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Union Budget 2018: India wants income tax relief, affordable houses, better infrastructure

All eyes will be on Finance Mister Arun Jaitley today as he presents his fifth Union Budget-and the last full one for the Modi government before the general elections coming up next year. | January 30, 2019 | Updated 19:25 IST
Union Budget 2018: India wants income tax relief, affordable houses, better infrastructure
Union Budget 2018-19

Union Budget Day has arrived. All eyes will be on Finance Mister Arun Jaitley today as he presents his fifth Union Budget-and the last full one for the Modi government before the general elections coming up next year. For over a month he has had everyone from research houses and stakeholders to the media and the aam aadmi guessing about the contents of his speech, scheduled to start in the next few hours. Everyone-including you-has a wish list in place, and the big question is whether Jaitley can afford to play Santa this year.

Union Budget 2018-19 comes against a backdrop of lower-than expected GST revenue collections, a widening fiscal deficit and increasing pressure to make as many people happy as possible with an eye on garnering votes in 2019. You can't envy Jaitley having to pull off this balancing act between fiscal discipline and political populism. But, still, he is possibly the luckiest finance minister in 30 years. Unlike his predecessors, he enjoys the backing of absolute majority in the Lok Sabha-approval by the Rajya Sabha is not mandatory for the Union Budget so Jaitley is assured of getting it passed without any modifications-and, thanks to GST, he did not need to stress out about fattening the exchequer while maintaining the political capital of his party.

Here's a comprehensive list of what India is expecting today, covering sectors, companies and homes, to help you decide in a few hours whether the Budget was a hit, or not.

Common man's Budget 2018 wish-list

  • Increase basic income tax exemption limit to Rs 3 lakh (Rs 3.5 lakh for senior citizens)
  • Raise ceiling for deduction under Section 80C by at least Rs 50,000, making the new limit Rs 2 lakh
  • Re-introduce standard deduction for salaried class
  • Revise income tax slabs to introduce a new bracket for Rs 10 lakh to Rs 15 lakh (if not higher) and rejig tax rates accordingly, say at 5%, 10%, 20% and 30%
  • Revise allowance limits-apart from raising the cap for tax-free medical reimbursement to Rs 50,000 from the present limit of Rs 15,000, transport allowance needs to be hiked too
  • Allow deduction for interest on fixed return saving instruments for senior citizens along with deduction for routine medical expenses
  • Extend the leave travel allowance (LTA) exemption to yearly basis instead of twice in a block of four years; also expand the scope to cover international travel
  • Raise the tax exemption limit on lump sum withdrawal from NPS from the current 40% to 60%
  • Enhance the gratuity exemption limit for formal sector workers to Rs 20 lakh
  • Reduce GST on insurance products, if not make them fully-exempt
  • Double the tax benefit available for first-time home buyers from the current level of Rs 50,000
  • Increase the deduction limit of interest paid on home loan by home buyers, from Rs 2 lakh to Rs 3 lakh
  • Widen the tax deduction window on education loans from the current 8 financial years to the full tenure of the loan, keeping in mind the spiralling cost of education
  • Increase interest rate subsidies already provided on home loans to Middle Income Group households, aligning them with spiralling costs of property ownership in urban areas.
  • Raise Tax Deducted at Source limit for bank interest from the current Rs 10,000-this ceiling was set back in 1997.
  • Bring FD taxation at par with debt mutual funds
  • Enhance deductions on health insurance under section 80D to Rs 40,000 for individuals and Rs 50,000 for senior citizens
  • Raise tax exemption on preventive health checkup under section 80D to Rs 20,000 from the current Rs 5,000
  • Announce the country's first National Employment Policy (NEP)
  • Make an announcement regarding the regulation and taxation of cryptocurrencies

The bad news is that some experts predict that the tax burden of the high income group might go up through the levy of the capital gains tax on Indian-listed securities or the enforcement of an inheritance tax

Corporate taxation in Union Budget 2018

  • Reduce corporate tax rate to 25% as promised (currently 30%); some predict the government will lower it to 27-28% as the first step
  • Simultaneous rationalisation of the rates of Dividend Distribution Tax and Minimum Alternate Tax (MAT)
  • Rationalisation of the interest deduction limitation provisions by excluding interest paid to unrelated parties
  • Carve out tax provisions to streamline proceedings under Insolvency and Bankruptcy Code
  • Continuation of investment allowance with lower thresholds to boost capex
  • Remove the present restriction of allowing carry forward of losses only to industrial undertakings should be done away with; all mergers should be treated at par

Agriculture sector in Union Budget 2018

  • Allocate more funds for crop insurance schemes
  • Establish fund to guarantee credit to encourage investment in this sector
  • Bump up allocation toward existing schemes related to MGNREGA, crop insurance and irrigation works as well as infrastructure related to cold chains to avoid wastage of perishable crops
  • Strong agricultural regulations apart from promoting rural employment schemes
  • Provisions to purchase the total output from farmers on fixed Minimum Support Price (MSP) assured by the government
  • Treat dairy vertical like agriculture sector and make it tax-exempt
Infrastructure sector in Union Budget 2018

  • Meet long-standing need for a single-greenfield authority for project approvals
  • Tax revenue during the operation and maintenance period, not during the construction period.
  • Higher funding support for key road projects, including Bharatmala project
  • Budgetary allocation to the Sagarmala project, which aims at transforming and modernising India's ports in a bid to augment port-led development, as well as funding for government's plans to develop 106 inland waterways
  • Announce measures to develop a seamless payment infrastructure in ports and integrate payment infrastructure at tolls and fuel retail outlets
  • Eliminate differential tax treatment for shipping industry
  • In urban transport, promote sustainable financing via dedicated funds
  • Create a National Urban Transport Fund and state governments to be encouraged to generate additional funding
  • Take adequate measures to meet target of 100% vehicle electrification by 2030
  • Increase railways investments by 10% from 2017-18 budget and scale-up high-speed train network. The Government may also allocate funds for Modi's pet Bullet train project.
  • Public listing of Ircon, IRFC and IRCTC to unlock value for Indian Railways
  • Help aviation industry by reducing VAT on aviation turbine fuel to 1%
  • Promote energy-efficient airports
  • Bring airport operations and maintenance under public private participation (PPP)
  • Zero rating for the Indian aviation MRO industry under the GST regime
  • Higher subsidy for power users in the rural segment, especially irrigation. Additional allocation towards last mile rural electrification and "Power for all" scheme is expected to be made
IT/Tech sector in Union Budget 2018
  • Extend weighted deduction under section 35 (2AB) for R&D activities to companies engaged in the development and sale of software or providing IT services
  • Support digital payments infrastructure. Provide greater incentives for digital transactions, like reducing digital payment transaction fees
  • Rationalise tariff structure, excise duties for mobile phones, tablet computers
  • Increase allocation towards cyber security products and data compliance services
  • With e-way bill rules expected to come into force soon, implement a simplified and smooth framework
  • Though Tax Collected at Source (TCS) has been suspended till March 2018 for eCommerce companies, to keep things uncomplicated, delete the provision altogether

Auto sector in Union Budget 2018
  • Incentivise replacement of ageing commercial vehicles in a phased manner would promote shift towards cleaner transportation
  • Introduce fewer GST slabs for vehicles and streamlining of compliance processes. Lower GST rates on electric vehicles, currently at 12%
  • Increase weighted deduction of R&D investments will incentivise industry to increase investments in R&D given the challenges of rapid technological shifts
  • Subsidize the battery and lithium imports or incentivise companies to set up this business in India
  • Real Estate sector
  • Give infrastructure status to real estate to help bring down finance, project costs, make homes more affordable
  • Increased focus on affordable housing in line with the government's objective of Housing for All by 2022
  • Set single-window clearance for all real estate projects, especially housing to avoid execution and project delays
  • Reduce GST rate for projects under construction from current 12%
  • Reduce GST rate for home purchases to 12%; Stamp duty should be subsumed under the GST
  • Include sale of fully constructed property under the ambit of GST. The current situation of partial exclusion has resulted in denial of input tax credits and cascading of taxes
  • A smooth launch of Real Estate Investment Trusts (REIT) without any tax and regulatory hurdles

Oil & Gas in Union Budget 2018
  • Cut excise duty on petroleum products (petrol & diesel) and/or increase petroleum subsidy
  • Reduce "cess" duty to 8-10% from 20% for oil and gas exploration and production
  • Set more beneficial GST rates for natural gas; Bring petroleum products under GST
  • Reduce or exempt city gas distribution companies from excise duty
  • Exempt LNG imports from paying basic customs duty
  • Provide subsidy aid to downstream companies selling LPG, kerosene below market prices
  • Enable gas swapping, which will also reduce monopolistic behaviour

Retail sector in Union Budget 2018
  • Bring clarity in FDI policy, especially in relation to e-commerce and sourcing, and introduce relaxed FDI regime for multi-brand retail trade (MBRT)
  • Give incentives to set up warehousing facilities
  • Increase spending and create quality infrastructure to help expansion of modern and organized retail sector in rural areas and Tier II/III cities
  • Reduction of GST rates for consumer goods and services and clarifications on transitional credit and anti-profiteering
  • Simplification of compliance procedures under GST regime, scaling up of IT infrastructure will help ease compliance
  • Clarifications on open issues and measures for ease of doing business, including those related to return filing timelines, their revisions, relaxation of non-compliance penalties would be welcome
  • Official industry status would be welcome, as would announcements related to single window clearance for retail investment

Start-ups in Union Budget 2018
  • Modify the provision of angel tax which was introduced in the 2012 budget, if not scrap it entirely
  • Increase allocation to government's programs like StartUp India, Digital India and Make in India
  • Total abolition of Minimum Alternate Tax (MAT) rather than a mere extension of carry-forward period
  • Frame the much-needed 'easy exit policy' for startups

Tourism and Hospitality sector in Union Budget 2018
  • Expand e-visa initiatives to more countries
  • Infrastructure & Industry status for the hospitality industry, at least for projects worth Rs 25 crore and more
  • Treat foreign exchange earnings in tourism services as exports and give a zero rating or a special rating of 5%
  • GST exemption for outbound travel and tour services
  • Grant tax benefits to businesses in remote areas
  • Replace declared tariff with actual tariff as consideration for GST on hotel accommodation as is the case with other industries; rationalise GST for hotel room rates in the luxury segment as well as for budget and mid-range hotels

Banking sector in Union Budget 2018
  • Allow full tax deduction for provisioning of non-performing assets at lenders
  • Reduce the tenure of tax-exempted retail term deposits to minimum of 3 years from current 5
  • Allow tax relief for proceedings under insolvency code
  • NBFCs must be treated at a par with banks for tax provisions
  • Provide blanket TDS exemption for payments to banks
  • Abolish MAT for units in IFSCs and increase tax holidays
  • Give details of the government's proposed Rs.2.11 lakh crs bank recapitalization plan

Healthcare sector in Union Budget 2018
  • Healthcare services should continue to be exempt from taxes under GST
  • Reduce high taxes (12-18%) levied on inputs such as consumables and medical equipment
  • Enhance the limit of non-taxable medical reimbursement to at least ?50,000
  • Weighted deduction available under section 35AD to a taxpayer engaged in building and operating a hospital must be restored to 150% (currently 100%) to reduce cost burden on patients
  • Liberalise provisions of section 35AD to include new hospitals with less than 100 beds

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