Budget 2018: The Union Budget for the financial year 2018-19, being the last Budget of the current Bharatiya Janata Party-led government before the 2019 general elections, meant that the finance minister Arun Jaitley had the huge task of considering populist expectations.
Budget 2018: The Union Budget for the financial year 2018-19, being the last Budget of the current Bharatiya Janata Party-led government before the 2019 general elections, meant that the finance minister Arun Jaitley had the huge task of considering populist expectations. At the same time, he had to walk a tightrope and strike a balance with the need for fiscal prudence. At a holistic level, it is evident that the government has clearly focused on increased spending in critical areas of the economy, such as agriculture, rural infrastructure, education and healthcare, at the cost of slippage on the projected fiscal-deficit targets. However, considering the lack of ability to make significant maneuvers on the fiscal front, this has come at a cost to other sections of the population, like the middle-class taxpayers and large corporates, not benefiting.
On the corporate front, the Budget 2018 did have some welcome news. The benefit of lower corporate tax rate of 25% has now been extended to all companies, which have reported a turnover of up to Rs 250 crore in the financial year 2016-17. The carving out of capital assets being transferred between holding and subsidiary companies in India from the provisions of Section 56(2)(x) has brought share transfers in group corporate restructurings at par with other forms of restructuring like mergers and de-mergers. Further, the introduction of measures like ability to carry forward tax losses by companies undergoing restructuring under the Insolvency and Bankruptcy Code, irrespective of the quantum of shareholding change and the set-off accumulated business losses as well as depreciation from a minimum alternative tax (MAT) perspective, will give an immense fillip to the restructuring process of several stressed companies under the Insolvency and Bankruptcy Code, though the requirement for the income-tax authorities to have had an opportunity before the resolution plan being approved could be time consuming and cumbersome.
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In so far as the financial services sector is concerned, the only incentive that has come through is for the International Financial Services Centre, wherein the transfer of certain financial securities transacted by non-residents through a recognised stock exchange within the IFSC has been exempted from tax. The biggest dampener has come in the form of the introduction of long-term capital gains (LTCG) on listed equity shares and units of equity-oriented mutual funds. The Union Budget has proposed a levy of 10% tax on gains exceeding Rs 1,00,000 (without indexation) with effect from April 1, 2018. However, gains accruing till January 31, 2018, have been grandfathered. In addition, a distribution tax of 10% on income distributed by equity-oriented mutual funds has been introduced.
On the start-up front, the tax incentives have been extended to cover start-ups formed until March 31, 2021, subject to the condition that their turnover doesn’t exceed Rs 25 crore in any of the seven years commencing from the date of incorporation. Further, the list of eligible business has also been expanded to cover businesses which have high potential for employment generation or creation of wealth. On the indirect taxes front, pursuant to the introduction of the Goods and Services Tax (GST), there have been no significant changes. This would be the new norm since the powers to bring in changes to the Goods and Services Tax regime vests with the Goods and Services Tax Council and not the finance minister. To conclude, it might be safe to say that the introduction of long-term capital gains on listed equity shares is the single biggest change brought in by the current Budget, which will be the last full budget for this government.
Views are personal