Continuing with the objective of moving towards becoming a ‘pensioned society’, the FM proposes govt contribution of 12% of wages for new employees for the first 3 years of employment
Budget 2018 was expected to be a dream Budget for the common man, especially with this Budget being the current government's last before the 2019 general elections.
Laying thrust on PM Modi's articulated vision of 'Minimum Government and Maximum Governance', the FM embarked on his speech - confronting an arduous task of addressing farm distress, creating jobs and boosting growth, while sticking to fiscal prudence and negotiating a tricky GST twist.
Highlighting India's recent jump in the World Bank's 'Ease of Doing Business' rankings, the FM stressed on the government's stance of furthering 'Ease of Doing Business' to 'Ease of Living' for India's aam janta — particularly for those belonging to the lower strata of our society.
Waxing eloquent about how the Government had already made positive changes in the individual tax rates over the last three years, the FM did not propose any change in the tax slabs/rates for individuals — thereby slashing the already-dwindled hopes. Rather, the extant education cess on tax (plus surcharge, if applicable) was increased by 1%.
Given the concerns of the salaried taxpayers, the FM proposes to reinstate the obliterated provision of 'Standard deduction' at Rs 40,000 per annum in lieu of the present exemptions. The ensuing annual net reduction of Rs 5,800 translates to a tax benefit for an individual subjected to tax at the highest slab rate of approximately Rs 2,080.
Expressing gratitude to the senior citizens, the FM doled out certain benefits to this set by announcing deduction of upto Rs 50,000 for interest from deposits held with banks & post offices; augmenting the threshold limit for deduction of TDS on interest income from Rs 10,000 to Rs 50,000; enhancing the deduction available towards health insurance premium/preventive health check-up from Rs 30,000 to Rs 50,000; and raising the deduction from Rs 60,000 to Rs 1,00,000 towards medical treatment of specified diseases.
Continuing with the government's objective of moving India towards becoming a 'pensioned society', the FM proposes government contribution of 12% of wages for new employees in the Employees' Provident Fund for all the sectors for the first 3 years of employment. Further, in case of women employees, the employees' PF share is proposed to be reduced from 12% to 8% for the first three years of employment.
To bring in better parity in respect of National Pension Scheme for self-employed, the FM proposes to extend the tax exemption on withdrawal to all subscribers, thereby bringing a much needed cheer to the self-employed class.
A lot had been spoken about the dreaded four-letter word 'LTCG' in the run-up to the Budget. Bringing a major change, the FM proposes to tax from April 2018 onwards, the LTCG from equity markets at a rate of 10%, without allowing indexation benefit. However, the FM did provide a soothing balm by proposing to grandfather gains made upto 31 January 2018 and by not extending this tax to LTCG upto Rs 1 lakh per year.
Rationalising the provisions of section 54EC, the FM proposed to restrict the scope of exemption only to LTCG arising from transfer of immovable property. Additionally, he proposed that the investment thereunder needs to be made in specified bonds, redeemable after 5 years and issued on/after 01 April 2018.
(Views are personal)
Pramod Achuthan
Partner–Tax,
EY India
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