BUDGET 2018 Assessment: Positives and Negatives

Finance Minister Arun Jaitley presented a mix bag of a Budget for the financial year 2018-19. Like every Budget, this one too has its positives and negatives.

Positives:

1. Minimum support price for Kharif crops hiked by 1.5 times
2. No TDS for senior citizens on FDs and post office deposits up to Rs 50,000.
3. Rise in custom duty on mobile phones from 15% to 20%. This will help domestic manufacturers.
4. Standard deduction of Rs 40,000 for salaried people re introduced
5. No legal status for crypto-currencies.
6. Package worth Rs 7,100 crore for the textile sector.
7. The government to contribute 12% of wages for new employees for Employee Provident Fund.
8. Free gas connection for 8 crore poor women under Ujwala scheme.
9. Lower tax rate of 25 per cent to companies with a reported turnover up to Rs 250 crore.
10. 100% tax deduction to companies registered as farmer-producer companies with turnover of Rs 100 crore.
11. Infrastructure outlay increased from Rs 4.94 lakh crore to almost Rs 6 lakh crore.
12. Rs 56,000 crore for SCs and Rs 39,000 crore for STs.
13. Ayushman Bharat Programme. Rs 5 lakh/year per family for 10 crore families for health expenses.
14. Deduction for senior citizens increased to Rs 50,000 for medical insurance.

The Negatives:

1. No change in personal income taxes. The middle class had expected change in tax slabs while others had expected raising of exemption limit.
2. The government has opted for wider fiscal deficit at 3.5 per cent of GDP for 2018-19 and projected 2018-19 deficit at 3.3 per cent of GDP. Higher fiscal deficit not good for government credibility and FDI among other things.
3. No tax cut for big corporates which could have helped revive private investment as well as create more jobs.
4. Transport allowance and medical reimbursements to become taxable
5. “Health and Education Cess” levied on tax liability has been hiked by 1 per cent from the current 3 percent to 4 percent. For example if you have a net taxable income of Rs. 5 lakh, your tax outgo will marginally increase by Rs. 125 and on net taxable income of Rs. 15 lakh their tax liability will increase by Rs. 2,625.

Market Investors:

1. Finance Minister proposes to tax long-term capital gains starting from April 1 up to Rs. 1 lakh at 10% plus cess at 4 %. It will be applicable on sale of equity and equity oriented mutual funds. However to provide relief to small investors, LTCG (Long Term Capital Gains) up to Rs. 1 lakh will be exempt from tax per fiscal.
2. Tax at the rate of 10 percent will be levied on the dividends distribution in case of equity mutual funds. However, this dividend will remain tax-free in the hand of investors. The tax will be deducted by the fund houses before distribution of dividend.