Micro Analysis of Union Budget 18

A lot of discussion is happening around the budget as presented by Finance ministry on 01 February 18. Ruling party is saying that it is the balanced budget which is best at the time whereas opposition party is considering it one of the worst budgets and similarly stock Market has reacted so far as very next session on 03 Feb after the budget Sensex corrected 800 points whereas Nifty fall 250 points.

It was largely expected before the budget that Exemption limit would be increased this time in the budget. This thought process was in line of the implementation of GST as somehow collection to the Government has been increased and a formal organised system has been implemented of Taxation through implementation of GST.

However Direct taxes are more direct than the Indirect tax which is more regressive and omnipresent. So in a country like India expecting reduction or elimination of Direct taxes would probably not possible especially when only 2% of population hold 90% of wealth.

Since Government is strongly committed to keep Fiscal deficit (Borrowing of the Gov.) at 3.3%, this could not be possible without strong financial major.

Some of the major initiative that has been announced in Budgets-

• Education is the fundamental backbone for the upliftment of any society and for that we have to have a qualified and professional teacher. So initiative by the Government in this direction is really appreciable. So all the initiative like training of teacher, Eklavya model residential school is really need of the hour.

• Launch of world’s biggest health protection scheme to cover 100 Million (10 Crore) people is no doubt one of the best initiative so far. However how soon and how it would be implemented has to be checked. But this initiative has a long lasting impact on society. At this time increasing pollution, adulteration, climate change and rapid rise of various disease has increased cost of Medical treatment and one such case wipe out whole life time earning providing medical insurance to those class is really required.
  • Deduction limit under section 80D has also been increased from 30000/- to 50000/- Rs.
  • Rs 1200 Crore has been allocated for Health & Wellness centres.
  • 600 Crore has been provided for nutritional support to all TB patients is a very good plan. However its ultimate implementation has to be seen.

• Providing free LPG connection to 8 crore poor families through UJJWALA YOJANA is one of the best initiatives by the government. Irony of India that we even today we use wood for cooking and their smoke cause various health issues.

Since total collection to union through Direct taxes is approximately 50% as per 18-19BE* and out of that 50% 45-50% expected from Individual taxes.  Any expectation or relaxation in that would cost revenue to the government and finally impacted its overall budget and making it difficult to keep fiscal deficit at 3.3%.

Some more changes that have been done through finance bill 2018 –

• Secondary & higher education cess at the rate of 3% has been replaced with Health & Education cess at the rate of 4%.

• Now Long term capital gain tax has been introduced on listed equities only if gain exceeds Rs. 1lakh at the rate of 10% without the benefit of Indexation. Finance minister gave strong reason for this that even without TAX EXEMPTION equity market is very attractive for Investment and large corporate has invested business surplus fund in financial assets. So modest change in taxation is need of the hour.

• Education cess & secondary and Higher education cess has been abolished on Imported Goods and in place a new surcharge with a name of “SOCIAL WELFARE SURCHARGE” at the rate of 10% has been introduced on aggregate duties of customs, on Imported goods.

• Now Standard Deduction of 40,000/- Rs has been again introduced for SALARIED CLASS by replacing transport allowance & Medical expenses which was (19200+15000=34,200). So net extra benefit to salaried class is Rs. 5800/- annually. However this will further reduced as cess @ 1% has been introduced and people in 30% tax bracket will end up paying extra taxes.
  

(Views are personal and any action on this data can be taken only after due consideration.)