All eyes on Arun Jaitley….in anticipation of what this fiscal year’s budget entails! The declaration of Budget 2018-2019 brought out contradictory reactions, the most prominent disappointment came from the unchanged income tax slabs. Though certain sections lauded, others called it as mildly disappointing.
The huge setback of a loss of 94,800 crores, owing to GST tax cuts, telecom spectrum revenue fallen by Rs 14,500 crores and cuts in excise on petrol and diesel rendering a Rs 13,000-crore blow to the fiscal accounts, were consequential in the Budget presented.
We have attempted to decode this year’s much awaited Budget. Let us breeze through the highlights.
Arun Jaitley has announced a standard deduction of Rs 40,000 for salaried taxpayers. slated to benefit 2.5 crore people-25-30% of the total taxpayer base.
- EPF contribution by women employees reduced to 8% from 12% ensuring a higher take home salary for women employees.
- Setting up of one medical college for every 3 parliamentary constituencies.
- Health cover of 5 lakhs to the poor.
- Tax exemption of interest income from bank deposits has been raised to Rs 50,000 from the current Rs 10,000, for senior citizens.
- The government has proposed to extend the Pradhan Mantri Vaya Vandana Yojana up to March 2020 under which an assured return of 8% is given by Life Insurance Corporation of India (LIC).
- The union government has cut basic excise duty on petrol and diesel by Rs 2.
- The Modi government has also abolished additional excise duty on fuel by Rs 6.
- An Agri-Market Infrastructure Fund of Rs 2000 crore will be set up for developing agricultural markets.
- Government will encourage organic farming by FPOs and Village Producers Organizations (VPOs) in large clusters, preferably of 1000 hectares each.
- A sum of Rs 200 crore have been allocated to support organized cultivation of highly specialized medicinal and aromatic plants and aid small and cottage industries that manufacture perfumes, essential oils and other associated products.
- The Finace Minister has promised to establish 1.5 lakh Health and Wellness Centres under the Ayushman Bharat programme to provide comprehensive health care-including for non-communicable diseases and maternal and child health services-free essential drugs and diagnostic services.
- A dedicated Affordable Housing Fund will be set up for poor families, funded from priority sector lending shortfall and fully serviced bonds authorized by the government.
- Wi-Fi, CCTVs will be provided in every railway station and escalators will be provided in stations with more than 25,000 footfalls.
- Introduction of 5 lakh new wifi hotspots.
- The government is resolute in converting blackboards to digital boards, bring technological expertise in the Education sector
- There will also be a special focus on the upliftment of suburban trains in Mumbai and Bengaluru.
- A promise to set up 24 new Government Medical Colleges and Hospitals by upgrading existing district hospitals in the country.
...And The Bad!
- Only companies with a turnover of up to Rs 250 crore will now be taxed at 25%.After this, out of about 7 lakh companies filing returns, only about 7,000 companies will remain in 30% tax slab.
- It has been proposed to tax long term capital gains exceeding Rs 1 lakh on sale of equity shares/units of Equity oriented Fund at 10%, without allowing any indexation benefit.
- Existing investors will be exempted from capital gains tax up to January 31, 2018. All gains made thereafter this cut-off date will be taxed. This move could earn the government Rs 20,000 crore in revenue in the first year.
- No change in interest on education loans
- No change in Income Tax slabs
- Virtual currencies have been deemed illegal.
- Custom duty increased from 15% to 20%
- The Government has levied a “social welfare surcharge” at 3-10% on imports in place of the Education Cess and Secondary and Higher Education Cess currently in place.
- Art patronage has been blatantly ignored.
- The Government has proposed to replace existing 3 per cent education cess on personal income tax and corporation tax with a 4 per cent ‘Health and Education Cess’ to focus on the education and health needs of poor and rural families.
Our thoughts?….where the Government has given due importance to educational progress and benefits to poor families, it has largely left export growth stagnant. The aftermath is awaited to be seen.