On 1 February 2018, the Indian Finance Minister presented the Union Budget for the financial year 2018 – 2019 (Budget 2018) in the Parliament and consequently the Finance Bill, 2018 has also been introduced in the Lower House for approval. The focus of Budget 2018 was to strengthen sectors such as agriculture, rural development, health, education, employment and infrastructure.
Some of the key highlights of the Budget 2018 are:
- Focus on improving and developing the food and agriculture sector by introducing new reforms which includes, inter-alia keeping the Minimum Support Price (MSP) for all unannounced Kharif crops at least at one and half times of their production cost like majority of Rabi crops; setting up state-of-the-art testing facilities in 42 Mega Food Parks established all over India and introducing a special scheme to address air pollution in the Delhi-NCR region by subsidizing machinery required for in-situ management of crop residue.
- New schemes introduced for the benefit of the lower income category envisioning to increase the distribution of free LPG connections from 5 crore to 8 crore; to fulfil target of housing for all by 2022, more than 1 crore houses will be built by 2019 in rural areas; maximizing livelihood opportunities in rural areas by increasing the spending on livelihood, agriculture and allied activities and construction of rural infrastructure.
- Introduction of the world’s largest government funded health care program called the ‘National Health Protection Scheme’ which will benefit over 10 crore families belonging to poor and lower income groups by providing financial coverage of up to INR 500,000 (Rupees five hundred thousand) per family for medical and hospital care.
- Reduction of corporate tax rate to 25% (twenty-five percent) for all companies reporting a turnover of up to INR 2,500,000,000 (Rupees two billion five hundred million), thus providing some relief to the medium, small and micro enterprises (commonly known as ‘MSMEs’).
- Introduction of measures to boost employment generation by amending relevant provisions related to the Employees Provident Fund and Miscellaneous Provisions Act, 1952 whereby, the Government proposes to contribute 12% (twelve per cent) of the wages of the new employees in the Employee Provident Fund, for all sectors for next three years of their employment and reduction of the contribution of Employee Provident Fund of women employees to 8% (eight percent) for first three years of their employment thereby providing incentive to employ more women in the formal sector and higher take home salary.
- Allocation of capital upto INR 1,485,280,000,000 (Rupees one trillion four hundred and eighty-five billion two hundred eighty million) solely for improvement of the Railways infrastructure and extending the rail network.
- The Securities and Exchange Board of India (SEBI) has been urged to consider mandating that all large corporates should source 25% (twenty five percent) of their financing requirements from the bond market. A proposal has also been made to the regulators to permit bonds rated ‘A’ grade to also be eligible for investment as opposed to the current regime wherein only bonds rated ‘AA’ grade are eligible for investment.
- Setting up a new target for disinvestment of INR 8,000,000,000,000 (Rupees eight trillion) in the financial year 2018-19 and merging three of the largest public sector insurance companies in India, viz. National Insurance Co. Ltd., United India Assurance Co. Ltd., and Oriental India Insurance Co. Ltd., into one single entity.
- In relation to the tax initiatives, a 100% (one hundred per cent) deduction has been proposed for companies registered as Farmer Producer Companies with an annual turnover of up to INR 1,000,000,000 (Rupees one billion), on profit derived from such activities, for a period of five years from financial year 2018-19.
- Permitting a standard deduction of INR 40,000 (Rupees forty thousand) to salaried tax payers, for calculation of tax liabilities, instead of the current exemption in place for transport allowance and reimbursement of miscellaneous medical expenses.
- Promotion of trade in stock exchanges situated in International Financial Services Centre (IFSC) by proposing to provide concessions in the manner of exempting all transfer of derivatives and certain securities by non- residents from capital gains tax and charging all non-corporate tax payers operating in IFSCs an Alternate Minimum Tax (AMT) at the rate of 9% (nine per cent).
- No adjustment shall be made in relation to the tax liabilities of a tax payer involved in the real estate sector, if the circle rate value does not exceed 5% (five percent) of the total consideration.
- Long Term Capital Gains (LTCG) arising from transfer of listed equities, or units of an equity oriented fund or a unit of a business trust is proposed to be taxed at 10% (ten percent) of such long term capital gains exceeding INR 100,000 (Rupees one hundred thousand), without allowing any indexation benefit. It has also been proposed to introduce a 10 % (ten percent) tax on distributed income by equity oriented mutual funds.
- Focusing on the ‘Make in India’ initiative, the Government has also proposed to increase the customs duty applicable on mobile phones and television sets to upto 20% (twenty percent).
- Abolishment of the Education Cess and Secondary and Higher Education Cess on imported goods, and replacing it with the Social Welfare surcharge at the rate of 10% (ten percent) of the aggregate duties of customs on imported goods to provide for social welfare schemes of the government.
- NITI Aayog will be initiating a national program to direct efforts in the area of artificial intelligence (AI). The Government will also explore the use of block chain technology and will take measures of eliminating the use of crypto-assets in financing illegitimate activities.
Apart from the above mentioned highlights, the Budget 2018 also seeks to improve care for senior citizens whilst the overall thrust has been to maximize health care and education for impoverished sectors of the society.
A copy of the Budget 2018 may be accessed through the following link:
http://pibphoto.nic.in/documents/rlink/2018/feb/p20182101.pdf