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Highlights of Union Budget 2018

This year’s budget is more take and less give for the common man. The high hope of increasing income tax slab has gone into vain. The finance minister has re-introduced standard deduction, gave some benefits to senior citizens and women employees. Overall there is nothing much for a common man. Let’s have a look at the highlights of union budget 2018.

Salient Features of Finance Bill, 2018

  1. No change in Tax Rate. All persons including individuals, HUF, Firms and Companies to pay the same tax. However, Education cess is being increased from 3 to 4 % to be knon as Education and Health cess.

  2. However for Domestic Companies having total turnover or gross receipts not exceeding Rs 250 crores in Financial year 2016-17 shall be liable tp pay tax at 25% as against present ceiling of Rs 50 crore in Financial year 2015-16.

  3. Long term Capital gain exemption under section 10(38) in respect of listed STT paid shares being withdrawn.

  4. However capital gain up to 31.1.2018 shall not be taxed as cost of acquisition will be taken as Fair Market Value as on 31.1.2018.

  5. Tax on STT paid long term capital Gain will be 10% under Section 112A. Further such tax will be liable for TDS.

  6. Standard Deduction of Rs 40,000 for salaried employees. However benefit of transport allowance of Rs 19,200 and Medical Reimbursement of Rs 15,000 under Section 17(2) are beinf withdrawn. Thus net benefit to salaries class only Rs 5,800

  7. Provision of Section 43CA, 50C and 56(2)(x) being amended to allow 5% of sale consideration in variation vis a vis stamp duty value. On account of location, disadvantage etc.

  8. Provision of section 40(ia) and 40A(3) and 40A(3A)are being made applicable to Charitable Trust . Hence expenditure incurred without deduction of tax and in cash will not be eligible as application of income under section 10(23C) and section 11(1)(a).

  9. Agriculture Commodity Derivates income /loss also not to be considered as speculative under section 43(5).

  10. Income Computation and Disclosure Standards(ICDS) being given statutory backing in view of decision of Delhi High Court decision.

  11. Marked to market loss computed as per ICDS to be allowed under section 36.

  12. Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA.

  13. Construction Contract income to be computed on percentage completion method as per ICDS.

  14. Valuation of Inventorty including Securities to be as per ICDS.

  15. Interest on compensation, enhanced compensation. Claim or enhancement claim and subsidy, incentives to be taxed in the year of receipt only as per new Section 145B.

  16. Conversion of stock in trade to the capital asset to be charged as business income in the year of conversion on Fair Market value on the date of conversion.

  17. 54EC benefit of investment in Bonds to be restricted to Capital gain on land and building only. A further period of holding being increased from 3 years to 5 years.

  18. PAN to be obtained by all entities including HUF other than individuals in case aggregate of financial transaction in a year is Rs 2,50,000 or more. All directors, partners, members of such entities also to obtain PAN.

  19. All companies irrespective of income to file a return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact whether it has a tax liability of Rs 3,000 or not.

  20. Assessments to be E-assessment under new section 143(3A)

  21. No adjustment under section 143(1) while processing on account of a mismatch with 26AS and 16A.

  22. Deemed dividend to be taxed in the hands of the company itself as Dividend Distribution of tax @ 30%.

  23. The penalty for nonfiling financial return as required under section 285BA being increased to Rs 500 per day.

Direct Tax

  • Farmer producer companies will get 100% exemption for 5 years

  • New employees cost deduction rationalized for 1st year of employment

  • Companies with turnover up to 250 Crore will have 25% tax rate

  • Rs 40000 standard deduction allowed to salaried employees

  • Interest on FDs limit raised to Rs 50000 for senior citizen

  • Senior Citizen Medical Insurance limit raised to Rs 50000

  • Critical illness expenditure limit also increased to Rs 1 lakh for senior citizen

  • Long-Term Capital Gain above Rs 1 lakh in a year on listed equity shares will be taxed at 10%. Such gains up to 31.01.18 exempted

  • Tax on Growth oriented Mutual Fund distributing Dividend

  • Total Cess on Income Tax is now 4%

  • Electronic Assessment introduced

Indirect Tax (Non-GST)

  • Customs duty on mobile phones and accessories increased

  • Educational Cess on some goods reduced

  • Certain changes in procedural part of Cus

MACROECONOMY MATTERS

  • Govt has implemented fundamental structural reforms

  • India stands out as the fastest growing economy in world

  • Promised to reduce poverty, build strong India

  • Direct transfer mechanism is a global success story

  • Will focus on health, infrastructure, senior citizens

  • Focus on ‘ease of living’ for common man

  • To move ahead on ease-of-doing-business

  • This Budget to consolidate gains of last 4 years’ budgets

  • Demonetisation has reduced cash in circulation

  • Recapitalised banks have better capacity to support growth

  • Indirect tax system made simpler with GST

  • FDI increased due to govt actions

  • Manufacturing sector back on growth path

  • There’s a premium on honesty because of govt’s reforms

  • Firmly on course to achieve 8% plus growth

  • India to become fifth largest economy very soon

  • India a $2.5-trln economy now

  • Achieved average 7.5% growth in first 3 years of govt.

AGRICULTURE

  • FY19 Budget aims to strengthen agri, rural economy

  • Seek paradigm shift to double farmers’ income by 2022

  • Govt committed to welfare of farmers

  • Govt to create mechanism for post-harvest facilities

  • MSP hikes not enough, farmers must be able to get benefits

  • Next kharif crop MSP to be at least 1.5 times of cost

  • Emphasis on generating gainful farm, non-farm jobs

  • Focus on low-cost farming, higher selling price

  • Institutional system for farm goods price, demand forecast

  • NITI Aayog to make robust system for fair price to farmers

  • Export of farm commodities to be liberalized

  • Agri export potential $100 bln

  • To launch Operation Green in line with Operation Flood

  • Allocate 5 bln rupees for Operation Green

  • Allocation for food processing sector 14 bln rupees FY19

  • Allocate 2 bln rupees for medicinal, aromatic crops

  • To encourage women self-help groups for organic farming

  • Cluster-based models to be developed for horticulture crops

  • e-NAM to be exempt from APMC regulations

  • To develop, upgrade 22,000 rural haats to agricultural mkts

  • To allocate 20 bln rupees for farm development fund

  • Favourable tax treatment for farm mfg organizations

  • Agri credit target at 11 trln rupees for FY19

  • Kisan credit card benefit also to animal husbandry, fishing

  • To launch bamboo mission for 12.9 bln rupees

  • 470 APMCs connected to e-NAM, rest to be connected by Mar

  • To set up 42 mega food parks for farm exports

FY18 REVISED

  • Hope to grow 7.2-7.5% in H2 FY18

  • Exports expected to grow 15% in FY18

POLICY STEPS

  • 100 bln rupees for animal husbandry, fisheries develop fund

  • To set up 2 new funds of total 100 bln rupees for fishery

  • Online loan facility for MSMEs to be revamped

  • To address bad loan problems of MSMEs

  • 37.94 bln rupees for MSME credit support

  • Job creation core of policy planning

  • To take steps for improving start-up funding environment

  • PSUs to be part of e-trade receivables platform

  • To link e-trade receivables platform with GSTN

  • To review refinancing policies under MUDRA plan

  • To give 40 mln power connections under Saubhagya Yojana

  • 3 trln rupees lending target for MUDRA plan FY19

  • Smart City scheme outlay 2.04 trln rupees.

SOCIAL SECTOR

  • To set up dedicated affordable housing fund under NHB

  • Aim 5.1 mln rural houses under affordable housing plan

  • Aim to give houses to all poor by 2022

  • Aim to build 20 mln more toilets under Swachh Bharat

  • More than 60 mln toilets built under Swachh Bharat plan

  • To give 80 mln LPG connections under Ujjwala scheme

  • To spend 1 trln rupees on education infra over 4 years

  • To subsidize removal of crop residue to tackle pollution

  • To set up Ekalavya schools for scheduled tribes

  • To treat education holistically pre-nursery to class 12

  • To move from Blackboard to digital board

  • Allocate 99.75 bln rupees for social security plan FY19

  • Allocation to Natl Livelihood Mission 57.50 bln rupees

  • Allocate 14.3 trln rupees for rural infra FY19

  • Allocate 26 bln rupees under groundwater irrigation plan

  • Health protection scheme to cover 100 mln, poor families

  • Allocate 12 bln rupees for health wellness centers

  • To launch PM research fellow plan for 1,000 BTech students

  • To set up 2 new schools of planning & architecture

  • 600 mln Jan Dhan accts to get micro insurance benefit

  • 24 new medical colleges to be set up via hospital upgrade

  • Aim 1 medical college for every 3 Parliament constituency

  • 6-bln-rupee nutritional support for Tuberculosis patients

  • Govt progressing towards universal health coverage

  • Health scheme to have 500,000 rupees/family/yr benefit

  • Allocate 566.2 bln rupees for Scheduled Castes welfare

  • Cover all poor family in PM insurance plan in mission mode

  • 187 projects sanctioned under Ganga cleaning programme

  • Allocate 391.35 bln rupees for welfare of Scheduled Tribes

  • Govt women employees to contribute 8% to EPF in first 3 yrs

MISCELLANEOUS

  • Special scheme to fight pollution in Delhi-NCR

  • To develop 10 places as iconic tourism destinations

  • To construct tunnel under Sela Pass

INDUSTRY, INFRASTRUCTURE

  • To allocate 71.5 bln rupees to textiles sector FY19

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