Since Independence, India has witnessed a total of 91 Budgets till now, out of which 14 were presented as Interim Budgets/Vote on Account. Due to the forthcoming elections, the country is set to witness its fifteenth Interim Budget/Vote on Account for FY 2024-25, on February 1, 2024. As per the Code of Conduct of the Election Commission of India, the ruling party is not allowed to propose major tax reforms in the Interim Budget as the same can influence voters, and thus can adversely hamper the fair voting process.
Recently, Finance Minister Nirmala Sitharaman also said, at a public event, that the upcoming Budget in February 2024 will be presented just to meet the requirements of expenses, till a new government is formed. The said budget will just be a Vote on Account, so no spectacular announcements should be expected by the taxpayers.
However, below is a summary of the key tax reforms in the Income Tax Act, 1961 which were proposed in Interim Budgets in India, since Independence.
Key income tax reforms made via Interim Budgets in the past
| Year | Finance Minister | Proposed change in the income tax structure | Other significant changes proposed |
| 2019-20 (01 February 2019) | Piyush Goyal | No change was proposed in the tax structure | (i) Income up to Rs 5 lakh exempted from Income Tax: Individual taxpayers whose annual taxable income did not exceed Rs 5 lakh were proposed to be given full tax rebate of Rs 12,500. (ii) Increase in Standard Deduction for salaried persons: The quantum of Standard Deduction was proposed to be raised by Rs. 10,000 from the previously existing deduction of Rs.40,000 to give a total benefit of Rs.50,000 in each tax year. (iii) Increase in TDS thresholds under Section 194A for interest and 194I for rent: The TDS threshold on bank FD was hiked to Rs 40,000 from Rs 10,000 previously. (iv) Others: a) It was proposed to exempt levy of Income Tax on notional rent on second self-occupied house property. b) The benefit of rollover of capital gains under section 54 was proposed to be increased from investment in one residential house to two residential houses for taxpayers whose capital gains does not exceed Rs.2 crore, which could be availed only once in life. c) For giving impetus to the real estate sector, it was proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed. d) The maximum limit of gratuity payment was increased from Rs.10 lakh to Rs.20 lakh. |
| 2014-15 (17 February 2014) | P. Chidambaram | No change was proposed in the tax structure | No amendments were proposed vide Interim Finance Bill, 2014-15 in the Income Tax Laws. |
| 2009-10 (16 February 2009) | Pranab Mukherjee | Change in the income tax slabs. | Certain changes in the slab rates were made. For instance, the basic exemption threshold limits (BEL) were revised as follows: a) In case of individual taxpayers – the BEL was revised from Rs. 1.1 to Rs. 1.5 lakhs, b) In case of resident women taxpayers (below the age of 65 years) – the BEL was revised from Rs. 1.45 to Rs. 1.8 lakhs, c) In case of senior citizen resident taxpayers (aged 65 years or more) – the BEL was revised from Rs. 1.95 to Rs. 2.25 lakhs. No other significant amendments were proposed vide Interim Finance Bill, 2009-10 in the Income Tax Laws. |
| 2004-05 (03 February 2004) | Jaswant Singh | No change was proposed in the tax structure | There were no proposals to amend the income tax laws in interim budget. However, the finance minister in his speech used the words “conviction of the government to bring the below listed amendments and were not proposed in the interim budget”. The proposals reflected the commitment of the government to implement the proposals if the government came to power. The said proposals which were subsequently implemented post elections in 2004 were as follows: (i) Extension of Exemption on Long Term Capital Gains Tax: The regime of listed equities acquired on or after 01 March, 2003 being exempt from long term capital gains tax to be extended for a further period of three years, so as to provide stability. At the time of subsequent enactment, the proposal was implemented without any specific time limit. (ii) Relief on Compulsory Acquisition of Agricultural Land by the Government: Capital gains and accrued interest on enhanced compensation on compulsory acquisition of agricultural land by the Government was proposed to be exempted from tax. Further, no deduction of tax at source on the interest earned on enhanced compensation for the acquisition of such land was also proposed. (iii) Other provisions which were committed to be revisited if the government was re-elected: Quantum of Standard deduction (basic exemption limits) and Tax treatment of family pension of war widows. |
| 1998-99 (25 March 1998) | Yashwant Sinha | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1998-99 in the Income Tax Laws. |
| 1996-97(28 February 1996) | Manmohan Singh | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1996-97 in the Income Tax Laws. |
| 1991-92 (04 March 1991) | Yashwant Sinha | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1991-92 in the Income Tax Laws. |
| 1980-81(11 March 1980) | R. Venkataraman | No change was proposed in the tax structure | Others: (i) Introducing exemption for statutory corporations set up by State Governments and (ii) Extending the scope of exemption for awards received from certain recognized Government bodies. |
| 1977-78 (28 March 1977) | H. M. Patel | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1977-78 in the income tax, wealth and gift tax laws. |
| 1971-72 (24 March 1971) | Y. B. Chavan | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1971-72 in the income tax, wealth and gift tax laws. |
| 1967-68 (20 March 1967) | Morarji R. Desai | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1967-68 in the income tax, wealth and gift tax laws. |
| 1962-63 (14 March 1962) | Morarji R. Desai | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1962-63 in the income tax, wealth and gift tax laws. |
| 1957-58 (19 March 1957) | T.T. Krishnamachari | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1957-58 in the Income Tax Laws. However, Wealth Tax Act, 1957 was enacted on April 1, 1957 and Gift Tax Act, 1958 was enacted on April 1, 1958. The two laws were brought separately and not via Budget announcement. |
| 1952-53 (29 February 1952) | C. D. Deshmukh | No change was proposed in the tax structure | No new amendments were proposed vide Interim Finance Bill, 1952-53 in the Income Tax Laws. |
What is an interim budget?
An Interim Budget is similar to a full-fledged Budget and therefore includes the complete set of financial statements of the country. The interim budget includes estimates for both expenditure and receipts for the part of the financial year for which the current government will be in power. An Interim Budget needs to be mandatorily discussed in the Lok Sabha after which it would be passed.
What is Vote on Account?
A Vote on Account only includes the expenditures made by the government. As per the Constitutional provisions, the ruling party is not allowed to withdraw funds from the Consolidated Fund of India unless it has been approved by law. Vote on account only provides for the expenditure in order for the government to enable to withdraw money from the treasury for routine and certain expenditures like salaries, ongoing programs, and debt servicing. The Vote On Account could be passed by the Lok Sabha without undergoing any discussion.
(The article is written by Dr.Suresh Surana, Founder, RSM India.)
