Budget 2018: The Modi government’s budget will be presented on February 1. Union Budget 2018 will be the Modi government’s fifth one and will be presented by FM Arun Jaitley in Parliament. “The education that does not help the common mass of people to equip themselves for the struggle for life …is it worth the name?” were the words of Swami Vivekananda quoted by the Finance Minister on the start of Budget 2017 proposals for the youth. This has given a clear indication of the government’s intention to improve skill-building, empowerment and quality education to energise the pillars of the nation. The middle class family’s dream in India has always been to give quality education to its children. With increasing cost of education, here are the Budget proposals, which would help the families to live their dreams.
Deduction for donations
Tax deductions always bring smile on the face of the taxpayers. More so when recognized for the contribution to social cause. Donation/sponsorship for higher education must be encouraged by allowing full deduction. Currently, donation to educational institutions are limited to 50% of the contribution. FM Jaitley should look into the issue in Budget 2018
Separate deduction for education expenditure
Cost of education expenses are deductible but the threshold is fixed for the common pool of expenditure and investments. With increasing cost of education, a separate deduction for the education expenditure (like transportation, computer-aided classes, lodging, infrastructure, mess, special coaching) would provide relief to the household and send a message on the government’s direction. Deduction under Section 10 towards children education and hostel allowance is provided only to the salaried class. Having a blanket deduction would benefit larger masses. Budget 2018 can the government’s best chance to fix this.
Introduce education savings scheme
The prevailing Small Savings Scheme meant exclusively for girl children to meet their education and marriage expenses – Sukanya Samriddhi Yojana – can be extended to all children in the Budget 2018. Unlike the Post Office Savings Scheme or the Senior Citizen Savings Scheme, there is no such investment mechanism for the benefit of education of children. As youth are always considered to be one of the pillars of India, setting up a strong base for investment on children’s education would encourage parents to set aside a corpus for the education of their wards.
The present GST Act aims to maintain a balance by exempting core educational services from tax and the other services being taxed at 18%. This would mean that input services such as canteen, repairs and maintenance, placement services for securing job placements are subject to GST and the tax credit cannot be claimed on the same by educational institutions as their output services are exempt. Further, higher education in private institutions which is subject to 18% GST would increase the cost of education. Not to miss out the GST on coaching institutions for professional and competitive exams that shapes the lives of budding professionals. With the government stressing the importance of education and skill building for youth, exemption of GST on all educational and allied services would be a welcome move in the Budget 2018.
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Foreign Direct Investments
The Modi government’s objective towards innovation and research centres require substantial expenditure and hence private investment plays a larger role. Despite the government of India allowing 100% foreign direct investment in education, inflows are not sufficient. Numerous approvals and multiple regulations are major impediments. Having a simple process would definitely help the government to achieve the milestones. The tax policy of the government sends a clear message to taxpayers on the focus and priorities of the government. With the increased cost of higher education, deduction for education cost or measures to reduce the overall cost of education would be a step in the right direction towards the vision of a New India. FM Jaitley should look into this area in Budget 2018.
Sudhakar Sethuraman is Partner, Deloitte India. Lakshmi Pichaimani is Senior Manager and Srividya Balachandran is Assistant Manager with Deloitte Haskins and Sells LLP