Finance Minister Arun Jaitley tabled the Union Budget 2018 on Thursday, February 1, 2018, the last full-year budget before 2019 general elections. People around the nation have been keenly waiting for this Budget 2018 as it was the first budget presented by Narendra Modi-led NDA government after implementing the nation-wide constitutional reform GST (Goods and Services Tax) in July 2017. In today’s Budget speech, Indian stock markets faced a knee-jerk reaction after the Finance Minister Arun Jaitley proposed to announce the LTCG (Long-Term Capital Gain) tax on equity investment above Rs 1 lakh at 10%. Following the announcement, the headline index S&P BSE Sensex plunged 463.28 points to hit an 8-day low of 35,501.74. Meanwhile, the Indian rupee also got a heavy jolt on Thursday at the day’s end falling as much as 44 paise against the US dollar.
— Amid the volatile trade in stock and currency markets following Budget 2018, we take a look at 13 key takeaways for Indian stock markets from Budget 2018 —
Disinvestment and consolidation
- The Indian government has exceeded the disinvestment target and is set to collect Rs 1 lakh crore in the financial year 2017-2018.
- Three government insurance companies to be merged into a single entity, and subsequently listed in the stock exchange, as part of the disinvestment programme.
- Including the strategic privatisation of national aircraft carrier Air India, the government has approved the listing of 14 CPSEs, including two insurance companies, on the stock exchanges. The government has also initiated the process of strategic disinvestment in 24 CPSEs.
- Finance Minister proposed to provide that TDS at the applicable rate shall be made in the respect of interest exceeding Rs 10,000 from newly introduced 7.75% GOI (Government Of India) Savings (Taxable) Bonds, 2018.
- Arun Jaitley introduced a tax on LTCG (Long-Term Capital Gain) at 10% on equity investments of over Rs 1 lakh.
- Finance Minister Arun Jaitley also proposed to introduce a tax on distributed income by equity-oriented mutual funds at 10%.
Know how Arun Jaitley’s Budget 2018 will impact your tax liability with this Income Tax Calculator
Funding and development
- The government along with market regulators such as SEBI and RBI have taken necessary measures for development of monetizing vehicles like Infrastructure Investment Trust (InvIT) and Real Investment Trust (ReITs) in India. The government would initiate monetizing selected CPSE (Central Public Sector Enterprises) assets using InvITs from next year.
- Reserve Bank of India has issued guidelines to nudge Corporates to access bond market. SEBI will also consider mandating, beginning with large Corporates, to meet about one-fourth of their financing needs from the bond market.
Watch Video | Budget 2018: Five Key Takeaways For Indian Stock Markets
- PSU Bank recapitalisation program has been launched with bonds of Rs 80,000 crore being issued in FY18. This will pave the way for the public sector banks to lend additional credit of Rs 5 lakh crore. The programme has been integrated with an ambitious reform agenda, under the rubric of an Enhanced Access and Service Excellence (EASE) programme.
- Arun Jaitley proposed to allow strong Regional Rural Banks to raise capital from the market to enable them to increase their credit to the rural economy.
Agricultural & rural development
- Union Finance Minister proposed to provide that trading in agricultural commodity derivatives on a recognized stock exchange shall not be treated as a speculative transaction even if no Commodities Transaction Tax (CTT) has been paid in respect of those derivative transactions.
- Non-Bank Finance Companies (NBFCs) stepped up financing of MSMEs (Micro Scale and Medium Enterprises) after demonetisation.
- The refinancing policy and eligibility criteria set by MUDRA (Micro Units Development & Refinance Agency Ltd) will be reviewed for better refinancing of NBFCs as NBFCs can be a very powerful vehicle for delivering loans under MUDRA.