Union budget 2018: Government plays it well by harmonizing populism with fiscal prudence

With a view to do justice to the prospects of the farmers and working population of India, alongside the prime target of fiscal consolidation, the government has sought to give a head start to economic growth by presenting its fifth and debatably toughest Budget that can be indeed branded as ‘growth-oriented’ and ‘pro-poor’.

Addressing all the key issues of Indian economy including the distress in agriculture sector, employment and skill development, infrastructure, healthcare and welfare of senior citizens, and very importantly limiting of fiscal deficit in 2018-19 at 3.3% of GDP, the Budget certainly seeks to amplify the prospects of the masses as well as the ruling government, which is heading towards the noteworthy “Mission 2019.”

Here are a few crucial high-points that reveal the prudence and brilliance of union government in striking a balance between populism and fiscal strengthening of the nation:

Direct tax reforms:

• Boisterously stating the past success of augmenting Total Direct tax collections by 12.6% and individual income tax revenue by 11% in FY 2017-18, the government has decided to halt any further rise in tax slabs.
• However, it has been decided to reduce the corporate tax rate to 25% for the corporate entities whose annual turnover doesn’t exceed ₹ 250 crore.
• As a part of its populist agenda, the government has introduced a standard tax deduction of ₹ 40,000 for the individual salaried taxpayers, on counterpart abolished Medi-claim and transport allowance deduction.
• With a view to aid the senior and super senior citizens, the government has amended the Sec.194a of Income Tax Act, wherein the exemption of interest income on bank deposits and post offices has to be raised from ₹10,000/-  to ₹50,000/-, and has abolished TDS deduction on FD and Post Office Interests for senior citizens.
• Furthermore, Section 80 TTB has been included as to provide for tax deduction of ₹50,000 for the senior citizens, from earlier ₹ 30,000/-.

Indirect tax reforms:

• The government has not announced any significant reform in GST; probably as such reforms have been already introduced in the consecutive GST meetings.
• However, the customs duty has been hiked from 15% to 20% on mobile phones.
• For TVs and other electronic gadgets and their spare parts, custom duty has been doubled from 7.5% to 15%.
• The government has radically abolished the provision of Education Cess and Senior Higher Education Cess (SHEC) on imported goods, and has introduced a Social Welfare Surcharge at the rate of 10% of the aggregate customs duties on imported goods.
• Conceiving the potential of food processing industry, the government has halved the custom-duty from 5% to 2.5% in cashews.

Reforms in the stock-market:

• Noticing the significant potential of the long-term capital gains, the government has decided that the LTCGs exceeding ₹ 1 lakh on the sale of listed equity share in a company or a unit of an equity oriented fund or a unit of a business trust will be henceforth taxed at the rate of 10%.   
• Apart from that, 10 % tax is imposed on dividend income via equity-oriented mutual funds.

To get detailed information about the reforms in taxation system introduced in the budget, click here to read .

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