Budget 2018: The move towards Universal Social Security by launching the National Health Protection Scheme to cover over 10 crore poor families, impacting approximately 50 crore people, by providing a coverage of Rs 5 lakh per family per annum is a big one.
Budget 2018: This Budget continues the government’s drive to bridge the gap between Bharat and India and there is long-term as well as short-term benefits for the economy. This was a balanced Budget considering that it was the last one before the general elections. In that sense, the effort of the finance minister to keep fiscal slippage restricted to 0.3% in FY18 and FY19 is commendable. Huge investments in health, sanitation, education, healthcare and infrastructure will boost citizens’ welfare as well economic growth. A lot of stress has also been put on execution. In agriculture, the focus on raising minimum support price (MSP) to 1.5 times of the cost of production across all products and the effort to create a mechanism along with respective states to see that the benefits actually flow to the farmers is an example of this. The move towards Universal Social Security by launching the National Health Protection Scheme to cover over 10 crore poor families, impacting approximately 50 crore people, by providing a coverage of Rs 5 lakh per family per annum is a big one.
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The finance minister looked at enhancing the cess on direct taxes and re-introduction of long term capital gains tax on equity after a 12-year honeymoon. Having said that, the impact on existing equity investors was cushioned by the grandfathering clause which ensured that any notional gains accrued till Jan 31, 2018 shall not be taxed. Moreover, the 10% tax is on capital gains exceeding Rs 1 lakh, a respite to small investors. Hence, one must consider this tax as a contribution to nation building and bridging the economic divide in the country. I don’t see any major impact of taxation on financialisation of household savings.
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For the salaried taxpayer, there was hardly anything except the standard deduction of Rs 40,000. The benefit is marginal as it comes in lieu of existing medical and transport allowances. However, senior citizens have a lot to cheer for in this Budget. First, an increase in deduction under Section 80D for health insurance premium from Rs 30,000 to Rs 50,000 per annum. Second, the deduction under Section 80TTA on interest income up to Rs 10,000 has been replaced by Section 80TTB to include interest from deposits with the limit enhanced to Rs 50,000. Third, TDS shall not be required to be deducted on such interest income.
The proposed disinvestment target of Rs 80,000 crore for 2018-19 and the proposal to launch Debt ETF will bring more investment opportunities in capital markets. This is a good budget for MSMEs as the tax rate has been cut to 25% for businesses with turnover up to Rs 250 crore in 2016-17, a step that will cover 99% of all corporates filing tax returns. This will boost private investment and support job creation. Finally, the Budget in a step towards democratisation of credit as also to boost corporate bond markets, strives to ensure flow of capital towards ‘A’ rated companies. This should lead to deepening of corporate bond markets as also a narrowing of credit spreads in this segment. To sum it up, this Budget is high on accountability and focuses on execution of existing programmes.
Chairman and Managing Director, Bajaj Capital