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Budget 2018: A transformational drive for rural India

February 5, 2018 11874 Views
Vishal Anand
Partner - Corporate & International Tax, PwC India

Budget expectations started with the Government trying to strike a balance with the headwinds from various stakeholders and factors like bleeding agriculture sector, dwindling voter's sentiment, job creation, industry growth, fine-tuning of fiscal deficit and expectations of tax dispensations.

The proposed budget is an effort towards uplifting of rural and agricultural sector, along with major push to health care and education sector for the poor in the country. Though the Government has raised the fiscal deficit to 3.5%, it is firmly believed that 8% plus growth will be achieved in the coming years.

With the liberalization of the export of agriculture commodities and fixation of minimum support price of atleast 1.5 times of the production cost, the budget has duly focused on strengthening rural agriculture economy. Substantial investments have also been proposed in infrastructure sector with allocations towards development of smart cities, railways, airports, etc.

With a challenging fiscal discipline, the Government came with several direct tax amendments including re-introduction of long term capital gains tax and standard deductions, MSMEs being gifted with reduced tax rate, increase in cess, etc. Key highlights of the proposed direct tax amendment includes:

  •  Incremented benefits for senior citizens for interest income and deduction of health premium and treatment expenses

  •  With the slab rates remaining intact, the salaried class will now be allowed a standard deduction of INR 40,000 replacing existing medical and transport allowances

  •  Incentives for employment generation

  •  Existing cess has been replaced by 'Health and Education Cess' at the rate of 4%

  •  E-assessment schemes to be notified

  •  For promoting start-up incubation, the window for incorporation for claiming such benefits has been extended and the range of eligible business has also been expanded

  •  Farm Producer Companies engaged with primary agricultural sector with turnover upto INR 100 crores also have been extended the benefit of non-taxability of such profits for 5 years

  •  Long Term Capital Gain exceeding INR 1 lacs shall be taxed @ 10% without allowing the benefit of indexation on transfer of equity shares, units of equity oriented funds or units of a business trust. However, all gains upto 31st January, 2018 will be grandfathered

  •  DDT shall be applicable on deemed dividend on account of loans and advances at 30%

  •  Corporate tax rate is reduced to 25% for companies who have reported turnover upto INR 250 crores in FY 2016-17

  •  With a view to align with MLI, the concept of business connection has been amended to include "significant economic presence"

  •  Suitable amendments have been made to mitigate Delhi High Court's ruling on ICDS to aid taxpayers

  •  Rationalization of the Indian CbC reporting regulation in line with OECD model legislation

Budget 2018 has attempted to focus on overall sectors, ranging from agriculture to infrastructure. It is a balanced budget and the Government has made an all-round attempt to introduce beneficiary provisions for the direct benefit of different section of society with special focus on agriculture, rural economy, health and education.

Views expressed are personal

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