The Union Finance Minister Arun Jaitley presented the Union Budget 2018-19 in Parliament on February 1, 2018 . He pulled out all the stops in the Narendra Modi government’s last full Budget to promise a better deal for farmers, boost the rural economy and make the poor less vulnerable to health exigencies . Responding to the distress in the agriculture sector that has reared its head in various States over the past year, the government has decided to offer a minimum support price (MSP) of at least 1.5 times the expenses borne by farmers for all crops .
2. Citing income tax data to show that individual businesspersons paid the less average tax than the salaried class, he reintroduced a flat Rs. 40,000 deduction from taxable income for the latter in lieu of the existing tax exemptions for transport and medical allow and extended this relief to pensioners.
3. But any gain in take-home salaries has been virtually offset by raising the 3% education cess levied on personal income tax and corporate tax. Now, a 4% education and healthcare cess will apply.
4. Hopes of a respite for consumers on the indirect tax front was also extinguished in this Budget, with the Centre hiking customs duties on a range of products, including mobile phones, wearable devices, television display panels, furniture, diamonds, footwear, cosmetics, and dental floss.
5. The idea is to push global producers to start making these goods in India, but till that happens, consumers will need to foot higher costs.
6. A much-anticipated rationalization of the high excise duties on petrol and diesel was carried out with an Rs. 8 reductions in these duties, but consumers will get no relief as a new road and infrastructure cess of Rs. 8 per liter has been levied to fund projects. Unlike excise duties, the Centre is not required to share cess with the States.
7. The government’s inability to give away too many goodies were largely due to its fiscal constraints, with this year’s fiscal deficit overshooting the 3.2% of GDP target and likely to touch 3.5% on account of the GST related issues. Instead of a 3% deficit in the coming year, the Centre settled to target the 3.3% mark, deferring the glide path to 3% to 2020-21.
8. Mr. Jaitley said the focus of the Budget – farmers, rural India, healthcare and education for the poor reflected the Modi government’s emphasis on improving the ease of living for the common man.
NHPS Proposed (National Health Protection Scheme):
Abhiyan Integrated Child
Bharat (Urban) Pradhan Mantri
|Yojana Pradhan Mantri
Awas Yojana (rural)
All figures in Rs. Billion; RE : revised estimates, BE: budget estimates Source : Government of India
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|BE 2018–19 outlay in Rs. billion
Railway safety fund
|Rashtriya Rail Sanraksha Kosh||50.0|
|Depreciation reserve fund||5.0|
|Extra budgetary resources-IRFC||285.0|
|BE : Budget Estimate|
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|Scheme||2017–18 (RE)||2018–19 (BE)|
UDAN = Ude Desh ka Aam Nagrik/Regional air connectivity scheme.
AMRUT = Atal Mission for Rejuvenation & Urban Transformation.
DDUGJY = Deen Dayal Upadhayay Gram Jyoti Yojana.
IPDS = Integrated Power Development Scheme.
BE = Budget Estimates.
RE = Revised Esimates.
2. Continuing with the Modi government’s focus on station development and monetization, Jaitley has earmarked money for the redevelopment of 600 more stations. The government also said all stations in India with the footfall of over 25,000 would get escalators.
3. In what is perhaps a bigger challenge than the capex target, the set for earnings is Rs 2,01,090 crore— a seven percent increase from last year.
4. The Railways expects to carry 1,216 million tonnes of freight — 51 million tonnes more than the last year – and has set a target to increase its passenger segment earnings to Rs. 52,000 crore from the current Rs. 50,125 crore. From non-fare earnings, it expects around Rs. 20,790 crores to take its total Gross Traffic Receipts to Rs. 2,00.840 crore. To put the figure in context, this year’s revised estimates for earnings is pegged at Rs. 1.87,425 crore.
5. The Railways will end the fiscal with an operating ratio of 96 percent, a negligible improvement from last year’s 96.5 percent. It expects this headline number to improve to 92.8 percent by the end of this fiscal year.
6. The ambitious rural package in this Budget brings in free gas connections to three crore new households, free electricity connections to four crore homes, two crore new toilets under the Swachh Bharat Mission, higher micro irrigation coverage, and so on. But of the massive outlay of Rs. 14.34 lakh crore required to bankroll these grandiose plans, as much as Rs. 11.98 lakh crore is expected to be met from extra-budgetary resources. A similar template has been used in social sector schemes. The National Health Protection Scheme, to provide an Rs. 5 lakh health cover to 10 crore households, is a much-needed social security intervention to benefit poor households that rely overwhelmingly on private health care. But there is little clarity on modalities. The entire dutch of proposals on improving learning outcomes, providing universal health coverage and alleviating a lot of minorities and girl children is expected to be funded through a mere Rs. 16,000-crore increase in allocations to Rs. 1.38 lakh crore. Infrastructure appears to be one of the few sectors where the funding problem has been addressed, with PSUs bankrolling a significant proportion of the Rs. 5.97-lakh crore outlay for FY19.
7. While being liberal in its announcements for rural India, the Budget has been frugal in its giveaways to the middle class and the corporate sector. Expectations of an increase in the basic exemption limit on income tax have been belied; instead, a standard deduction of Rs. 40,000 is back for salaried taxpayers. While it is only fair that the salaried pay income tax on their net income (after expenses) as the self-employed do, this deduction (which also replaces transport and medical reimbursements) is too small to establish real parity. The clamor for an across-the-board cut in the basic corporate tax rate from 30 to 25% has also been ignored, with the cut limited to mid-size companies (up to Rs. 250-crore turnover). Though this will benefit the overwhelming majority of corporate tax filers, how this impacts the competitive edge of India’s largest companies in the global context will be debated. Especially so, since the U.S. recently slashed its corporate tax rate to 21% and European nations average 20%. For the salariat and the corporate sector, the increase in education cess will offset some of the gains from these tax cuts. Senior citizens have benefited, particularly from the tax relief on interest from bank deposits and post office schemes, which has been hiked from Rs. 10,000 to Rs. 50,000 a year. These interest payouts are also exempt from the vexatious TDS provisions. This relief renders senior citizens far less vulnerable to steadily dwindling interest rates on bank deposits and small savings schemes; it also helps them to continue relying on fixed-income instruments to cover living expenses. This relief may reverse the unhealthy trend of risk-averse savers shifting wholesale from bank deposits to market-linked options such as equity mutual funds, in search of higher returns.
|1. Revenue Receipts||13,742,03||15,157.71||15.054.28||17,257.38|
|2. Non-Tax (net to cenre)||11,013.72||12,270.14||12,694.54||14,806.49|
|3. Non-Tax Revenue||2,728.31||2,887.57||2,359.74||2,450.89|
|4. Capital Receipts||6,009.91||6,309.64||7,123.22||7,164.75|
|5. Recoveries of Loans||176.30||119.33||174.73||121.99|
|6. Other Receipts||477.43||725.00||1,000.00||800.00|
|7. Borrowing and other liabilities||5,356.18||5,465.31||5,948.49||6,242.76|
|8. Total Receipts (1+4)||19,751.94||21,467.35||22.177.50||24,422.13|
|9. Total Expenditure (10+13)||19,751.94||21,467.35||22,177.50||24,422.13|
|10. On Revenue Account of which||16,905.84||18,369.34||19,443.05||21,417.72|
|11. Interest Payments||4,807.14||5,230.78||5,308.43||5,757.95|
|12. Grants in Aid for
creation of capital assets
|13. On Capital Account||2,846.10||3,098.01||2,734.45||3,004.41|
|14. Revenue Deficit (10–1)||3,163.81
|15. Effective Revenue Deficit (14–12)||1,506.48
|16. Fiscal Deficit
[9 – (1 + 5 + 6)]
|17. Primary Deficit (16–11)||549.04
|Borrowings & other liabilities||19 (19)|
|Corporation tax||19 (19)|
|Income tax||16 (16)|
|Union Execise duties||8 (14*)|
|Goods and Services Tax & other taxes||23 (10)|
|Non-Tax Revenue||8 (10)|
|Non-debt Capital receipts||3 (3)|
|Centrally Sponsored Scheme||9 (10)|
|Central Sector Scheme||10 (11)|
|Interest Payments||18 (18)|
|Finance Commission and Other Transfers||8 (5)|
|States’ share of taxes and duties||24 (24)|
|Other Expenditure||8 (8)|
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A summary of some of the direct tax changes is given below :
3. No change in personal tax rates.
4. Salaried taxpayers get a Standard Deduction of Rs. 40,000 in lieu of conveyance and medical expense.
5. 10 percent long-term capital gains tax on the transfer of listed equity shares exceeding Rs. 1,00,000.
6. Deduction for senior citizens increased to Rs. 50,000 for Mediclaim u/s 80D.
7. Senior citizens fixed deposits exempt from TDS up to Rs. 20,000.
8. Senior citizens fixed deposit interest exempt from TDS up to Rs. 50,000.
9. Cess on income tax increased from 3 percent to 4 percent.