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Important Features of Budget 2018
No change in the tax rate. All people, including people, HUF, companies, and companies, must pay the same tax. However, access to education is increasing from 3 to 4%, which is known as “educationand health“.
However, for national companies that have a total turnover or gross receipts that do not exceed Rs 250 crores in the fiscal year 2016-17, they will be required to pay taxes at 25% compared to the current maximum limit of Rs 50 crore in the fiscal year 2015-16.
Exemption from the long-term capital gain exemption under section 10 (38) with respect to paid STT shares.
However, the capital gain until 31.1.2018 will not be taxed since the acquisition cost will be taken as the fair market value as of 31.1.2018.
Tax on long-term paid capital STT The gain will be 10% under Section 112A. In addition, said the tax will be responsible for TDS.
The standard deduction of 40,000 rupees for salaried employees. However, the benefit of the transport subsidy of Rs 19,200 and the medical rebate of Rs 15,000 under section 17 (2) are being taken off. Therefore, the net benefit for class wages of only Rs 5,800.
Provision of Section 43CA, 50C and 56 (2) (x) modified to allow for a consideration of 5% of the sale in the variation with respect to the value of stamp duty. Because of the location, the disadvantage, etc.
The provision of section 40 (ia) and 40A (3) and 40A (3A) is being applied to the Charitable Foundation. Therefore, expenses incurred without tax deduction and in cash will not be eligible for income application under section 10 (23C) and section 11 (1) (a).
The income/loss derived from the products derived from agriculture should not be considered as speculative in section 43 (5).
The Information and Computing Income Standards (ICDS) receive legal backing in light of the decision of the Delhi Supreme Court decision.
Marked by the market loss calculated according to the ICDS to be allowed in section 36.
Gain or loss in foreign currency according to ICDS to be allowed under new section 43AA.
Income from the construction contract that will be calculated in the percentage of completion method according to ICDS.
Valuation of Inventory Values according to ICDS.
Interest for compensation improved compensation. Claim or subsidy of claim or improvement, incentives to tax in the year of receipt only according to the new Section 145B.
Conversion of shares in the trade to the capital asset that will be charged as commercial income in the year of conversion to fair market value on the date of conversion.
54EC benefit of the investment in Bonds that will be limited to the capital gain on land and construction only. The additional period of tenure was increased from 3 years to 5 years.
The NAP must be obtained by all entities including HUF that are not individuals in case the financial transaction aggregate in a year is Rs 2,50,000 or more. All directors, partners, members of these entities also to obtain PAN.
All companies, regardless of the income to submit the declaration and in case it has not been submitted, these companies will be responsible for prosecution, regardless of whether it has the tax liability of Rs. 3,000 or not.
Evaluations to be evaluated electronically according to the new section 143 (3A)
There is no adjustment under section 143 (1) while processing due to the mismatch with 26AS and 16A.
The attributed dividend will be taxed in the hands of the company itself as Dividend Tax distribution @ 30%.
The fine for undocumented financial return as required in section 285BA is increased to Rs 500 per day.
Propose to increase the customs duty on mobiles from 15% to 20% and on some other mobile parts to 15%, and some parts of TVs to 15%
Propose to increase the health and education cess to 4%
Propose to tax long-term capital gains exceeding Rs 1 lakh in listed stock at 10%.
Rs 50,000 additional benefit to senior citizens for investment in the medical claim.
A standard deduction of additional Rs 40,000 for salaried employees. This move will benefit 2.5 crore taxpayers. No changes in the structure of income tax of individuals.
Rs 7000 crore will be the revenue foregone for the reduced corporate tax on MSMEs.
I propose to extend the benefit of the reduced corporate rate of 25% for companies with a reported turnover of up to Rs 250 crore.
100% tax deduction for the first five years to companies registered as farmer producer companies with a turnover of Rs. 100 crore and above.
41% more returns were filed this year, which shows that more people have joined the tax net.
Demonetisation was received by honest taxpayers as ‘Imaandaari ka Utsav’.
Revised fiscal deficit estimate for 2017-18 is 3.5% of GDP, the fiscal deficit of 3.3% expected for 2018-19.
Automatic revision of MPs’ emoluments every five years, indexed to inflation.
Emoluments of President, Vice President and Governor being revised: Rs 5 lakh; 4 lakh; Rs 3.5 lakh per month respectively.
Exceeded the disinvestment target and collected Rs 1 lakh crore: FM.
The government insurance companies to be merged into a single entity, and subsequently listed in the stock exchange, as part of the disinvestment programme.
The government will assign every enterprise in India a unique ID on the lines of Aadhaar.
The government has identified 372 basic business reform actions. Each state will take up these reforms.
We will explore the use of blockchain.
Rs 5.97 lakh crore allocated for infrastructure spending in India.
5 lakh WiFi hotspots to be set up in rural areas to provide easy Internet access.
Redevelopment of 600 major railway stations has been taken up; Mumbai transport system is being expanded; the suburban network of 160 km planned for Bengaluru.
The government proposes to revamp the system of sanctioning of loans to SMEs. The information required for sanctioning the loan will be linked with GSTN and all required information can be fetched from GSTN Portal. It will help to grant the loans quickly and will help in reducing processing time.
UDAN will connect 56 unserved airports in India.
An institute is coming up at Vadodara to train people for the bullet train programme.
AMRUT programme will focus on the water supply to all households in 500 cities. Water supply contracts for 494 projects worth 19,428 core awarded.
Rs 1,48,528 crore is the capital expenditure for the Indian Railways for 2018-19… All trains to be progressively provided with WiFi, CCTV, and other state-of-the-art amenities.
Bharatmala project approved for better road connectivity at Rs 5.35 lakh crore.
Proposal to develop 10 prominent tourist destinations as Iconic tourism destinations.
Women’s contribution reduced to 8.33% towards PF in the first 3 years for new EPF accounts… The government will contribute 12% of EPF contribution for new employees in all sectors.
70 lakh farming jobs have been created this year, shows an independent study.
Rs 3 lakh crore allocated for PM MUDRA Yojana.
The government is slowly but steadily progressing towards universal health coverage.
Announce allocation of Rs. 56,619 crore for SC welfare and Rs. 39,135 crore for ST welfare
The expectations are running high – what the Budget can or should deliver as it is the last full year Budget by the current government before May 2019 general election and post GST.
Capital Market Response
Since 2010, the Sensex has gone up six times out of nine in the month after the Budget. Similarly, the benchmark index has also fallen eight out of nine times during the month prior to the Budget.
Though this time, we have not seen a significant correction ahead of the Budget, the chances of graph moving in the upside direction post Budget seems to be limited.
Receipts & Expenditure
FM Arun Jaitley has the unenviable task of balancing economic with politics. Fiscal deficit for FY18 could be 3.4% (below 3.5% for FY17) vs Budgeted 3.2% of GDP (a slippage of only 20 bps) due to higher divestment receipts and cutback in expenditure (mainly capital) offsetting the fall in GST collections and lower receipts from RBI.
Fiscal deficit for FY19 could be projected at 3.2% (thus being on the path to fiscal responsibility, though with some lag). For FY19, expenditure focus areas would be agriculture and housing.
In agriculture, the GoI would specialize in addressing the rural distress by subsidy mechanism wherever the market {price|market value|value} of crops fall below the minimum support price (MSP). Capex focus can be on irrigation, food provides chain, rural roads, and housing.
Common Man & General Business
On the taxes front, we have a tendency to expect to raise of exemption limits for people from ?2.5 lacs presently to ?3 lacs, company rate being cut to 25th for firms with annual sales up to ?100 cr (vs ?50 cr earlier), period of holding for LTCG being raised from this one year to 2 or 3 years, and no alternative major reliefs.
If crude prices settle at $75+ in FY19 and/or GST collections do not grow robustly (leading to a further growth in GDP), then the stress on the fiscal deficit will become visible with its impact on inflation and interest rates.
Otherwise, CPI could hover @5% in H1CY18 and between 4 to 5% in H2CY18. The 10-year bond yields could remain in the 7.1-7.6% band for better part of CY18.
GST & Insolvency
Among indirect taxes, GST is the prerogative of the GST Council and hence apart from some policy direction, no changes in GST are expected out of the Budget. Some tinkering of import/export duty is possible.
GST collection growth and insolvency code progress are two major themes to follow in 2018.
Private consumption is expected to stay strong; 2018 monsoon could be a concern. Some populist giveaways are likely though without the major dent in the fiscal situation.
Overall, we see fewer negatives from this Budget. Possibilities of an unexpected large positive are also limited.
