Parliament Diary

The Union Budget was presented by the Finance Minister, Mr. Arun Jaitley in Lok Sabha.

Some key Budget Highlights are:

Expenditure: The government proposes to spend Rs 24,42,213 crore in 2018-19, which is 10.1% above the revised estimate of 2017-18.

Receipts: The receipts (other than net borrowings) are expected to increase by 12% to Rs 18,17937 crore, owing to higher estimated revenue from the goods and services tax and income tax.

GDP growth: The government has assumed a nominal GDP growth rate of 11.5% (i.e., real growth plus inflation) in2018-19. The nominal growth estimate for 2017-18 was 11.75%.

Deficits: Revenue deficit is targeted at 2.2% of GDP, which is lower than 2.6% in the revised estimate of 2017-18. Fiscal deficit is targeted at 3.3% of GDP, lower than the revised estimate of 3.5% in 2017-18. Note that during the year, the government breached its budgeted target for both fiscal deficit (3.2%), and revenue deficit (1.9%).

Ministry allocations: Among the ten highest allocations to ministries, the highest percentage increase is observed in the Ministries of Railways (31.7%), followed by Consumer Affairs, Food and Public Distribution (17.6%). Allocation for the Ministry of Petroleum and Natural Gas decreased by 6.3% over the revised estimate of 2017-18.

Some changes in the Finance Bill include:

Income tax:  Currently, an additional surcharge of 15% is levied on the income of individuals earning over Rs one crore.  In this budget, a surcharge of 10% has been introduced for those with income exceeding Rs. 50 lakh up to Rs one crore.

For salaried individuals, a standard tax deduction of Rs 40,000 has been introduced.  The deduction for transport allowance and medical reimbursements has been removed.

Education cess:  The 3% Education Cess has been replaced by a 4% Health and Education Cess for non-resident persons, including foreign companies.

Corporation tax:  Currently, companies with annual turnover of less than Rs 50 crore pay corporate income tax at the rate of 25%.  This threshold has been increased to Rs 250 crores.

Long-term capital gains:  Currently, long term capital gains from transfer of equity shares or unit of equity oriented fund or a unit of business trust is exempt from payment of income tax.  These transfers will now be taxed at 10%, if the profit from the transaction exceeds one lakh rupees.  For computing gains, the purchase price would be considered as the higher of the actual purchase price or the price as on January 31, 2018.

Deductions for senior citizens:  Certain tax deductions have been increased for senior citizens.  These include: (i) deduction towards premium on health insurance policy or medical expenditure from Rs 30,000 to Rs 50,000; (ii) deduction for medical treatment of specified diseases to Rs one lakh; and (iii) deduction of up to Rs. 50,000 on interest income. 

Change in custom duties:   Custom duty rates have been amended for certain items.  Further, a 10% social welfare surcharge has been imposed on aggregate customs duties. 

Road and infrastructure cess:  The existing Road Cess has been converted to Road and Infrastructure Cess.  This cess on petrol and high-speed diesel has been increased by Rs 2 per litre, while the excise and customs duty have been cut by the same amount.  Unlike customs and excise duty, the cess does not form a part of the pool of taxes devolved to states. 

Some Policy Highlights include:

Agriculture:  Currently, the Minimum Support Price for Rabi crops has been 1.5 times their cost.  This is proposed to be extended to Kharif crops as well.  This move will facilitate the objective of doubling farmers’ income by 2022.

Health: The National Health Protection Scheme will be launched to cover over 10 crore poor families, with a coverage up to Rs five lakh per family per year.

Education: A new scheme called ‘Revitalising Infrastructure and Systems in Education (RISE) by 2022’ will be launched, with a total investment of Rs 1,00,000 crore in the next four years.  This aims to promote investments in research and related infrastructure in premier educational and health institutions. 

Employee Provident Fund:  Amendments will be made to the Employees Provident Fund and Miscellaneous Provisions Act, 1952 in due course to reduce the contribution of women employees to the Employee Provident Fund.  This reduced contribution of 8% will be applicable for the first three years of their employment, as compared to the existing rate of 12% or 10% as applicable.