Important Highlights & Tax Proposals of Finance Budget 2018-19
The Finance Minister, Sh. Arun Jaitley presented his fifth Union budget 2018 in Parliament today i.e. 01-02-2018. Following are important proposals made therein:-
Direct Taxes Proposals
- No changes in Personal Income tax slab.
- No Changes in Limit of deduction u/s 80C.
- Benefit of exemption for withdrawal up to 40% from National Pension System Trust (NPS) is extended to all subscribers and not only to employees.
- Deduction for health insurance premium shall be allowed proportionately over the years for which the benefit of health insurance is available.
- No expenditure or allowance or set off of any loss shall be allowed in respect of undisclosed income determined by the Assessing Officer under section 115BBE of the Act.
- Incorporation date for a start-up for availing benefit under section 80-IAC of the Act is extended to 31st March, 2021 from 31st March, 2019
- 100% deduction to Farmer Producer Companies having annual turnover up to 100 crores in respect of their profit derived from agricultural activities for a period of five years from financial year 2018-19. At present, hundred per cent deduction is allowed in respect of profit of co-operative societies which provide assistance to its members engaged in primary agricultural activities.
- Benefit of employment period of 150 days for taking 30% additional Deduction U/s 80 JJAA has been made applicable to footwear and leather industries. First year of employment is made free from condition of minimum period.
- No adjustment shall be made in calculation of Capital gain on immovable property w.r.t. circle rate if circle rate value does not exceed 5% of the consideration.
- In the Union Budget, 2017, corporate tax rate was reduced to 25% for companies whose turnover was less than `50 crore in financial year 2015-16. In Budget 2018, the benefit of this reduced rate of 25% also to companies who have reported turnover up to`250 crore in the financial year 2016-17.
- A standard deduction of `40,000/- is allowed from salary income but this is in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the transport allowance at enhanced rate shall continue to be available to differently abled persons.
- Withdrawn of Exemption of Transport allowance of Rs. 1600/- p.m.
- Withdrawn of Exemption of Rs. 15000/- regarding medical reimbursement .Exemption of interest income on deposits with banks and post offices to be increased from 10,000/- to `50,000/- and TDS shall not be required to be deducted on such income, under section 194A. This benefit shall be available also for interest from all fixed deposits schemes and recurring deposit schemes.
- Limit of deduction for health insurance premium and/ or medical expenditure increased from `30,000/- to `50,000/-, under section 80D.
- Limit of deduction for medical expenditure in respect of certain critical illness from, 60,000/- in case of senior citizens and from `80,000/- in case of very senior citizens, to 1 lakh in respect of all senior citizens, under section 80DDB.
- Pradhan Mantri Vaya Vandana Yojana extended up to March, 2020 under which an assured return of 8% is given by Life Insurance Corporation of India. The existing limit on investment of `5 lakh per senior citizen under this scheme is also being enhanced to `15 lakh.
- Capital gain tax exempted on transfer of derivatives and certain securities by non-residents in stock exchanges located in. Further, non-corporate taxpayers operating in IFSC shall be charged Alternate Minimum Tax (AMT) at concessional rate of 9% at par with Minimum Alternate Tax (MAT) applicable for corporates.
- Payments exceeding `10,000/- in cash made by trusts and such institutions shall be disallowed.
- Long term capital gains ( arising from transfer of listed equity shares, units of equity oriented fund and unit of a business trust) exceeding `1 lakh shall be taxed at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31st January, 2018 will be grandfathered. For example, if an equity share is purchased six months before 31st January, 2018 at `100/- and the highest price quoted on 31st January, 2018 in respect of this share is `120/-,there will be no tax on the gain of `20/- if this share is sold after one year from the date of purchase. However, any gain in excess of `20 earned after 31st January, 2018 will be taxed at 10% if this share is sold after 31st July, 2018. The gains from equity share held up to one year will remain short term capital gain and will continue to be taxed at the rate of 15%.
- Tax imposed on distributed income by equity oriented mutual fund at the rate of 10%.
- The existing 3% education cess will be replaced by a 4% “Health and Education Cess” to be levied on the tax payable.
- New scheme for income tax assessment will be launched where the assessment will be done in electronic mode which will almost eliminate person to person contact leading to greater efficiency and transparency.
- It is proposed to mandate that in order to avail benefit of any deduction under Chapter VIA-C, the persons have to file return within due date specified under section 139(1) of the Act.
Indirect Taxes Proposals
On the Indirect Taxes side, this is the first budget after the roll out of the Goods and Service Tax. Excise duties to a large extent and service tax have been subsumed in GST, along with corresponding duties on imports. Hence, these budget proposals are mainly on the customs side.
- Reduction customs duty on raw cashew from 5% to 2.5%.
- Customs duty increased on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%.
- Education Cess and Secondary and Higher Education Cess abolished on imported goods, and in its place impose a Social Welfare Surcharge, at the rate of 10% of the aggregate duties of Customs will be levied and on some specified goods the proposed surcharge rate will be 3%.
- Name of Central Board of Excise and Customs [CBEC] is changed to Central Board of Indirect Taxes and Customs (CBIC).
Others Important Announcements
- Minimum support price (MSP) has been declared for the majority of rabi crops at least at one and a half times the cost involved. Government has decided to keep MSP for the all unannounced crops of kharif at least at one and half times of their production cost. Niti Ayog, in consultation with Central and State Governments, will put in place a fool-proof mechanism so that farmers will get adequate price for their produce.
- Expanding coverage of e-NAM (E-national agriculture market) to 585 APMCs. 470 APMCs have been connected to e-NAM network and rest will be connected by March, 2018.
- An Agri-Market Infrastructure Fund with a corpus of `2000 crore will be set up for developing and upgrading agricultural marketing infrastructure in the 22000 Grameen Agricultural Markets (GrAMs) and 585 APMCs.
- Facility of Kisan Credit Cards is extended to fisheries and animal husbandry farmers to help them meet their working capital needs.
- Government of India will take necessary measures and encourage State Governments to put in place a mechanism that their surplus solar power is purchased by the distribution companies or licencees at reasonably remunerative rates.
- It has been decided that by the year 2022, every block with more than 50% ST population and at least 20,000 tribal persons, will have an Ekalavya Model Residential School. Ekalavya schools will be on par with Navodaya Vidyalayas and will have special facilities for preserving local art and culture besides providing training in sports and skill development.
- The Government would launch the ‘‘Prime Minister’s Research Fellows (PMRF)’’ Scheme this year. Under this, we would identify 1,000 best B.Tech students each year from premier institutions and provide them facilities to do Ph.D in IITs and IISc, with a handsome fellowship. It is expected that these bright young fellows would voluntarily commit few hours every week for teaching in higher educational institutions.
- 24 new Government Medical Colleges and Hospitals will be set up by upgrading existing district hospitals in the country. This would ensure that there is at least 1 Medical College for every 3 Parliamentary Constituencies and at least 1 Government Medical College in each State of the country.
- Government will contribute 12% of the wages of the new employees in the EPF for all the sectors for next three years. Also, the facility of fixed term employment will be extended to all sectors.
- Reduction in EPF contribution of women employees to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers’ contribution.
- A flagship National Health Protection Scheme will be launched to cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries) providing coverage upto 5 lakh rupees per family per year for secondary and tertiary care hospitalization. This will be the world’s largest government funded health care programme.
- 14 CPSEs got listing approval, including two insurance companies, on the stock exchanges.
- Strategic disinvestment in 24 CPSEs has been initiated. This includes strategic privatization of Air India.
- Three public sector general insurance companies National Insurance Company Ltd., United India Assurance Company Limited and Oriental India Insurance Company Limited will be merged into a single insurance entity and will be subsequently listed.
- Disinvestment target for 2018-19 is Rs. 80000/- crore.