Talking to people around on budget this time; most of them are unhappy, as budget has not kept pace with the expectations, like for a salaried (US), no announcements on tax slabs, or tax exemptions 😉.
But for a budget, with elections just around the corner, our dear finance minister has maintained a fine balance on populist measures, economic growth & stability.
Let me highlight, key takeaways from the budget:
Tax on long term capital gains (LTCG) -Equity &Equity Mutual Funds,where investments more than 1 year old, will now attract a tax of 10% on the profit earned, exceeding 1 lacs, which was previously zero. The capital gain calculation will start from 31st Jan 2018 for earlier investments.
Which means, if you have invested INR 100 on 1st Jan 2016, and if you redeem on 2nd Feb 2018 @ INR 155, LTCG will be calculated based on the price on 31st Jan 2018. Let’s say on 31st Jan 2018, the value was INR 150, in-short you have to calculate LTCG on INR 5, provided the total gain exceeds 1Lac.However, short term capital gain (STGC) will remain unchanged at 15% rate.
Tax on distributed income by equity oriented Mutual Fund, is also proposed, where distributed income by equity oriented mutual funds to be taxed at the rate of 10%. This will provide level playing field across growth-oriented funds and dividend distributing funds.
Standard Deduction: it’s been proposed, to allow standard deduction of INR 40k, in lieu of the present exemption, in respect of transport allowance and reimbursement of miscellaneous medical expenses.
Health & Education Cess: at present there is a three percent cess on personal income tax, which is now increased by 1% to 4%.
Senior Citizen benefits:
a) Exemption of interest income on deposits with banks and post offices to be increased from 10K to 50K.
b)Raising the limit of deduction for health insurance premium from 30K to 50K.
c)Raising the limit of deduction for medical expenditure (critical illness) from 60K/ 80K to 1lakh.
Incentive to micro, small & medium enterprises/ entrepreneurs: Its proposed to extend the benefit of the reduced tax rate of 25% (offered earlier only to < 50 Crs turnover), now to companies who have reported turnover up to 250 crores in FY 2016-17.
Other key points on budget:
- No Change in personal income Tax.
- The rural & farmer focus was expected and necessary, with minimum support price (MSP) of all Kharif crops,to be increased by 1.5 times that of the production cost, and many other benefits.
- The launching of the flagship healthcare scheme to cover 10 crore poor families (or 50 crores individuals) is a great initiative.
- The merger of Oriental Insurance, National Insurance & United India Insurance is another good move to stabilize the three public sector units, and the Insurance sector.
- Fiscal deficit pegged at 3.5% of the GDP, higher than expected.