UNION BUDGET FY18 – BRINGS ALL AROUND CHEER!

By Ruma Dubey

The presentation of the Union Budget began with some amount of drama. The sad demise of Mr.Ahmed, a sitting MP; under normal laws meant adjournment of Parliament. But the Speaker assured all that because non-adjournment request had come from the President of India, the Budget would be presented as scheduled today and Parliament will be adjourned tomorrow.  Obviously, there was a protest about this change but thankfully, practicality and better sense prevailed and the Budget got underway!

Overall, the Budget, as usual has been very good for the farmers, the poor, women, those living in rural areas and for those earning less than Rs.5 lakh per annum. If you are rich and earn more than Rs.50 lakh per annum – this budget does not bring any cheer, only more surcharge.

For the market, it has been a good budget. No reduction in corporate tax rate was softened by the no change in long term capital gains tax. And the cigarette companies did not have an excise duty hike but additonal excise duty was increased for filtered cigarettes by 44% to 49%. Also the middle and small scale companies which have income of less than Rs.50 crore per annum have reason for cheer. Housing has been at the forefront of this budget and by giving an infrastructure status to affordable housing, the Finance Minister has done a great deed!

The mentioning of political party funding was also a very good move. With so much talk about black money and how money was fueled into this black hole, the FM did a good thing by bringing down the maximum cash amount from one source to Rs.2000 from Rs.20,000. And another good move is the confiscation of asset of willful defaulters; obviously this is a Mallya effect but at least it has come in now.

What this Budget has done is focus on rural India and the agriculture sector which does need as much impetus as it can get. Maintaining of the fiscal deficit at 3.2% for FY18 is a positive thing, which the Govt plans to achieve through small tinkering in taxation and increased spending of 25%, which in turn is expected to give impetus to growth.

All in all, it is a routine Budget with the usual suspects – farmers, agriculture and rural India taking away the cake, leaving some of the cream for the middle class urban Indian. The usual infrastructure push, increased allocation to MNREGA. But given the doomsday expectations which the market had nurtured this is an extremely positive Budget, especially in the backdrop of demonetization. The underlying message is that the Govt is ushering in more transparency and compliance, where Ease of Doing Business takes precedence.

We all can now heave a sigh of relief and move on; Janet Yellen is waiting with news just round the corner!

The highlights:

• Increased rural spend - Total allocation for rural sector up by 24% at Rs.83,000 crore
• Demonetization effect – no spillover into next fiscal       
• No change in long term capital gains for listed companies
• To bring 1 crore households out of poverty by FY19
• 100% rural electrification by 2018
• Defence expenditure, excluding pensions at Rs.2.74 lakh crore
• Fiscal deficit for FY18 pegged at 3.2% of GDP and at 3% for FY19
• FY18 revenue deficit at 1.9% of GDP
• FY18 net market borrowing at Rs.3.48 lakh crore
• Allocation of Capital Expenditure is up by 25%
• No transaction over Rs.3 lakh to be allowed in cash
• Affordable housing to be given infrastructure status, allocation to housing increased to Rs23,000 crore
• Instead of built-up area, carpet area will be used for affordable housing
• To make changes in capital gains tax for housing
• Pilot project for Aadhar based smart cards containing health details for senior citizens
• New FDI Policy under consideration
• FIPB to be abolished, roadmap in the next few months 
• To announce a new trade infrastructure export scheme

TAXATION – PERSONAL

• Quick refund of tax time reduced to 1 year
• Reduce existing rate of taxation with those income between Rs.2.5 lakh to Rs.5 lakh to 5% from current 10%
• 10% surcharge earning between Rs.50 lakh to Rs.1 crore
• One page form for filing tax returns for those with income less than Rs.5 lakh

TAXATION – CORPORATE

• Not to remove MAT
• To carry-forward MAT to 15 years from current 10 years
• Profit linked deductions to start-ups reduced to 3 years from 7 years
• Holding period for land & building to be brought down from current 3 years to 2 years
• Basic customs duty on LNG cut from 5% to 2.5%
• To reduce corporate tax for small companies with turnover of less than Rs.50 crore to 25%
• To cut presumptive turnover threshold for companies with turnover up to Rs 2 crore to 6%

FUNDING FOR POLITCAL PARTY

• To bring in transparency in this type of donation
• Maximum amount which any political party can receive in cash from one source brought down to Rs.2000 from current Rs.20,000
• To amend RBI Act for issue of Electroral Bonds for political funding
• Political parties will need to file tax

OIL & GAS SECTOR

• Govt to set-up new crude oil reserves
• To  create integrated PSU oil major

AGRICULTURE

• Rural, agri allocation at Rs 1.87 lakh crore, up 25% (YoY)
• Agri sector expected to grow at 4.1% in current year
• Target for agri credit fixed at Rs.10 lakh crore
• Fasal Bima Yojana reach to be increased to 40% and to 50% in FY19
• Dedicated micro irrigation fund with corpus of Rs.5000 crore
• Dairy processing fund with initial corpus of Rs.2000 crore and Rs.8000 crore in three years
• MNREGA allocation increased from Rs.38,500 crore in FY17 to Rs.48,000 crore in FY18

HEALTH

• Govt committed to take structural reform in medical education, practice
• New rules regarding medical devices will be formulated; will attract investment in sector, will reduce cost of the devices
• To amend drug rules to ensure drugs available at reasonable prices
• To encourage reputed hospitals to start courses
• 1.5 lakh health sub-centres to be transformed to wellness health centers

ROAD DEVELOPMENT

• 2000 km of coastal roads have been identified for development
• National Highway allocation at Rs 64,000 crore

BANKS

• Rs 10,000 cr allocated for recapitalisation of PSU banks, to allocate more if required
• Double lending target of banks to Rs.244 lakh crore

PSUs

• IRCTC, IRCON & IRFC to be listed on stock exchanges
• To bring in new, revised mechanism for time-bound listing of PSUs
• Divestment target hiked to 72,500 crore for FY18 from Rs.56,500 crore in FY17

DIGITIZATION

• Targeting 2,500 crore digital transactions across platforms like UPI
• To take steps to promote digital payments at petrol pumps & hospitals
• AadhaarPay to be launched shortly
• To launch two new schemes to promote BHIM App

RAILWAY BUDGET

• To commission 3,500 km of railway tracks in 2018
• Centre to fund 55k cr out of 1.31 lk cr railway infra budget
• To invest Rs 1.31 lakh crore in railways in 2017-18
• Railway Throughput to be enhanced by 10%
• At least  25 stations re-development contracts will be awarded in 2017-18
• New Metro Rail policy to be announced; will open up new job possibilities
• Service charges on e-tickets booked via IRCTC to be withdrawn
• To feed 7000 solar railway station in medium term
• Railways to implement end-to-end solutions for some commodities
• Unmanned level crossing in railways will be eliminated by 2020