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  • Union Budget 2018 Analysis and Highlights

    Top Highlights from Today’s Budget Session By Finance Minister, Arun Jaitley

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    • The Budget of 2018 has brought into action the largest ever government-funded health coverage programme. The Government will launch the National Health Protection Scheme to offer medical coverage to more than 10 crore families
    • Long-term capital gains that exceed Rs.1 lakh will henceforth be taxed at 10 percent, without covering indexation
    • To ensure increased transparency and efficiency, an electronic IT assessment is expected to spread out across India
    • There has been a 20% increase in the custom duty levied on mobile phones and 15% on parts of televisions
    • There has been an increase in the cess levied on education and health. It has now surged to 4%
    • The exemption amount limit on bank deposits pertaining to senior citizens has gone up to Rs.50,000
    • Arun Jaitley has proposed to institute a 10% tax on the distributed income earned through equity-specific mutual funds.
    • Salaried individuals henceforth will have to withstand a deduction of Rs.40,000 pertaining to expenses in the areas of medicine and transportation
    • If your company has an annual turnover of Rs.250 crore, you will have to pay a 25% tax on the same
    • There has been no changes in the Income Tax slab rates. All individuals are to comply with the existing slab rates
    • Arun Jaitley has proposed a fiscal deficit of 3.3% pertaining to the country’s GDP for FY 2018-19
    • Proposal of revised emoluments according to the following structure - Rs.5 lakh/month for the President of the country, Rs.4 lakh/month for the VP, and Rs.3.5 lakh/month for the existing Governors
    • Automatic revision of emoluments every five years concerning Parliamentarians, itemised to inflation
    • The target for disinvestment for FY 2018-19 has been increased to Rs.80,000 crore
    • Rural areas to receive 5 lakh WiFi hotspots in order to provide internet access to 5 crore citizens
    • Elimination of cryptocurrencies to get rid of all kinds of illegal transactions
    • Capacity of airports have been increased to handling one billion trips per year
    • A 4000 km long railway track is expected to be laid down this year
    • Railway stations receiving footfalls of 25000 will now have new and improved escalators, Wifi connections and CCTVs
    • Transportation in Mumbai city to receive a total amount of Rs.40000 crore. Rs.17,000 crore has been set aside for the growth of the Bengaluru metro network.
    • 600 railway stations will undergo a major upgradation in terms of security, according to the Finance Minister
    • In order to conserve all the heritage cities and sites in India, a programme known as National Heritage City Development Augmentation Scheme has been established and instituted
    • An EPF contribution of 12% is to be rolled out to all new employees in all sectors
    • Infrastructure is the new backbone of the Indian economy
    • PM Mudra Yojana to receive Rs.3 lakh crore
    • Since MSME contributes to the economy in a great manner, Finance Minister Arun Jaitley has laid added emphasis on their importance. He also stated that these MSMEs will undergo mass formalisation post demonetisation and implementation of GST
    • The Jan Dhan Yojana is including 60 crore bank accounts under its designation
    • Scheduled Tribe populations will now experience Eklavya schools
    • Two new schools will be established under Architecture and Planning
    • A scheme to identify the brightest BTech students and offering them a chance to pursue their higher education in esteemed institutes like IITs has been announced
    • In Vadodara, a new specialised railway university will be established
    • The food processing sphere is currently growing at the rate of 8% per year. The allocation for the Ministry of Food Processing will be Rs.1,400 crore in 2018-19
    • Finance Minister, Arun Jaitley has laid increased emphasis on providing more benefits and higher remuneration to the farmers of the country
    • Union Budget of 2018 primarily focuses on agriculture
    • The Minimum Support Price (MSP) of agrarian products to be fixed at 1.5 times to the rate of the market
    • A sum of Rs.500 crore has been allocated to launch a new programme named “Operation Green”, similar to the successful “Operation Flood”

    Despite the pitfalls that India has encountered over the last few years, the Union Budget of 2018 presented by Finance Minister, Arun Jaitley instills hope in the citizens of the nation.

    Analysis of the Outcomes of Union Budget 2018

    The Union Budget was released on February 1, 2018 by Finance Minister, Arun Jaitley. It can be analysed that several economic reforms have been made over the past few years under the leadership of Prime Minister Narendra Modi. The following points give an overall view of the Union Budget:

    • This year’s budget primarily focuses on rural development by concentrating on agriculture, horticulture, self-employment, etc. The Budget also proposed changes for development of rural infrastructure and the standard of living for underprivileged sections of the society.
    • Under the Saubhagya Yojna, 4 crore households will get electricity connections. Under the Ujjwala Yojana, the impoverished sections of the society will get free LPG connections.
    • The government will also be offering more than 800 medicines at very low prices at around 3,000 Jan Aushadhi centres. Healthcare facilities are top priority for this year’s Budget.
    • The government has introduced new schemes for conducting free dialysis of poverty-stricken people.
    • More agricultural produce market committees (APMCs) will be linked to the successful e-NAM network.
    • The government will enhance and improve the operations of 22,000 rural haats and convert them into Gramin Agricultural Markets (GrAMs).
    • The Finance Minister announced that horticulture crops should be grown in clusters.
    • He also said that there should be clusters for the purpose of agricultural cultivation and these clusters can apply the models of clusters that function in the industrial sector.
    • The Budget is focussing on bamboo this year. It plans to encourage growth of bamboos with a holistic approach.
    • The Budget has allocated Rs.9,975 crore towards the National Social Assistance Programme.
    • To offer good education across the entire nation, especially in remote areas, the government intends to build Ekalavya Model Residential Schools for educating around 20,000 tribal individuals.
    • In the context of foreign direct investment, the government is now allowing private investment in defence production. This particular step will free up rules regarding foreign direct investment and attract higher funds for foreign direct investment.
    • The government has initiated the bank recapitalisation program by issuing bonds of Rs.80,000 crore this year.

    Key Highlights of the Union Budget 2018

    The much-awaited Union Budget 2018 was presented on 1 February 2018 by the Finance Minister of India, to the Parliament. Given below are some of the most important highlights from the budget.

    • No changes have been made to the existing personal income tax slabs.
    • Salaried tax-payers will be getting a standard deduction of Rs.40,000 for “other medical expenses” and transport allowance.
    • Rs.2,000 crore will be provided as funding in an effort to develop agri markets.
    • Senior citizens will be able to claim tax benefits upto Rs.50,000 for health insurance policies. The tax deduction for critical illnesses has been increased to Rs.1 lakh.
    • Around 4 crore homes will be provided free electricity connections, under the Saubhagya Yojana Scheme.
    • Around 8 crore free gas connections will be provided to poor women, by way of the Ujjwala Yojana Scheme.
    • The government will implement a minimum support price that will applicable for all crops. The price has been increased to 1.5 times the production cost.
    • For new employees, regardless of the sector they are employed in, the Government will be contributing 12% of the wages.
    • The National Health Protection Scheme will be launched, by way of which a health insurance cover amounting to Rs.5 lakh per family, for every year, will be provided.
    • The railway capex for the financial year 2018-19 is set at Rs.1.48 lakh crore.
    • The disinvestment target for this financial year is fixed at Rs.80,000 crore.
    • There will be an automatic revision every five years of emoluments parliamentarians.

    What the wishlist was for the Union Budget 2018...

    The Budget for this year is very special as this is going to be the first one after incorporating Goods and Services Tax (GST). The introduction of GST was one of the biggest economic reforms in the history of the country. There is one more reason that the Budget 2018 is special and that is this will be the last Budget to be formulated by the present government as the general elections will be held sometime in the year 2019. Several tax experts and financial experts have been making different analyses of this year’s Budget with concrete and knowledgeable speculations.

    Modules of Union Budget 2018

    The Union Budget 2018 will most probably have 2 main sections. In the first section, the Budget will cover the plans of the government for the coming fiscal period. The foremost portion of the Budget will explain the brand new expenditures and new financial schemes offered by the government. The Budget will describe the different allocations of funds towards multiple sectors and industries.

    The second portion of the Budget will discuss the various direct taxes as well as indirect taxes. This part of the Budget will give a comprehensive explanation of all the new developments about the different taxes. It will also cover the announcements that will be made by the Union regarding alterations in taxes.

    Impact of Union Budget 2018 on Different Types of Taxes

    This year, the introduction of GST has heavily impacted the indirect tax section of the nation. Hence, it will be extremely challenging for the government to create a pragmatic budget. However, it has been reported that this year’s Budget will not cover components related to GST. The Finance Ministry of the country may find it tough to modify indirect tax rates. Most certainly, direct tax will be the main element in the second portion of Budget 2018.

    Due to the introduction of GST, the central government was forced to let go of its authority to levy taxes on goods produced and services offered in all parts of the nation. Hence, the centre must compulsorily get an approval from the GST Council if it wants to make any alterations to the Central Goods and Services Tax (CGST). Therefore, tax experts and financial experts are of the opinion that the Finance Minister would not make any big modification to indirect tax rates.

    The Finance Minister will most probably keep his word of reducing the corporate tax rate. Mr. Jaitley may also bring in some small changes to the individual tax slabs. Apart from this, the Ministry of Finance will most probably reduce customs as well as excise duties under the second part of the Budget under the indirect tax bracket. These excise duties and customs will not come under the scope of GST.

    Development of the Indian Economy through Union Budget 2018

    The government of India aims to improve the overall economy of the nation by fixing the fiscal deficit and fluctuating inflation situations. The Finance Ministry intends to help the economy grow extensively by planning an innovative and all-inclusive Budget. This can be done with the help of focus on rural development, increase in rural wages, generation of more sustainable job opportunities, foreign direct investment (FDI), unique economic reforms, and paperless financial transactions through digital media.

    Union Budget 2018: A Common Man’s Wishlist

    The Union Budget 2018, which is the last budget before the General Elections, will be presented on 1 February 2018 to the Parliament. The general public remains hopeful of a populist budget – one that will promote insurance penetration, reduce taxes, and make financial services and products less expensive. Having said that, here’s a list of the top five things that are on most people’s wishlist for the upcoming Union Budget 2018.

    Reduction of GST Rate for Insurance Products

    The introduction of the Goods and Services Tax (GST) has certainly simplified the taxation process and has reduced the tax rates for several services and products. The implementation of the GST has, however, increased the tax rate for financial products from 15%, which was levied earlier, to the current 18%. This has resulted in insurance products costing the general public more than it used to. Since, most types of insurance policies are a necessity, people are hopeful that the GST rate for these services/products will be reduced.

    Increasing Tax-Free Limit for Corporate Medical Allowance

    With the increasing incidence of lifestyle diseases in India and the rise in healthcare costs, people are spending significantly more on their medical expenses now than they did before. Corporates usually fix the tax limit for medical allowance at Rs15,000. However, it is not unusual for individuals to spend significantly more than this limit, since basic health insurance policies don’t cover cost of medicines and drugs, consultations, follow-ups, etc. Thus, if the Union Budget revised this limit, it would bring much relief to the public.

    Introducing a separate Tax Deduction for Term Insurance Plans

    Currently, individuals who have term insurance policies can claim tax benefits under Section 80C of the Income Tax Act, 1961. However, this is the same section under which individuals can claim tax benefits for investments made in a Public Provident Fund (PPF) scheme, EPF scheme, fixed deposits, National Pension Scheme (NPS), etc., thus making Section 80C very over-crowded. If the government made a separate section under which individuals could claim tax benefits solely for their term insurance plans, this would encourage individuals to purchase term insurance plans and will also help increase insurance penetration in India.

    Making a higher portion of the NPS corpus tax-free

    The National Pension Scheme (NPS) is an effective investment avenue for individuals looking to secure their post-retirement years. An individual who has invested in the NPS can withdraw up to 60% of the corpus amount as soon as he/she attains the age of 60 years. However, only 40% of the sum that is withdrawn will be tax-free and the remaining 20% of the sum is taxed. If the government made a higher percentage of this corpus tax-free or made the entire 60% tax-free, it would significantly increase the popularity of the NPS as an investment tool.

    Including Hybrid Funds under Section 80C

    Several first-time investors and risk-averse individuals often opt to invest their funds into Fixed Deposits or FDs. However with the reducing interest rate of FDs, more and more investors are looking for similar, low-risk investment avenues that offer better returns with a tax advantage. For this reason, hybrid funds are quickly gaining popularity. Hybrid funds offer higher returns than traditional investment options but are relatively low-risk and not as volatile as equity funds. Thus, the government extending the Section 80C tax exemption benefit to hybrid funds will encourage individuals to invest in this category.

    Given the many hopes from the upcoming Union Budget 2018, it is safe to say that this year’s Budget is one that is highly anticipated by all!

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