an HR perspective there are many positives. The government did not disappoint the HR fraternity as it prepares to wind-up its five-year tenure in a couple of months from now. The government along with the HR professionals will now have to focus on an impeccable implementation of the budget schemes for them to be effective on-ground.