The last full-fledged budget of the NDA government before the 2019 general elections presented by finance minister today was more inclined towards rural populace. But it was taken slightly cautiously by the market in the initial stages. Markets seem to be slowly recovering from the narrow dip as they have already turned green. The government has estimated a 7.2-7.5 per cent GDP growth in the second half of FY 2018.
PM Modi described it as “Farmer friendly, common citizen friendly, business- environment friendly, development friendly budget”.
Outlook Money gives you a quick rundown on five key highlights of budget 2018-19 and how it will impact you.
Impact- There is not much good news for salaried employees. “There is no change in the rate of tax for all individuals whether male /female resident, senior citizen or super senior citizen. It was quiet expected that maximum exemption limit will be raised and benefit will be granted for salaried class,” says Rakesh Bhargava, Director, Taxmann. However, standard deduction that was withdrawn in 2005 has been reintroduced but transport, medical and other allowances have been taken away. However, the gains due to this will be nominal as Rs 15,000 due to medical allowance and Rs 1,600 per month due to travel allowance provides a deduction of Rs 34,200 anyway. “This will provide tax relief to salaried individuals, albeit marginally,” says Rahul Jain, Head – Edelweiss Personal Wealth Advisory.
Impact: Education cess is applied on the taxable income and increases the tax burden. Say if someone with an income of Rs 10 lakh was paying Rs 1 lakh as taxes after factoring in all deductions, till now he would pay an education cess of Rs 3,000. Hereafter, he will pay an education cess of Rs 4,000. The increased cess will allow the government to collect an additional Rs 11,000 crore to take care of education and health of BPL and rural families.
Impact: While this came as a blow, the FM lessened the blow by putting in a clause saying that all gains till 31 December 2018 will be grandfathered. “Equity still remains the lowest taxed investment vehicle and LTCG Tax will not impact the growing equity and SIP culture amongst retail investors,” says Radhika Gupta, CEO – Edelweiss Asset Management.
Impact: Prices of imported mobile phones will go up. “There is a clear policy shift in increasing customs duty to incentivize domestic manufacturing on many items like cell phones. Message is loud and clear – manufacture in India if you want to access Indian market,” says Pratik Jain, Partner & Leader, Indirect Tax - PwC India. This will lead to creation of more jobs.
Impact: This is in tune with reducing corporate tax in a phased manner. Currently, it is applicable to companies which have a turnover of up to Rs 50 core. “This move will again go a long way in giving a significant boost to this segment and will create more employment,” says Shanti Ekambaram, President – Consumer Banking, Kotak Mahindra Bank.