Budget 2018 Highlights
- LTCG over Rs 1 lakh to be taxed at 10% (special terms and conditions apply)
- Tax benefit on health insurance under section 80D increased to Rs 50,000 from Rs 30,000 per year
- Critical illness expenditure based tax exemption increased to Rs 1 lakh per year for senior citizens
- Standard deduction of Rs 40,000 annually provided to salaried tax payers
- No changes to tax structure for individuals
- Average tax paid by salaried professionals Rs 35,000
- 12.6% growth in direct taxes in 2017-18 and 18.7% growth in indirect taxes in 2017-18
- 85.51 new tax payers in FY17
- Fiscal deficit for FY 2019 is projected at 3.3% of GDP and 3.5% for FY 2018
- Gold policy to be developed to make gold an asset class
- National Insurance, United India Insurance and Oriental Insurance to be merged into single entity and listed
- Disinvestment target for FY 2018-2019 is Rs 1.8 lakh crore
- 5 lakh WiFi spots for benefit of 5 crore rural citizens
- Toll payment to be made digital, to replace cash
- Government to take measures to prevent use of cryptocurrencies
- Digital India allocation doubles to Rs 373 crore
- Renovation and upgradation of 600 railway stations across India
- Focus on use of technology to improve railway safety
- 99 cities selected for Smart City project with total allocation of Rs 2.04 lakh crores
- Women EPF contribution reduced to 8% for first 3 years of the employment
- Infrastructure investment target: Rs 50 lakh crore
- Govt will look at helping fintechs to contribute more to MSME growth
- Rs 3 lakh crore allocated for loans under MUDRA
- Online loan sanctioning to be done for MSMEs for quicker decisioning by banks
- Rs 1200 allocated to health and wellness centres
- Government sets up National Health Protection Scheme worth Rs 10 lakh crore to cover 10 crore poor families with per family coverage of up to Rs 5 lakh annually
- Focus on digital reform of current blackboard based education system
- Rural infrastructure and livelihood improvement to receive additional Rs 14.3 lakh crores
- 2 crore new toilets to be created under Swachh Bharat Abhiyan
- Rs 10,000 crore allocated to fishery and animal husbandry
- Ujjwala Yojana to include 8 crore additional gas connections for poor families
- FM allocated Rs 200 crore to support small scale industries
- New agricultural development fund introduced with corpus of INR 2000 crores
- GDP is expected to rise to 7.5% in coming financial year
- Government to increase minimum support price to 1.5X cost of production of agricultural products
- Governemnt to focus on agriculture, treating it as a busines enterprise.
Union Budget 2018-19 will be the first post-GST budget of India. It is also the last full budget before the 2019 general elections and will be presented on 1st February 2018 by Finance Minister Arun Jaitley. The budget session is expected to begin on 30th January 2018; President Ram Nath Kovind will address the joint session of both the houses. The Economic Survey would be tabled on 31st January. This will be the fifth budget presentation in a row for Arun Jaitley.
After the budget-2017, which was referred as mediocre, this will be the last full budget of Modi-led NDA government for this term. Different sectors have high expectations for the much touted economic reforms. Let’s take a quick look at what can be expected from this new budget-
Tax Structure- This year, the indirect tax structure of the country was given a facelift with the new Goods and Services Tax (GST) regime. And in Union Budget 2018, we can expect changes in the direct tax structure including income tax. The current government opines that the tax base in the country needs to be widened to curb tax evasion. Also, the tax rates need to be rationalised. To review the existing structure of direct taxes in the country and the related exemption norms, a task force has been created by the government which is headed by CBDT member Arbind Modi. The idea is to make direct taxes more contemporary so that it matches the current requirements.
Infrastructure- Infrastructure is also expected to be a priority in the upcoming Budget 2018. Arun Jaitley said that the government wants to maintain the momentum at which new infrastructure is being developed in the country. The new budget will put impetus on developing rural infrastructure. Under the Bharatmala project, the biggest ever highway development plan has already been approved by the government. Urban infrastructure, housing, water and sanitation needs are also expected to be discussed at the new budget announcement. Now that the Railway Budget has also been merged with Union Budget, railway infrastructure will also be an important topic. There is urgent need for investment in railway infrastructure along with the framework of stations and trains.
Recapitalisation of Public Sector Banks- A mega recapitalisation plan was announced by the government in October to counter the rising bad loans of public sector banks. The plan is worth Rs 2.11 Lakh Crores out of which Rs 1,35,00 crore will be in the form of front-loaded recapitalisation bonds. Though the government has not shared the details on the types of bonds or the interest rates on these bonds, the news itself has created quite a buzz in the bonds and equity markets. The government is expected to raise around Rs 70,000 crore by February 2018 and the budget will also be announced in the same period.
Apart from these major reforms, several economists are urging the government to cut corporate tax rates in order to make the Indian industries competitive on a global level.