To promote house ownership, the government will encourage states to consider lower stamp duties for properties purchased by women.
Published Jul 23, 2024 | 6:15 PM ⚊ Updated Jul 23, 2024 | 6:15 PM
The Budget's main thrust and focus have been growth via the infrastructure development with policies and programmes structured to help and boost affordable housing. (iStock)
Finance Minister Nirmala Sitharaman’s record seventh consecutive Budget is commendable for many reasons. It is built on the foundation laid in the interim Budget, focusing on continuity and macroeconomic stability.
First and foremost is the finance minister retaining the huge infrastructure CAPEX allocation at ₹11.11 lakh crore, which is 3.4 percent of the GDP, but has reduced the fiscal deficit target to 4.9% from 5.1% as envisaged in the interim Budget.
This translates to a deficit of ₹16,133 lakh crore from ₹16,537 lakh crore. It will have three direct benefits: Reducing the government’s borrowing and thus impacting inflation favourably, attracting Foreign Direct Investments (FDIs) and helping in raising our sovereign rating, which will in turn, help corporates to raise funds at cheaper interest rates.
The combined fiscal deficit, including Centre and states, is estimated below 8 percent, which is stupendous, and perhaps a first in the country, if achieved.
The Budget’s main thrust and focus have been growth via infrastructure development, with policies and programmes structured to help and boost affordable housing.
It also included initiatives directly aiming to promote Micro, Small and Medium Enterprises (MSMEs) and addressing their long-term issues and targeted programmes to boost employment with emphasis on ‘skilling’.
Continuing with Prime Minister Narendra Modi’s first announcement immediately taking charge of providing 3 crore additional houses under the Pradhan Manthri Awaz Yojana (PMAY) in both rural and urban areas, the Budget has now provided ₹10,000 crore allocation for PMAY urban 2.0 scheme.
PMAY 2.0 aims to provide houses to one crore urban poor and middle-class families and has the multiplier effect which promotes employment, income, savings and private CAPEX.
This includes central support to the tune of ₹2.2 lakh crore in the next five years, ensuring certainty and continuity of the policy. The scheme also provides interest subsidies to facilitate loans by banks and housing finance companies at low rates.
However, effective monitoring of the PMAY scheme is essential and critical as lots of issues are prevalent in the area of land/site selection, quality of houses, selection of beneficiaries and allotment.
Further, to promote house ownership, the government will encourage states to consider lower stamp duties for properties purchased by women.
This will be supplemented by putting in place policies and regulations to promote ‘rental’ housing, which will address to the needs of migrant workforce.
The core idea in promoting housing as an engine of growth is not only providing shelter to both the rural masses and the urban poor but provides huge employment being highly labour intensive unlike construction of bridges and highways which are now getting highly mechanised.
This is complemented by implementing three schemes under the ‘employment linked incentive’ by intelligently linking with the EPFO (Employment Provident Fund Organisation) enrolment with a focus on first-time employees.
The schemes are uniquely designed and they reward and recognise both first-time employees and employers.
The scheme envisages direct benefit transfers (DBT) of one month’s salary up to ₹15,000 in three installments with a monthly salary cap of ₹1 lakh and is expected to benefit nearly two crore youth in the country.
Similar schemes will incentivise employers in the manufacturing sector up to a specified salary ‘scale’ towards their EPFO contribution of both employer and the employees.
The emphasis has been to create, promote and nurture a skilled labour force under the PPP model with a vision and mission for the next 10 years to take advantage of the demographic dividend that we enjoy and to equip our youth for employability and adaptability to the digital and AI ecosystem.
To improve social security benefits (non-government), employers’ deduction under the National Pension Scheme has been increased from 10 percent to 14 percent of the employees salary.
The benefit will be extended to employees of the private sector, PSBs and PSUs if they opt for the ‘new income-tax’ system. This benefit will be under Section 80CCD of the Income-Tax Act.
To promote consumption by facilitating higher disposable income in the hands of the salaried middle-class, the ‘standard deduction’ has been increased from ₹50,000 to ₹75,000 and the deduction on family pension for pensioners is enhanced from ₹15,000 to 25,000, which will benefit nearly four crore individuals.
Further, the tax rate has been tinkered with in the ₹3 lakh to ₹7 lakh tax slab at 5 percent which was earlier ₹3 lakh to ₹6 lakh and consequently ₹7 lakh to ₹10 lakh and ₹10 lakh to ₹12 lakh will be now at 10 percent and 15 percent, respectively.
But these will apply to the new tax regime nudging individuals in the old tax system to move to the new one.
Perhaps the only ‘googly’ and most unexpected in the Budget is the hike in capital gains tax both under long- and short-term and the hike in Securities Transaction Tax to 0.1 percent for “ forwards and options” delivery basis.
The long-term capital gains have been hiked to 12.5 percent from 10 percent and the short-term (select financial assets) have been increased as high as 20 percent from the present 15 percent.
However, the limit of exemption of capital gains on certain listed financial assets has been increased from ₹1 lakh to ₹1.25 lakh per year. Coming to real estate transactions, the long-term capital gains will be taxed at 12.5 percent without indexation (post-2002) and hence, seems regressive.
Granting infrastructure status to the entire real estate sector, which is now restricted to ‘affordable housing’, expanding the definition of affordable housing by increasing the units carpet area/unit costs to ₹65 lakh in metros and ₹55 lakhs in non-metros, hike in interest rebates for both principal and interest deduction under housing loan EMIs continues to be in the ‘wish list’.
(S Narendra is a Bengaluru-based Banker, Economist and guest columnist. Edited by Majnu Babu).
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